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Opens in new windowBeing laid off unexpectedly can be disorienting and stressful. In addition to managing the shock of job loss, fired employees often face a flurry of practical concerns, including finding a new job, managing finances, and understanding their severance package and what’s included in it - if the company even offers them severance at all.
During the turmoil, one big thing that often gets overlooked is whether a bonus will be included in the severance package, especially if the termination happens just before the bonus is due to be paid out. For some roles, a bonus makes up a significant portion of a person’s total compensation, so missing out on an expected paycheque can add an extra layer of financial uncertainty to an already precarious situation.
To help explain what happens to your bonus when you lose your job, we spoke to Lior Samfiru, employment lawyer and national co-managing partner of Toronto-based Samfiru Tumarkin LLP, Canada’s largest employee-side employment law firm.
Is your bonus part of your severance package?
Yes, your bonus should be factored into your severance package if it has become an expected part of your salary. It should also include other components such as commissions, benefits, stock options, car allowance or expense accounts. That said, severance isn’t just about your base salary; it should reflect the full spectrum of your compensation, including any bonuses you were expecting to receive - though the inclusion of a bonus in your severance package ultimately depends on the terms of your employment contract.
How an employment contract may affect your bonus
Employment contracts in Ontario can have clear, unambiguous language about whether or not bonuses are to be paid or included in severance post-termination. But, according to Samfiru, the mere existence of a clause in your contract doesn’t mean you’re out of luck.
“In my years of experience, contracts often contain poorly written or unreasonable clauses, making them unenforceable and not worth the paper they’re written on.”
Samfiru recommends consulting an employment lawyer for a review of your situation and employment agreement after experiencing job loss. This is crucial before accepting a severance offer, as it ensures you do not give up your employment rights.
Can your employer decide to stop giving you a bonus?
Simply put, no. Your employer can’t refuse to pay a bonus that you’ve earned or that’s become an expected part of your annual pay. Withholding that bonus could constitute constructive dismissal, which means that you might be able to quit and receive severance pay. However, it’s important to consult with an employment lawyer before making any decisions.
How do you calculate bonus as part of a severance package?
Many different factors, including your total earnings, age, length of employment, benefits, and your ability to find similar work, are considered when calculating your total severance package. Samfiru Tumarkin’s Severance Pay Calculator can give you an idea of the potential size of your severance package, which can be as much as 24 months’ pay.
On how to know if your bonus should be included in severance, Lior Samfiru says, “When it comes to severance, all components of compensation should be included, not just your base pay. A rule of thumb is to think, ‘if I were to continue working, would I get this?’ If the answer is yes, then you should get it as part of your severance. A company can’t avoid paying you what you’ve earned just because they chose a convenient termination date.”
Navigating bonus entitlements and severance packages after being fired can be a difficult process. To determine a more specific, realistic range for your potential severance package, reach out to an expert from Samfiru Tumarkin LLP. They’ll review your employment contract, any initial severance offer, and the specifics of your situation to provide guidance and advice. Working with their experienced and respected law firm will help ensure you get the full compensation you’re owed.
Contact employment lawyer Lior Samfiru, national co-managing partner at Samfiru Tumarkin LLP, to get the advice and compensation you need by calling 1-888-861-4555, emailing Ask@EmploymentLawyer.ca or filling out an online contact form.
His law firm represents non-unionized employees in Ontario, Alberta and British Columbia. Discover your employment rights by watching Lior on Ask a Lawyer every Wednesday at 9:30 p.m. on CP24.