Termination of Employment in Canada: A Full Employer’s Guide

Key takeaways

• Employers must provide two weeks’ written notice when they want to terminate an employee’s contract.
• It’s important for employers to understand laws and legislation around employment to avoid wrongful termination claims.
• What the employee receives as payment when terminated depends on how long they have worked for the business and which jurisdiction you fall under.

Canada’s 2025 Labour Force Survey revealed that employment fell by 33,000 in March. Among the 1.5 million people who were unemployed by this point, 44.1% were laid off within the previous 12 months. Figures also show that the average voluntary turnover rate in Canada is 10.2%.

As an employer, it’s crucial that you understand your legal obligations in relation to termination of employment—whether this be for layoffs, dismissals of voluntary departures. All terminations of employment must be conducted in line with the legislation set out in the Employment Standards Act.

Failure to comply with employment standards in Canada may result in wrongful termination claims. It could also lead to legal disputes that could impact the finances and reputation of a business, and potential severance pay obligations.

In this guide, we’ll outline how termination in Canada is handled and discuss best practices for employers to follow to ensure they stay compliant with Canadian employment standards.

Notice, pay and severance

Notice of termination/payment in lieu

An employer that wants to terminate the employment of an worker must provide the worker with at least two weeks’ written notice or pay the employee their wages in lieu of notice for termination without cause. A combination of the two is acceptable.

Notice is the amount of time provided between informing the employee in writing that they’ll be terminated and the date the termination will take place. You can give working notice, whereby the employee continues to work and receives all their usual pay and benefits up until the date of termination. Alternatively, you can provide them with payment in lieu of notice.

Payment in lieu of notice means that the termination takes effect immediately and the employee is paid for the weeks of notice. The member of staff will not return to work following payment in lieu of notice.

Severance and separation entitlement

In some jurisdictions, employees terminated without cause must be given severance pay. This generally depends on the size of the employer and the member of staff’s length of service at the company.

If you terminate the employment of a worker that’s completed at least 12 consecutive months of continuous employment, you must provide them with severance pay in accordance with employment standards in Canada.

Severance pay is whichever of the following is greater:

• two days’ wages at the employee’s regular rate for each full year that they’ve worked for the employer before they were terminated, or
• five days’ wages at the employee’s normal rate of wages

It’s worth noting that some jurisdictions require severance pay for employees if the business meets certain thresholds in relation to factors like payroll size and the employee’s length of service.

Final pay and other obligations

Employers are legally required to issue the final payment for a terminated employee and pay them by the following pay date. They must also send the Record of Employment (ROE) to the member of staff and notify the authorities of the termination of employment. Any outstanding payments are to be paid to the worker by the following pay date too. Failure to meet these requirements may result in a penalty of up to CAD$2,000 and up to six months’ imprisonment.

Employees have the right to undergo civil action for wrongful termination and claim damages if they suffer losses during the notice period.

Best practices for employers

If you’re planning on conducting a termination of employment, there are a few steps you’ll need to take to ensure you handle the dismissal ethically and legally.

Here are a few best practices for employers when terminating employment:

• Preparation: This includes documenting issues that occurred with the employee during employment, warnings given as a result, and performance reviews. Be sure to use clear employment contracts and clauses and follow a fair process that remains respectful and professional. Create a letter of termination in advance and ensure it includes all relevant dates and terms

• Conducting the meeting: Set up a meeting with the employee in a suitable location and at an appropriate time, well in advance. Remote meeting can suffice if the worker is located off site. Be professional and respectful at all times and ensure that all information is communicated clearly. Be sure to keep records of what occurs during the engagement and send up a follow-up email if suitable.

• Handling special issues: Some terminations of employment require special care and compliance. For example, group or mass terminations require employers to notify the Labour Program’s Head of Compliance and Enforcement in writing at least 16 weeks prior. And for constructive dismissals, avoid making unilateral changes to essential employment terms without written consent, as this can be grounds for wrongful dismissal and compensation could be due.

HR software and systems for termination

A comprehensive HR platform can help you effectively manage the termination process in a professional, compliant way. The platform is designed to assist you with tracking employee performance, document warnings, and record all communications and termination workflows. This can ensure that the termination process is handled with accuracy, transparency, and consistency.

By automating and centralizing data and routine tasks, BambooHR software helps to reduce the risk of human error and enables more compliant termination processes. This in turn allows businesses to track and record every step of the employee life cycle — from onboarding to offboarding.

FAQs for employers

Handling terminations of employment can raise many questions, and it’s important that HR teams and management have a firm understanding of the steps and rules that need to follow in accordance with employment standards in Canada.

Below, we answer some of the common questions surrounding termination of employment.

When do I need to give notice vs pay in lieu?

If you want to terminate an employee’s contract, you must provide two weeks’ written notice or pay in lieu of notice, or a combination of both. The minimum requirement of two weeks’ notice increases to one week per completed year of service after three years and goes up to eight weeks. Pay in lieu is equal to regular wages for the notice period.

What constitutes “cause,” and when is it unsafe to claim it?

A number of reasons can constitute cause for the termination of employment. Examples include incompetence, insubordination, theft, fraud, deception, absenteeism, sexual harassment and violence. It’s unsafe to claim these things without clear, well-documented evidence, as this could lead to claims of wrongful termination.

How should I calculate severance / termination payment?

In Canada, severance or termination pay depends on length of service and jurisdiction, so you’ll need to confirm the rules for your province or territory. Severance pay can be calculated as the greater of two days’ wages at the employee’s regular rate for each full year that they’ve worked for you or five days’ wages at the employee’s regular rate.

What if the employee is on leave or under protected status?

In Canada, termination is deemed as unlawful if the cause is entirely related to an employee taking protected leave—such as for parental, medical or disability. An employer can, however, legally terminate a member of staff while they’re on leave if they can clearly demonstrate that the reason for termination is unrelated to the employee’s leave. For example, if the business is restructuring, the company is closing, or the position has been eliminated for justifiable reasons.

What’s the difference between temporary layoff and termination?

The difference between temporary layoff and termination is that a temporary layoff is a temporary suspension of employment, meanwhile termination is a permanent end to a worker’s employment with a business. A temporary layoff allows employers to lay an employee off work for a limited timeframe without completely terminating the employment relationship.

What special rules apply in mass terminations?

Every Canadian jurisdiction, except Prince Edward Island, has special notice rules for mass terminations. In all of these jurisdictions, employers must give notice of a mass termination as well as individual notice of the termination employment to each employee. Employers also need to notify the Labour Program’s Head of Compliance and Enforcement in writing at least 16 weeks prior to the termination taking effect if 50 or more employees are being terminated on the same date or within a four-week period.