Severance Pay in Alberta: Employer Obligations & Employee Rights

Severance pay is one of the most misunderstood areas of employment law in Alberta. Many employees are offered far less than what they are legally entitled to, and many employers mistakenly believe that the Employment Standards Code sets the full amount of severance owed. In reality, the Code sets only the minimum—while common law often requires significantly more.

Whether you’ve been dismissed or you’re an employer planning a termination, understanding how severance pay in Alberta actually works is essential. This guide explains minimum standards, common law severance, employer obligations, and employee rights so you can make informed decisions.

What Is Severance Pay in Alberta?

Severance pay is the compensation an employer must provide when terminating an employee without cause. Alberta law recognizes two separate entitlement systems:

1. Employment Standards Code (minimum notice or pay in lieu)
   
2. Common law (reasonable notice based on court decisions)
   

Most employees are entitled to far more under common law than the minimums employers offer.

Employment Standards Minimums: The Legal Floor

The Employment Standards Code sets minimum termination pay ranging from 1 to 8 weeks, depending solely on years of service. These minimums do not consider:

• Age
  
• Position or responsibilities
  
• Difficulty finding new work
  
• Industry conditions
  
• Length of unemployment expected
  

These factors matter significantly under common law.

The minimums are not a complete severance package—they are simply the legal floor employers must meet.

Common Law Severance: The Full Amount Owed

Under common law Alberta, courts determine “reasonable notice” based on:

• Length of service
  
• Age of the employee
  
• Character of employment (role/seniority)
  
• Availability of comparable work
  
• Salary, bonuses, and benefits
  
• Economic conditions
  

Most employees are entitled to months, not weeks, of compensation.

Examples:

• 5 years of service may result in 4–8 months of severance
  
• 10 years of service may result in 12–18 months
  
• Senior, long-service, or older employees may receive 18–24 months or more
  

The gap between minimum standards and common law can be tens of thousands of dollars.

What Severance Packages Must Include

A proper severance package in Alberta must address all components of compensation, not just salary. Depending on your role, your package may include:

1. Salary or Pay in Lieu of Notice

This is the largest part of most severance packages.

2. Bonuses and Incentive Pay

Courts regularly include:

• Annual bonuses
  
• Sales commissions
  
• Incentive plans
  
• Profit-sharing
  

An employer cannot avoid payment simply by calling a bonus “discretionary.”

3. Benefits

Common law requires continuation of:

• Health coverage
  
• Dental
  
• Vision
  
• Life insurance
  
• Disability benefits
  

If continuation is not possible, a cash equivalent may be required.

4. Vacation Pay

Employers must pay all earned and accrued vacation.

5. RRSP or Pension Contributions

Where these form part of the employee’s compensation, they must be included.

Failing to include any of these may result in an unlawful severance calculation.

When Employees Are Owed Severance

You are typically owed severance if you were:

• Terminated without cause
  
• Laid off indefinitely
  
• Constructively dismissed
  
• Terminated while on probation (in many cases)
  
• Terminated with an invalid employment contract
  

You may also be owed severance if the employer:

• Misclassified you as a contractor
  
• Cut your pay or responsibilities significantly
  
• Pressured you to resign
  

If you are uncertain, a consultation with an employment lawyer Alberta can clarify your entitlement.

When Employers Are Not Required to Pay Severance

Employers are only exempt from paying severance when they can prove just cause—a very high standard.

Examples that often do not qualify as cause:

• Poor performance
  
• Tardiness
  
• Conflict with coworkers
  
• Insubordination
  
• Single errors or mistakes
  

True just cause requires serious misconduct and a fair disciplinary process. Most terminations for cause are overturned.

Why Many Severance Packages Are Incorrect

Most employers rely solely on Employment Standards minimums without considering common law obligations. Other common problems include:

• Termination clauses written incorrectly
  
• Outdated employment agreements
  
• Failure to include bonuses or commissions
  
• Insufficient benefits continuation
  
• Inaccurate calculations of average earnings
  

Employees routinely receive severance offers far below legal entitlement.

Should You Accept the First Severance Offer?

In nearly every case, no.

Initial offers are often:

• Time-limited
  
• Much lower than common law amounts
  
• Missing key compensation elements
  
• Contingent on signing a release
  

Once you sign a release, you cannot pursue additional severance—even if you were owed significantly more.

Always get legal advice before signing anything.

Employer Obligations During Termination

Employers in Alberta must:

• Provide proper notice or severance
  
• Deliver a Record of Employment promptly
  
• Pay outstanding wages and vacation
  
• Handle termination respectfully and lawfully
  
• Avoid misrepresentations or bad-faith conduct
  

Bad-faith termination can lead to additional damages.

Employers should seek legal guidance to ensure compliance and reduce litigation risk.

Employee Rights During Termination

Employees have the right to:

• Receive severance that reflects common law reasonable notice
  
• Review the severance package before signing
  
• Seek advice from an employment lawyer
  
• Challenge cause allegations
  
• Request clarification on calculations
  
• Decline insufficient offers
  

If you believe your severance Alberta package is too low, legal review can significantly change the outcome.

Examples of Typical Severance Ranges in Alberta

(Generalized illustrations)

• Mid-level manager, 8 years of service, age 35:
  Common law notice: 10-12 months
  
• Executive/ Senior manager, 14 years of service, age 55:
  Common law notice: 16–20 months
  
• Technical specialist, 4 years of service, age 40:
  Common law notice: 6–8 months
  
• Sales employee with commissions, 10 years of service, age 50:
  Common law notice: 9–12 months, severance pay includes average commissions + salary + bonus

Actual entitlements vary depending on the factors noted above.

When to Speak With an Employment Lawyer

You should consult an employment lawyer Alberta professional if:

• You were offered severance but are unsure if it’s fair
  
• You were terminated for alleged cause
  
• Your employment contract contains a termination clause
  
• You earn commissions or bonuses
  
• You believe discrimination played a role
  
• You feel pressured to sign a release
  

A lawyer can negotiate on your behalf, identify errors in the employer’s calculations, and ensure full compensation.

Employers should also seek legal advice to avoid costly termination mistakes.

Speak With an Employment Lawyer

Whether you are an employer planning a termination or an employee evaluating your severance package, Libra Law’s Employment Law team can help. We provide clear, strategic advice grounded in Alberta employment law and common law principles.

Explore our Employment Law services:
https://libra-law.ca/service/employment-law

Speak with an employment lawyer today to understand your rights and next steps.

This article is for general informational purposes only and does not constitute legal advice. To obtain advice specific to your situation, please consult a lawyer or qualified professional.