Severance Package Negotiation in Ontario: How to Negotiate Without Making it a War

Most employees don’t negotiate severance because they don’t want conflict.

That’s understandable. Losing a job is stressful, and many people just want closure. But severance negotiation does not need to be aggressive, hostile, or confrontational. In fact, the most successful severance negotiations are calm, factual, and grounded in legal risk.

When handled properly, employers are often open to movement especially when the issues are communicated clearly and professionally.

In most cases, yes.

If your employer is offering more than the legal minimum, they are already negotiating just starting from their preferred number. That initial offer is rarely their best offer.

Severance negotiations are about reallocating risk. Employers pay more when they understand that the risk of paying less may ultimately cost them more.

Negotiation is often worthwhile when one or more of the following apply:
• you have meaningful length of service
• you are older or in a specialized role
• your compensation includes bonus, commission, or variable pay
• your employment contract contains a weak or outdated termination clause
• the offer requires a broad release of claims
• there are potential human rights issues (medical leave, disability, family status, etc.)
• you were induced to leave a prior employer
• you were placed on a layoff not permitted by your contract

In many of these situations, the employer’s exposure extends far beyond statutory minimums.

Money matters but terms often matter just as much. Common negotiation points include:
• extended benefits coverage
• bonus and commission treatment during the notice period
• car, housing, or other allowances
• RRSP or pension contributions
• outplacement or career transition support
• reference letters or agreed wording
• confidentiality and non-disparagement clauses
• scope of non-competition or non-solicitation restrictions
• payment structure (lump sum vs. salary continuance)
• tax structuring strategies
A well-negotiated severance package improves both the financial result and the practical outcome.

1. Don’t sign immediately
You are almost always entitled to time to obtain legal advice. If the deadline is unreasonably short, ask for an extension. Employers frequently agree.

2. Prepare a fact-based counter
Effective severance negotiations rely on objective factors, including:
• age
• length of service
• role and seniority
• total compensation (not just base salary)
• job market realities
• applicable case law

Case law becomes particularly important in non-routine cases, such as:
• misclassification as an independent contractor
• void or unenforceable termination provisions
• human rights or reprisal issues
• inducement from prior employment

There can also be significant tax advantages to properly characterizing portions of a settlement as certain types of damages. Even where a claim may not ultimately succeed at trial, employers will often agree to re-allocate amounts in exchange for certainty resulting in a better net outcome for the employee.

3. Keep the tone professional
You are not threatening litigation you are identifying legal risk.
A properly structured demand letter typically ends with language such as:
“Please contact me by [date]. Should you wish to discuss this matter, we are amenable to a without-prejudice conversation.”
Most employers respond to a well-reasoned demand. Over-the-top or unrealistic demands, on the other hand, often trigger aggressive responses and stalled negotiations.
Employment lawyers generally have a strong sense of what is reasonable at each stage. Employees who negotiate on their own often anchor too high (forcing the employer to harden its position) or too low (negotiating against themselves).

4. Propose a clean resolution
Employers pay to avoid uncertainty.
Litigation is expensive, time-consuming, and unpredictable. Most employers want to resolve terminations without cause efficiently and quietly. Make “yes” easy.

5. Finalize the deal
Once terms are agreed upon, the employer will typically prepare settlement documentation. This usually includes Minutes of Settlement and a Release, with final input from the employee or their lawyer before execution.

• focusing only on base salary and ignoring bonus or benefits
• sending emotional emails that create “cause” ammunition
• accepting rigid deadlines without requesting extensions
• sending correspondence that is not marked without prejudice when it should be
• negotiating without understanding whether a contract limits entitlements
• signing a release for a few extra weeks when months or more may be available
• becoming frustrated when negotiations take time

Some employers adopt a “wait and see” approach, particularly where mitigation is likely. Others use clawbacks (often 50% of amounts above ESA minimums) to encourage quick resolution and re-employment. These strategies must be anticipated and addressed.

Often, yes especially when the numbers are meaningful.

A lawyer’s letter does at least five things:
• clarifies legal entitlement and employer risk
• frames negotiations professionally
• prevents accidental concessions
• anchors discussions at a defensible position
• incorporates tax-efficient structuring

McMackin Law’s approach to severance negotiation is straightforward: we push for what is justified, we don’t waste time, and we keep the process controlled providing clear, practical advice at every stage.