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Jan 30, 2018 | Canadian Professional Sales Association lock

Despite the common misconception, severance pay is not the same thing as termination pay. In Canada, Termination pay is given in place of required notice of termination of employment. Severance pay, on the other hand, is compensation paid by an employer to an employee who has his or her employment severed. Here’s what you need to know about severance pay and termination pay for sales.

What is Required for Severance Pay?

Severance pay compensates an employee for loss of seniority and the value of their specific skills; it also recognizes their length of service. You are required to have worked at a company for a minimum period of time (usually three months) and have lost your position through no fault of your own.

While it varies from province to province, severance pay is usually calculated by multiplying the employee's regular wages for a regular work week by the sum of the length of their completed employment up to a required maximum of 26 weeks. So if you worked in a company for eight years, you would be entitled to eight weeks severance pay.

What is Required for Termination Pay?

Termination pay may be offered in addition to severance pay as part of the employee’s severance package. It is often utilized in sales because when a sales employee is “let go” by the company, it often necessitates that they leave the position immediately so as not to compromise key accounts and results. Therefore the employee must legally be compensated for the lack of notice by continuing to receive pay as if they were still employed throughout the required notice period. This notice period varies by length of employment and by province; you can find out the notice period by province here. For example, if you were employed in Ontario for two years, you would be entitled to two week’s notice and therefore two week’s termination pay should you be asked to leave and not to complete your notice period.

However, when it comes to termination pay and sales things become a little more tricky. Some employers may, erroneously, believe they must calculate the amount of pay based on an employee’s base salary. This is untrue unless explicitly stated in the employee’s contract.

Termination pay is about compensating an employee for what they would have earned had they continued employment, therefore it should take into account both commission and bonuses as well as base pay.

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