Offices in Ottawa and Perth
(613) 722-1500

CONTACT US (613) 722-1500

Termination Pay Pitfalls: What About Commission and Bonuses?

Termination Pay Pitfalls: What About Commission and Bonuses?

By:

Mann Lawyers

Posted September 4, 2019

For non-salaried employees and their employers, termination entitlement can be a complicated matter. Sometimes employees’ entire pay structures are centered on bonuses and commissions. Upon termination, employees are often left wondering how much they are owed if they receive very little in the way of a base salary. Employers worry about short-changing their employees. Under the Employment Standards Act, 2000, employers are required to look at the amount of money the employees make, rather than how it is characterized, for the purposes of determining entitlement.

Employers are required, at a bare minimum, to pay Employment Standards Act, 2000 termination pay to employees upon termination (unless they are dismissed for willful misconduct). This amounts to one week’s pay in lieu of notice per year of service, up to a maximum of eight weeks. During that period, health and other benefits must be maintained. The wages paid during this time must be equivalent to wages paid during a regular work week.

Oftentimes, employers run into problems when calculating the termination pay for employees who are paid either entirely or partially based on commissions and bonuses. In other words, these employees do not have “regular work weeks”: they are not paid on the basis of an hourly wage or salary. How must employers determine how much they are entitled to?

The Employment Standards Act, 2000 states:

No regular work week

[…] if the employee does not have a regular work week or if the employee is paid on a basis other than time, the employer shall pay the employee an amount equal to the average amount of regular wages earned by the employee per week for the weeks in which the employee worked in the period of 12 weeks immediately preceding the day on which notice was given.

In such a scenario, the employer must average the employee’s pay over the previous 12 weeks (base salary, commissions, bonuses, and other payments) to determine the weekly amount. Termination pay amounts must be carefully reviewed, as the employer may not have calculated the amount properly. In a situation where an employee received a significant commission during right before termination, these payments can be substantial. A properly worded termination clause inserted into an employment contract can limit an employer’s liability on termination.

If you have questions about termination pay, please contact our employment group.

This blog post was written by Nigel McKechnie, a member of our Employment Law team.  Nigel can be reached at 613-369-0382 or at nigel.mckechnie@mannlawyers.com.

More Resources

Blog |
Estate Litigation

By: 

Posted September 20, 2022

Disputes over a will after a testator has died can result in costly and time-consuming litigation.  Testators may anticipate this conflict and try to avoid[...]
Blog |
Business Law

By: 

Posted September 6, 2022

Canada is a lush, beautiful country, and nature abounds. Canada is also a vibrant economic market and foreign companies looking to do business in Canada[...]
Blog |
Real Estate

By: 

Posted August 30, 2022

There has been much discussion on the changes in the real estate market, particularly on affordability. To save costs, many prospective buyers and sellers may[...]
Blog |
Practice Management

By: 

Posted August 23, 2022

In an earlier blog post, I discussed some practice development tips for newer lawyers.  This post continues that conversation. Not Work Life Balance – Integration[...]
Blog |
Practice Management

By: 

Posted August 15, 2022

Most seniors have an opinion on what new or newer lawyers should be considering concerning practice development.  Me too.  I don’t think there is a[...]
Blog |
Environmental Law

By: 

Posted August 8, 2022

Purchasing a property that is contaminated can be daunting.  There are many risks to consider, including significant liability risks.  In some cases, a full assessment[...]

Subscribe to Our Newsletter

"*" indicates required fields

Name*
Consent*
This field is for validation purposes and should be left unchanged.