Severance Pay, Severance Pay Affect Unemployment Benefits, Unemployment Benefits

How Does Severance Pay Affect Unemployment Benefits

Being dismissed from employment is undoubtedly one of the most stressful times in someone’s life. Figuring out how to use your income to cover the regular costs of everyday life while searching for work can be a challenge.


Thankfully, in Canada, there are several safety nets that are set up to help people during that difficult time. These safety nets typically include severance or termination pay and Employment Insurance (“EI”). However, things may get confusing if you are receiving severance pay and trying to determine whether you can also claim EI.


This article will help you navigate this difficult time and figure out what you can claim for your situation.


What is Severance Pay?


Severance pay is what employees are paid if they are terminated from a position with a company. Employees will only be entitled to severance pay if it is in lieu of proper notice, and if they have been terminated without cause. Employees who are terminated with just cause will not be entitled to any severance pay from their former employer. 


Typically, severance pay is calculated based on a number of factors, including employee salary, age, and years of service. To read about how severance pay is calculated, click on this link


Termination pay refers to the minimum amount of severance pay that an employee can be given when terminated by an employer, whereas severance pay is the full amount. Which one an employee receives will depend on their employer.


What is Unemployment Benefits?


Unemployment benefits, otherwise known as EI, are benefits that are available to people who have lost their job through no fault of their own. That means that the benefits are only available if the employee was terminated without cause and if they did not quit their job voluntarily. 


The employee needs to be able to prove that they were paying into the EI program through their job before they became unemployed for the minimum number of weeks specified on the Employment Insurance page


You will also need to prove that you are willing to work and currently seeking work where possible.


To find out if you are eligible for EI, you should check your eligibility on the Employment Insurance page. If you have questions about employment insurance, you should consider reaching out to a qualified lawyer for more information.


Can I Receive Severance Pay and Unemployment Benefits?


Severance pay is meant to tide an employee over while they are unemployed until they are able to get a new job and a new source of income. Unemployment benefits represent the same thing, as they can be claimed by people who do not have an income at the time through no fault of their own.


Since severance pay and unemployment benefits are meant to bridge the gap of unemployment, an individual cannot claim both at once. If an individual tries to claim unemployment benefits while receiving a severance package from their former workplace, their claim may be delayed until the severance period is over. 


It is still recommended that you apply for unemployment benefits as soon as possible if you do not know when your severance pay will come in. However, if your severance pay does come in while you are receiving unemployment benefits, you may need to pay your unemployment benefit income back to the Canadian government, so make sure you have the funds on hand to do so.


What Can I Do to Protect Myself?


The best thing that you can do to protect yourself from a situation where you do not have either EI benefits or severance pay would be to speak to a lawyer as soon as you hear that you are being terminated from your position. A lawyer can help you negotiate the best possible severance pay, and inform you when the best time to apply for unemployment benefits would be.


You should also be sure to be smart with your money when unemployed, in case you ever need to pay your benefits back due to an overpay. If you are unsure about how to handle this or when to apply for unemployment benefits, speak to a qualified lawyer about the topic. 


While unemployed, you should be consistently looking for work opportunities to ensure that you qualify for both severance pay and unemployment benefits. If you are not looking for other employment opportunities, you may not be awarded either type of pay.




It can be a confusing and scary time in your life if you have been terminated from an employment opportunity. Employees should keep in mind that they cannot claim unemployment benefits at the same time as they are in a severance pay period, as the two serve the same purpose. However, individuals can apply for unemployment insurance as soon as the severance pay period is over. 


If you are facing termination, speak to a lawyer about how you can negotiate the best deal from your severance package and navigate your unemployment in the best possible way. 


Contact Us

If you are an employee who is concerned about unemployment or termination, our team of experienced workplace lawyers at Achkar Law can help. Contact us by phone toll-free at 1 (800) 771-7882 or email us at [email protected], and we will be happy to assist. 


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