Severance Pay

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1 General

Severance pay is an entitlement that may be payable to an employee of the Public Service upon termination of employment if certain requirements are met.

The conditions for payment of severance pay are contained in the collective agreements, pay plans, or specific terms and conditions of employment.

Depending on the type of termination, the severance pay benefit may be increased if the employee is entitled to an immediate annuity or an annual allowance under the Public Service Superannuation Act (PSSA).

On termination of employment, the recovery of superannuation deficiencies from severance pay is on the authority of the employee only and should not be processed automatically by the paying office. The recovery of all other deficiencies, such as disability insurance (DI) and long-term disability (LTD), can be made from the severance payment.

Employees whose termination of employment is due to incompetence, incapacity, or abandonment of position are entitled to severance pay benefits if the relevant authority specifically allows for such reasons or there is an article providing severance pay benefits on termination of employment for cause.

When determining if severance pay benefits are payable, the amounts due, the circumstances providing entitlement, etc., reference must be made to the applicable terms and conditions of the employee. For instance, employees belonging to groups such as the EX category, minister's exempt staff, and Career Assignment Program, as well as students and certain unrepresented employees in the administration and foreign service category, have their own terms and conditions of employment apart from collective agreements, and it is these authorities that must be referenced to determine entitlement.

Retirement with an entitlement to an immediate annuity

The severance pay payable is in accordance with the retirement clause of the collective agreement when the employee is entitled to an immediate annuity and meets one of the following conditions:

• retires with thirty (30) or more years of pensionable service and is at least 55 years of age;
• retires at age 60 with at least two (2) years of pensionable service; or
• retires because of disability with two (2) or more years of pensionable service.

Note: The employee may be entitled but is not required to be in receipt of an immediate annuity to meet the definition of retirement for severance pay purposes.

Example (employee entitled to an immediate annuity)

An employee with over thirty (30) years of pensionable service, will be 55 years of age on Thursday, August 14, 2003.

The employee may terminate employment at the close of business on Wednesday, August 13, 2003, because there is an entitlement to receive the benefits applicable to a retirement on August 14, 2003. Since the employee is 55 years of age on that date, the employee meets the above requirements. The termination, for severance pay purposes, is considered a retirement.

Retirement with an entitlement to an annual allowance

Some collective agreements provide severance pay benefits on termination of employment when an employee is entitled to an annual allowance under the PSSA. An annual allowance under the PSSA is payable if the employee, on termination of employment, has two (2) or more years of pensionable employment and is over 50 years of age.

Note: The employee may be entitled but is not required to be in receipt of an annual allowance to meet the definition of retirement for severance pay purposes.

Example 1 (employee is entitled to an annual allowance)

An employee with over twenty-six (26) years of pensionable service was 50 years of age on Thursday, August 14, 2003.

The employee may terminate employment at the close of business on Wednesday, August 13, 2003, because there is an entitlement to receive the benefits applicable to a retirement on August 14, 2003. Since the employee is 50 years of age on that date, the employee meets the above requirements. The termination for severance pay purposes is considered a retirement.

Example 2 (employee is not entitled to an annual allowance)

This same employee with over twenty-six (26) years of pensionable service will be 50 years of age on Thursday, August 14, 2003, and wants to terminate employment at the close of business on Tuesday, August 12, 2003. There is no entitlement to an annual allowance on termination of employment because the employee does not meet the above requirement since the employee's age is only 49 on that date. The reason for termination for severance pay purposes is considered a resignation.

2 Deceased employee

In the case of a deceased employee, there are no qualifying conditions to establish eligibility for the payment of severance pay. The relevant collective agreement specifies the severance pay entitlement.

3 Term employees

Term employees who are subject to the provisions of a collective agreement may be entitled to severance pay.

A term employee who is hired for a specified term and completes that term is not a layoff and therefore is not entitled to severance pay. However, if a term employee who is subject to a collective agreement is laid off prior to completion of the term of employment, there may be an entitlement to severance pay under the provision of any layoff clause in the relevant collective agreement.

Note: The two-week payment in lieu of notice is not considered severance pay.

Since the employee is leaving the Public Service prior to the end of the specified term, the termination of employment is considered a retirement for severance pay purposes.

As per the EC collective agreement, severance pay may be paid to an employee for retirement purposes if the employee is entitled to an immediate annuity or an annual allowance under the Public Service Superannuation Act (PSSA).

Under the PSSA, the employee has the option of an annual allowance on the date of SOS and is therefore entitled to a severance pay.

Unlike example 1, the employee completes the specified term period and is SOS effective Friday, August 1, 2003.

In accordance with the EC collective agreement, there is no provision for severance pay on end of term; the employee is therefore not entitled to severance pay.

4 Rate of pay

Many collective agreements define the weekly rate of pay as the weekly rate of pay to which the employee is entitled for the classification prescribed in the certificate of appointment.

If the wording of the collective agreement refers only to the certificate of appointment without specifying the substantive position, then the rate of pay to be used is the acting salary if the employee has met the qualifying period of the collective agreement of the substantive position.

Additionally, some collective agreements have a specific article regarding the rate of pay used to determine the employee's severance pay as being the employee's acting rate of pay if the employee has been in an acting position for more than one (1) year at the time of severance.

Example 1 (employee's substantive position is AS, acting position is SI)

An employee acting in an SI position under the EC collective agreement is retiring at 61 years of age with 11 years and 215 days of employment. The last day of employment is Friday, July 18, 2003.

The employee's substantive position is an AS under the PA collective agreement. The acting remuneration of the SI is for the period from March 3, 2003, to July 18, 2003, inclusive (100 working days). The employee meets the qualifying period of at least three (3) consecutive working days or shifts, as stipulated in the PA collective agreement (substantive position).

The severance pay entitlement will be determined in accordance with the EC collective agreement (expiry date June 21, 2003), where it states under paragraph 25.03(b), " . . . notwithstanding paragraph 25.03(a), where an employee has been in an acting position for more than one (1) year at the time of severance, the rate of pay used to determine the employee's severance pay is the employee's acting rate of pay."

In this case, the employee has not been in the acting position for more than one (1) year; the severance pay entitlement will therefore be remunerated at the AS salary (substantive position).

Example 2 (employee's substantive position is SI, acting position is AS)

An employee acting in an AS position under the PA collective agreement is retiring at 61 years of age with 22 years and 272 days of employment. The last day of employment is Friday, August 29, 2003.

The employee's substantive position is an SI under the EC collective agreement. The acting remuneration of the AS is for the period August 18, 2003, to August 29, 2003, inclusive (10 working days). The employee meets the qualifying period of at least four (4) consecutive working days or shifts as per the EC collective agreement (substantive position).

The severance pay entitlement will be determined in accordance with the PA collective agreement (expiry date June 20, 2003), where it states under Article 63.01 " . . . an employee shall receive severance benefits calculated on the basis of the weekly rate of pay to which he or she is entitled for the classification prescribed in his or her certificate of appointment on the date of his or her termination of employment."

In this case, the employee's severance pay entitlement will be remunerated at the AS salary (acting position) because the employee's certificate of appointment on the date of termination of employment on August 29, 2003, is for the acting AS position.

5 Severance pay calculations

The entitlement to severance pay is determined by the employee's continuous employment and not from the continuous service date.

When the collective agreement specifies complete years, the days in excess of the complete year(s) must be rounded off. To round off at complete years of employment, subtract the excess days from the complete years. If the excess days were not subtracted, it would mean that the employee would, in effect, be overpaid since the weekly rate of pay being used in the calculation is the full-time weekly rate and not the part-time weekly rate.

The following steps should be followed in order to establish the employee's benefits:

1. Establish the period of continuous employment eligible for severance pay.
   Note: Many types of leave without pay are not included in the calculation of the severance pay benefit payable. Reference must be made to the severance pay and leave articles of the relevant authorities to determine whether or not to include the leave without pay. It must be noted, however, that severance pay is based on continuous employment and, therefore, the leave without pay reduces the period after the determination of entitlement. (Refer to the example at the end of section 2.5.)
2. Determine whether the severance pay is based on partial or complete years of continuous employment.
   Note: The excess days to be deducted to assure complete years must be deducted from the period of employment where the assigned work week (AWW) is the lesser of all periods.
3. Consolidate the part-time portions to equivalent full-time periods.
4. Add all of the full-time periods of years (including decimals). Depending on the reason for termination, the entitlement may be one-half (½) week or one (1) week for each completed* year. The total number of weeks is then multiplied by the full-time weekly rate of pay for the appropriate group and level to produce the severance pay benefit.
   *For greater certainty, refer to the relevant authority to determine if the calculation is based on complete years or whether partial years can be used. For instance, in many collective agreements the severance pay provisions on layoff, death, and retirement allow for the inclusion of partial years. Conversely, only complete years are to be used if the reason for termination of employment is resignation, rejection on probation, and termination for cause for reasons of incapacity or incompetence.
5. The equivalent full-time period in years, to two (2) decimal places, shall be multiplied by the full-time weekly rate of pay for the appropriate group and level.

Example (determining continuous employment)

1. Period of continuous employment.
   August 1, 1993, to July 31, 2003
   
2. Leave without pay for relocation of spouse.
   February 1, 1998, to January 31, 1999
   
3. Severance pay for a resignation is based on ten (10) or more complete years of continuous employment with the benefit being one-half (½) week's pay for each complete year of continuous employment.
   
4. Determine the number of complete years of continuous employment.

   Period August 1, 1993, to July 31, 2003

   Particulars 10 years continuous employment

5. Determine the period(s) of leave without pay which is not to be included in the calculation of the benefit payable.

   Period February 1, 1998, to January 31, 1999

   Particulars 1 year leave without pay for relocation of spouse

6. Reduce the continuous employment period by the leave without pay.

   Period August 1, 1993, to July 31, 2003 February 1, 1998, to January 31, 1999

   Particulars 10 years continuous employment -1 year leave without pay 9 complete years of continuous employment

7. The severance pay entitlement is nine (9) weeks multiplied by one-half (½) weekly rate of pay for each complete year of continuous employment based on the rate of pay of the classification prescribed in the certificate of appointment on the date of the termination of employment.

5.1 Part-time employees (one-third (1/3) or less of the scheduled work week of the position)

Refer also to the chapter entitled "Part-time, casual and seasonal employees."

Part-time employees who are excluded from a collective agreement because their AWW is one-third (1/3) or less of the scheduled work week (SWW) of the position shall be paid severance pay in accordance with the relevant collective agreement.

Example 1 (continuous employment period with the same AWW)

An employee in the SI group with an AWW of twelve (12) hours under the EC collective agreement is resigning at 45 years of age, and the last day of employment is Friday, July 18, 2003.

The continuous employment period is from December 16, 1991, to July 18, 2003 (11 years and 215 days).

As per the EC collective agreement, to be entitled to severance pay on resignation, the employee must have at least ten (10) years of continuous employment. The entitlement of one-half (½) week's pay is based on each complete year of continuous employment. The severance pay benefits for this employee are therefore based on the number of complete years, which is eleven (11).

1. Period of continuous employment (part-time worker).
   December 16, 1991, to July 18, 2003
   AWW = 12.00 hours (SI SWW = 37.50 hours)
   (11 years, 215 days)
2. Severance pay for a resignation under the EC collective agreement is based on complete years of continuous employment.
   Because the AWW of the employee remains unchanged during the complete period of continuous employment, subtract the 215 days from the complete period, which leaves a total of eleven (11) complete years.

   Convert the years into days and decimals

   Formula: 1 year = 365.25 days (365 + 365 + 365 + 366 ÷ 4)

   Years December 16, 1991, to July 18, 2003 AWW equals 12.00 hours		Part-time days and decimals
   11 years Result	equals equals	11 years x 365.25 equals	4,017.75 days 4,017.75 days

3. Consolidate the part-time period into the full-time period.

   Part-time days and decimals December 16, 1991, to July 18, 2003 AWW equals 12.00 hours	Full-time days and decimals
   4,017.75 days mulitplied 12.00 (AWW) 37.50 (SWW)	1,285.68 days

4. 1,285.68 days divided by 365.25 = 3.52 full-time years.
5. The severance pay entitlement is 3.52 weeks multiplied by one-half (½) week's pay for each complete year of employment calculated on the basis of the employee's weekly rate of pay.

Example 2 (continuous employment composed of two part-time periods)

An employee in the SI group under the EC collective agreement is resigning at 45 years of age, and the last day of employment is Friday, July 18, 2003.

The continuous employment period is from December 16, 1991, to July 18, 2003 (11 years and 215 days).

As per the EC collective agreement, to be entitled to severance pay on resignation, the employee must have at least ten (10) years of continuous employment. The entitlement of one-half (½) week's pay is based on each complete year of continuous employment. The severance pay benefits for this employee are therefore based on the number of complete years, which is eleven (11).

1. Period of continuous employment (part-time worker).
   December 16, 1991, to February 24, 1995
   AWW = 7.50 hours (SI SWW = 37.50 hours)
   (3 years and 71 days)

   February 25, 1995, to July 18, 2003
   AWW = 12.00 hours (SI SWW = 37.50 hours)
   (8 years and 144 days)

2. Severance pay for a resignation is based on complete years of continuous employment.
   To round off at complete years of continuous employment, subtract the days in excess of the completed years, e.g., 215, from the part-time period where the AWW is the lesser of the two periods because this provides a greater benefit to the employee. In this case, this would be the period with the AWW of 7.50 hours. From 3 years and 71 days, deduct the 215 days from the complete period of continuous employment (11 years and 215 days).

   In this situation, convert the years and days into days to 2 (two) decimal places before subtracting the 215 days.

   Formula: 1 year = 365.25 days (365 + 365 + 365 + 366 ÷ 4)

   Years December 16, 1991, to February 24, 1995 AWW equals 7.50 hours		Part-time days and decimals
   3 years and 71 days Result	equals plus equals	3 years x 365.25 equals	1,095.75 days 71 days 1,166.75 days

   1,166.75 days - 215 days = 951.75 days

   Years February 25, 1995, to July 18, 2003 AWW equals 12.00 hours		Part-time days and decimals
   8 years and 144 days Result	equals plus equals	8 years x 365.25 equals	2,922 days 144 days 3,066 days

3. Consolidate the part-time periods into full-time periods.

   Part-time days and decimals December 16, 1991, to February 24, 1995 AWW equals 7.50 hours	Full-time days and decimals
   951.75 days multiplied by 7.50 (AWW) 37.50 (SWW)	190.35 days

   190.35 days divided by 365.25 = .52 full-time years

   Part-time days and decimals February 25, 1995, to July 18, 2003 AWW equals 12.00 hours	Full-time days and decimals
   3,066 days multipled by 12.00 (AWW) 37.50 (SWW)	981.12 days

   981.12 days divided by 365.25 = 2.69 full-time years

4. Add all of the full-time periods of years (including decimals).

   plus	0.52 years (December 16, 1991, to February 24, 1995) 2.69 years (February 25, 1995, to July 18, 2003) 3.21 years

5. The severance pay entitlement is 3.21 weeks multiplied by one-half (½) week's pay for each complete year of employment calculated on the basis of the employee's weekly rate of pay.

5.2 Part-time employees (more than one-third (1/3) of the scheduled work week of the position)

Refer also to the chapter entitled "Part-time, casual and seasonal employees."

For part-time employees who perform the duties of a position for more than one-third (1/3) of the SWW of the position, the severance pay calculation is as defined in the relevant collective agreement.

Example 1 (continuous employment composed of part-time periods only)

An employee in the CS group is resigning at 46 years of age, and the last day at work is Friday, July 18, 2003.

The continuous employment is from December 1, 1980, to July 18, 2003 (22 years and 230 days).

As per the CS collective agreement, to be entitled to severance pay on a resignation, the employee must have at least ten (10) years of continuous employment. The entitlement of one-half (½) week's pay is based on each complete year of continuous employment. The severance pay benefits for this employee are therefore based on the number of complete years, which is twenty-two (22).

1. Period of continuous employment.

   December 1, 1980, to February 24, 1995
   AWW = 22.50 hours (CS SWW = 37.50 hours)
   (14 years and 86 days)

   February 25, 1995, to July 18, 2003
   AWW = 35.00 hours
   (8 years and 144 days)

2. Severance pay for a resignation is based on complete years of continuous employment.

   To round off at complete years of continuous employment, subtract the days in excess of the completed years, e.g., 230, from the part-time period where the AWW is the lesser of the two periods because this provides a greater benefit to the employee. In this case, this would be the period with the AWW of 22.50 hours. From 14 years and 86 days, deduct the 230 days from the complete period of continuous employment (22 years and 230 days).

   Before subtracting 230 days, convert the years and days into days, to two (2) decimal places as follows:

   Formula: 1 year = 365.25 days (365 + 365 + 365 + 366 ÷ 4)

   Years and days December 1, 1980, to February 24, 1995 AWW equals 22.50 hours		Days and decimals
   14 years and 86 days Result	equals plus equals	14 years multiplied by 365.25 equals	5,113.50 days 86.00 days 5,199.50 days

   Years and days February 25, 1995, to July 18, 2003 AWW equals 35.00 hours		Days and decimals
   8 years and 144 days Result	equals plus equals	8 years x 365.25 equals	2,922.00 days 144.00 days 3,066.00 days

   From the period of employment that has the AWW, which is the lesser of the two part-time periods, subtract the 230 days, which in this case is the period from December 1, 1980, to February 24, 1995.

   5,199.50 days - 230 days = 4,969.50 part-time days

3. Consolidate both part-time periods into equivalent full-time period.

   Part-time days and decimals December 1, 1980, to February 24, 1995 AWW equals 22.50 hours	Full-time days and decimals
   4,969.50 days multipled by 22.50 (AWW) 37.50 (SWW)	2,981.70 days

   2,981.7 days divided by 365.25 days = 8.16 full-time years

   Part-time days and decimals February 25, 1995, to July 18, 2003 AWW equals 35.00 hours	Full-time days and decimals
   3,066.00 days multipled by 35.00 (AWW) 37.50 (SWW)	2,861.60 days

   2,861.60 days divided by 365.25 days = 7.84 full-time years

4. Add both periods of full-time years of employment:

   plus equals

   8.16 years (December 1, 1980, to February 24, 1995) 7.84 years (February 25, 1995, to July 18, 2003) 16.00 years

5. The severance pay entitlement is sixteen (16) weeks multiplied by one-half (½) week's pay for each complete year of employment based on the rate of pay of the classification prescribed in the certificate of appointment on the date of the termination of employment.

5.3 Full-time and part-time employment periods

Where the period of continuous employment in respect of which a severance pay benefit is to be paid consists of both full-time and part-time employment or varying levels of part-time employment, the benefit shall be calculated as indicated in the relevant collective agreement.

Example 1 (continuous employment composed of both full- and part-time periods)

An employee in the AS group under the PA collective agreement is resigning at 45 years of age, and the last day at work is Friday, July 18, 2003.

The continuous employment is from December 16, 1991, to July 18, 2003 (11 years and 215 days).

As per the PA collective agreement, to be entitled to severance pay on a resignation, the employee must have at least ten (10) years of continuous employment. The entitlement of one-half (½) week's pay is based on each complete year of continuous employment. The severance pay benefits for this employee are therefore based on the number of complete years, which is eleven (11).

1. Period of continuous employment (part-time)

   December 16, 1991, to February 24, 1995
   AWW = 22.50 hours (AS SWW = 37.50 hours)
   (3 years and 71 days)

   February 25, 1995, to July 18, 2003 (full time)
   AWW = 37.50 hours
   (8 years and 144 days)

2. Severance pay for a resignation is based on complete years of continuous employment.

   To round off at complete years of continuous employment, subtract from the part-time period of 3 years and 71 days, the 215 days of the complete period of continuous employment (11 years and 215 days).

   Before subtracting 215 days, convert the years and days into days and decimals as follows:

   Formula: 1 year = 365.25 days (365 + 365 + 365 + 366 ÷ 4)

   Years and days December 16, 1991, to February 24, 1995 AWW equals 22.50 hours		Days and decimals
   3 years and 71 days Result	equals plus equals	3 years x 365.25 equals	1,095.75 days 71.00 days 1,166.75 days

   1,166.75 days - 215 days = 951.75 part-time days

3. Consolidate part-time period into full-time period

   Part-time days and decimals December 16, 1991, to February 24, 1995 AWW equals 22.50 hours	Full-time days and decimals
   951.75 days multiplied by 22.50 (AWW) 37.50 (SWW)	571.05 days

   571.05 days divided by 365.25 days = 1.56 full-time years

   Also, convert the full-time period of February 25, 1995, to July 18, 2003, into years and decimals.

   Years and days February 25, 1995, to July 18, 2003 AWW equals 37.50 hours		Days and decimals
   8 years and 144 days Result	equals plus equals	8 years x 365.25 equals	2,922.00 days 144.00 days 3,066.00 days

   3,066.00 days divided by 365.25 days = 8.40 full-time years

4. Add all of the full-time years (including decimals).

   plus equals

   1.56 years (December 16, 1991, to February 24, 1995) 8.40 years (February 25, 1995, to July 18, 2003) 9.96 years

5. The severance pay entitlement is 9.96 multiplied by one-half (½) week's pay for each complete year of employment based on the weekly rate of pay of the classification prescribed in the employee's certificate of appointment on the date of termination of employment.

Example 2 (continuous employment composed of full- and part-time periods - complete and partial years)

An employee in the AS group under the PA collective agreement is retiring at 61 years of age. The last day of employment is Friday, July 18, 2003.

The employee's continuous employment period is from December 16, 1991, to July 18, 2003 (11 years and 215 days).

As per the PA collective agreement, to be entitled to severance pay on a retirement, the employee must be entitled to an immediate annuity or an annual allowance. The entitlement is one (1) week's pay for each complete year of continuous employment and, in the case of a partial year of continuous employment, one (1) week's pay multiplied by the number of days of continuous employment divided by three hundred and sixty-five (365), to a maximum of thirty (30) weeks' pay.

The severance pay benefits for this employee are therefore based on the number of complete and partial years.

1. Period of continuous employment.

   December 16, 1991, to February 24, 1995
   AWW = 22.50 hours (AS SWW = 37.50 hours)
   (3 years and 71 days)

   February 25, 1995, to July 18, 2003
   AWW = 37.50 hours
   (8 years and 144 days)

2. Severance pay for a retirement is based on complete and partial years of continuous employment.
3. Consolidate the part-time period into full-time period.
   Formula: 1 year = 365.25 days (365 + 365 + 365 + 366 ÷ 4)

   Years and days December 16, 1991, to February 24, 1995 AWW equals 22.50 hours		Days and decimals
   3 years and 71 days Result	equals plus equals	3 years x 365.25 equals	1,095.75 days 71.00 days 1,166.75 days

   Part-time days and decimals December 16, 1991, to February 24, 1995 AWW equals 22.50 hours	Full-time days and decimals
   1,166.75 days multiplied by 22.50 (AWW) 37.50 (SWW)	700.05 days

   700.05 days divided by 365.25 days = 1.92 full-time years

   Also, convert the full-time period from February 25, 1995, to December 15, 2002, into years and decimals:

   Years and days February 25, 1995, to December 15, 2002 AWW equals 37.50 hours		Days and decimals
   7 years and 294 days Result	equals plus equals	7 years x 365.25 equals	2,556.75 days 294.00 days 2,850.75 days

   2,850.75 days divided by 365.25 days = 7.81 full-time years

   Then divide the partial year (December 16, 2002, to July 18, 2003) of 215 days by 365 as per the PA collective agreement.

   215.00 days divided by 365 = 0.59 full-time years

4. Add all periods of full-time years of employment (including decimal places):

   plus plus equals

   1.92 years (December 16, 1991, to February 24, 1995) 7.81 years (February 25, 1995, to December 15, 2002) 0.59 years (December 16, 2002, to July 18, 2003) 10.32 years

5. The severance pay entitlement is 10.32 weeks multiplied by one (1) week's pay multiplied by weekly rate of pay to which the employee is entitled for the classification prescribed in the certificate of appointment on the date of the termination of employment.

5.4 Employees working on an as-and-when-required basis

Where the period of continuous employment in respect of which a severance pay benefit is to be paid consists of periods of as-and-when-required employment, the calculation can be established using a working year instead of a calendar year.

This type of calculation would be required when the calculation of the severance pay benefit based on a calendar year does not reflect the hours remunerated at straight time by the employee and using the conventional calculation would result in a lesser benefit to the employee.

Before applying the same steps as indicated in section 2.5, determine the actual hours remunerated under entitlement codes 001 and 002 for the eligible period of continuous employment.

The formula used to convert calendar days to working days is as follows:

71% x calendar days = the number of working days.

(260.88 working days divided by 365.25 calendar days = 71%)

Example (as-and-when-required basis)

An employee in the AS group under the PA collective agreement is resigning at 45 years of age, and the last day at work is Friday, March 28, 2003.

The continuous employment is from September 17, 1984, to March 28, 2003 (18 years and 193 calendar days).

As per the PA collective agreement, to be entitled to severance pay for a resignation, the employee must have at least ten (10) years of continuous employment. The entitlement of one-half (½) week's pay is based on each complete year of continuous employment. The severance pay benefits for this employee are therefore based on the number of complete years, which is eighteen (18).

Assume, for this example, that the employee was remunerated for a total of 25,556.75 hours under entitlement code 001 for the eligible period of continuous employment.

1. Period of continuous employment (as-and-when-required basis).

   September 17, 1984, to March 28, 2003
   AWW = variable (AS SWW = 37.50 hours)
   (18 years and 193 calendar days)

2. Severance pay for a resignation is based on complete years of continuous employment.

   Before rounding off to complete years of continuous employment and subtracting 137.03 working days (193 calendar days multiplied 71 per cent, converted), convert the hours worked into working days as follows:

   Hours remunerated September 17, 1984, to March 28, 2003 (18 years and 193 calendar days)
   25,556.75 hours	25,556.75 divided by 1956.6 hours equals 13.06 working years multiplied 260.88 days equals 3,407.09 working days

   3,407.09 working days (18 years) - 137.03 working days (193 calendar days) = 3,270.06 working days.

   3. and 4. Consolidate the as-and-when-required period into full-time period.

   Convert working days and decimals into full-time years and decimals as follows:

   3,270.06 work days divided 260.88 days = 12.54 years

3. The severance pay entitlement is 12.54 weeks x one-half (½) weekly rate of pay for each complete year based on the rate of pay of the classification prescribed in the certificate of appointment on the date of the termination of employment.

5.5 Seasonal employees

For purposes of establishing an entitlement to severance pay, an indeterminate seasonal employee is deemed to have completed one year of continuous employment for each year of seasonal employment. The calculation of the severance payment, however, does not include the off-season period.

Example 1 (seasonal)

An employee in the PM group under the PA collective agreement is resigning at 35 years of age, and the last day at work is August 31, 2003.

The continuous employment is from April 1, 1991, to August 31, 2003.

The season consists of five (5) months each year (April 1 to August 31).

As per the PA collective agreement, to be entitled to severance pay on resignation, the employee must have at least ten (10) years of continuous employment. The entitlement of one-half (½) week's pay is based on each complete year of continuous employment.

The employee has twelve (12) years of seasonal employment and meets the requirement of ten (10) years of continuous employment; the employee is therefore entitled to the severance pay benefits.

For the purpose of establishing the basis of the one-half (½) week's pay entitlement benefit, a person who works five (5) months each year for twelve (12) years for a total of sixty (60) months has the equivalent of five (5) years of continuous employment.

The severance pay entitlement is five (5) weeks multiplied by one-half (½) weekly rate of pay for each complete year of employment based on the pay of the classification prescribed in the certificate of appointment on the date of the termination of employment.

Example 2 (seasonal)

An employee in the PM group under the PA collective agreement is retiring at 55 years of age, and the last day at work is August 31, 2003.

The continuous employment is from April 1, 1978, to August 31, 2003.

The normal season consists of five (5) months each year but has varied with longer and shorter periods of time.

As per the PA collective agreement, to be entitled to severance pay on retirement, the employee must be entitled to an immediate annuity or annual allowance under the PSSA. The entitlement of one (1) week's pay is based on each complete year of continuous employment. In the case of a partial year of continuous employment, the entitlement is based on one week's pay multiplied by the number of days of continuous employment divided by 365 days.

The employee has twenty-five (25) years of seasonal employment and is entitled to an immediate annuity. The employee is therefore entitled to the severance pay based on retirement benefits.

Total the number of months, including partial months that the employee worked. For partial months add the number of calendar days during each partial period and divide the result by thirty (30) to determine complete months. An example follows:

The severance pay entitlement is calculated on ten (10) years and one hundred and eighty-one (181) days of continuous employment or 10.50 weeks (10 years + 181 days x 1 ÷ 365 days) multiplied by the weekly rate of pay of the classification prescribed in the certificate of appointment on the date of the termination of employment.

5.6 Laid-off employee reappointed within a period of continuous employment pursuant to subsection 29(1) of the PSEA

For the calculation of severance pay, where an employee was reappointed within a period of continuous employment, only the periods of employment should be counted.

Example (reappointment of a laid-off employee)

A full-time SI employee worked from September 1, 1966, and was laid off at the close of business day October 31, 1974 (8 years and 61 days).

The employee is reappointed under subsection 29(3) of the PSEA as a full-time SI, effective September 1, 1975, and then resigned at the close of business day September 30, 1977 (2 years and 30 days).

The severance pay entitlement is 1.83 years multiplied by one-half (½) week's pay for each complete year of continuous employment.

5.7 Surplus employees

Employees should not be laid off when departments know that their employment with departments or agencies enumerated in Schedule 1, Part 1 of the Public Service Staff Relations Act (PSSRA) will be substantially continuous. Departments should arrange reporting dates of transfers in such a way as to give effect to this policy.

Employees who have been identified as surplus to requirements or have received notice of layoff and accept term appointments or lower-level indeterminate appointments shall not receive severance pay at the date of reappointment. In the case of employees who have an offer of employment before the lay-off date, with the employment to commence after the lay-off date, departments should arrange to provide either short-term assignments or periods of leave with or without pay prior to the re-assignment date so that no layoff will occur.

The entitlements to severance pay for employees who take term appointments or indeterminate appointments at a lower level will be protected at the amount earned up to the date at which the layoff would otherwise occur. The dollar value of the entitlement will be adjusted in accordance with salary revisions applicable to the classification and level prior to the acceptance of the term or lower level indeterminate position. For greater certainty, this means that the salary revisions of the classification and level subsequent to the day of layoff will be applied.

When an employee subsequently terminates employment, the dollar value of the severance pay entitlement for the period prior to the designated layoff after salary revisions in the intervening period have been applied shall be compared with the dollar value of the severance pay on termination. The employee shall receive the greater of the two amounts. Severance pay benefits from employment subsequent to lay-off will be accorded as detailed in section 2.5.9 of this module.

Example (surplus)

A surplus full-time CR-05 employee under the PA collective agreement with a continuous employment date of April 1, 1992, was scheduled for layoff effective April 1, 2001. The employee accepted an indeterminate appointment to a lower level as a CR-03 effective February 1, 2001. The employee subsequently resigns effective August 22, 2002.

As per the PA collective agreement, on the first layoff the severance pay benefit is two (2) week's pay for the first complete year of continuous employment and one (1) week's pay for each additional complete year of continuous employment and, in the case of a partial year of continuous employment, one week's pay multiplied by the number of days of continuous employment divided by 365 days. The severance pay benefit for this employee is therefore based on the number of complete years, which is nine (9). The entitlement due is ten (10) weeks: two (2) week's pay for the first complete year of continuous employment and one (1) week's pay for each additional complete year.

CR-05

The employee's salary rate is $40,934 (maximum of CR-05 on June 21, 2000).

Severance pay payable on April 1, 2001, is calculated as follows:

The rates of pay are revised effective June 21, 2001 (subsequent to the lay-off date) due to the CR revision, and the severance pay is revalued follows:

The rates of pay are revised effective June 21, 2002 (subsequent to the lay-off date) due to the CR revision and the severance pay is revalued as follows:

CR-03

The employee accepted indeterminate appointment at a lower level as a CR-03 effective February 1, 2001, at $33,681 (maximum on June 21, 2000) in lieu of a layoff.

The employee's salary rate after the revision of June 21, 2001, is $34,624 (maximum).

The CR-03 rate on June 21, 2002, is revised to $35,490 (maximum).

August 2002

The employee resigns effective August 22, 2002.

The employee now has ten (10) years and 144 calendar days of continuous employment.

Severance pay is based on ten (10) complete years, as per a resignation:

The severance pay entitlement is ten (10) weeks multiplied by one-half (½) the weekly rate of pay for each complete year of employment based on the pay of the classification prescribed in the certificate of appointment on the date of the termination of employment.

When the employee subsequently terminates employment, the dollar value of the severance pay entitlement on this termination shall be compared with the resultant dollar value of the severance pay for layoff on April 1, 2001, after salary revisions in the intervening period have been applied. The employee shall receive whichever amount is greater.

The employee will receive the greater of the two amounts, which is $8,266.64, the dollar value of the severance pay entitlement for the designated lay-off period, which includes salary revisions in the intervening period.

In addition, the employee will receive severance pay benefit for the one-year employment as a CR-03:

The total severance pay benefit for this employee is as follows:

$8,266.64 + $340.10 = $8,606.74

If the employee resigned before completing ten (10) years continuous employment, the severance pay benefit would be the adjusted amount based on the service prior to the lay-off date.

If the employee completed thirty (30) or more years of continuous employment before retirement and the rate of pay on retirement exceeds the revised rate for a CR-05, the severance pay benefit would be thirty (30) weeks' pay at the rate of pay on retirement.

Only those employees who do not have an offer of employment before the lay-off date may be considered as true layoffs and receive severance pay at the date of layoff.

5.8 Cessation of employment pursuant to subsection 30(4) of the PSEA

The revised section 30 of the PSEA came into effect on June 1, 1993. Subsection 30(4) provides that if an employee who receives a leave of absence priority pursuant to subsections 30(1) or (2) of the PSEA is not appointed to an indeterminate position during the period of the leave of absence priority, the employee ceases to be an employee at the end of that period and is not entitled to severance payment.

An employee who resigns or retires prior to the date on which their employment would be terminated under subsection 30(4) would receive payment of severance pay in accordance with the provisions of the relevant collective agreement.

5.9 Severance benefit paid previously

If, within a period of continuous employment, an employee had previously been paid a severance pay benefit, retiring leave, or a cash gratuity in lieu of, the new severance pay entitlement is arrived at by determining the number of years of continuous employment to the maximum authorized, less the period of service in respect of which a severance benefit has previously been paid.

Where an employee received a severance pay benefit in respect of a period of employment that does not form part of this period of continuous employment, no reduction applies.

In determining the number of years of continuous employment according to the Terms and Conditions of Employment Policy, only those periods of actual employment before and after a break in service count as continuous employment.

If there is a conflict between the above method and the provisions of a collective agreement, the agreement governs.

Example

An employee was hired on October 16, 1978, and resigned at 39 years of age effective September 1, 1989, close of business day. The employee was entitled and received severance pay for this period.

The employee was re-employed in the AS group, on November 20, 1989, and retired December 13, 2002. The employee is entitled to an immediate annuity (retirement due to ill health).

The severance pay calculation is as follows:

The severance pay entitlement is 13.07 weeks multiplied by the weekly rate of pay of the classification prescribed in the certificate of appointment on the date of the termination of employment.

Note: If the reason for termination of employment did not permit the counting of partial years, the amount of severance pay would be calculated as follows:

The severance pay entitlement is 12.12 weeks multiplied by the weekly rate of pay of the classification prescribed in the certificate of appointment on the date of the termination of employment.

6 Transfer of severance pay

Payment of a retiring allowance, such as severance pay, may be transferred in whole or in part to a registered pension plan or a registered retirement savings plan, subject to the federal income tax rules and regulations.

Only the employee directly concerned may affect such a transfer of severance pay. It is not available to the estate or to beneficiaries when severance pay, following the death of the employee, is paid to any other recipient.

Reference: PWGSC Compensation Directive.

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