Bonuses count in severance in Ontario, yet many employees are surprised to learn that employers often calculate severance based only on base salary. For many employees, bonuses are not just a perk they are a core part of their total compensation. Excluding them from a severance package can significantly undervalue what an employee has lost.
A recent decision from the Ontario Superior Court of Justice, Warren v. Canaccord Genuity Corp., reinforces a growing trend in employment law: courts are looking at the full compensation picture when assessing wrongful dismissal damages.
This includes bonuses, incentives, and other variable pay, especially where there is a strong likelihood the employee would have earned them during the notice period. Understanding how these amounts are calculated can have a significant impact on the value of your severance package.
TL;DR: Are Bonuses Included in Severance Pay in Ontario?
Yes. In Ontario, bonuses are included in severance if the employee would likely have earned them during the notice period. Courts assess total compensation, including discretionary bonuses, commissions, and incentive
Do Bonuses Count in Severance Pay in Ontario?
Yes. When courts assess wrongful dismissal damages, the goal is straightforward: put the employee in the position they would have been in if they had received proper notice. In practice, that means looking beyond salary alone.
Total compensation today often includes:
- Annual or discretionary bonuses
- Performance-based incentives
- Commission or variable pay
- Sometimes even equity-based compensation
Looking Beyond Base Salary in Wrongful Dismissal Claims
What matters is not just what was guaranteed, but what the employee realistically would have earned during the notice period.
That idea that continues to shape how courts approach these cases often framed as “lost opportunity” is seen as:
- What compensation the employee likely would have received if they had remained employed during the notice period.
Key Case: Warren v. Canaccord Genuity Corp.
The dispute over bonus calculation
Unlike salary, bonuses can vary from year to year. They may depend on individual performance, company results, or broader market conditions.
In Warren v. Canaccord Genuity Corp, one of the main points of contention was the value of Warren’s notice period bonus. While both parties accepted that Warren was entitled to damages representing his lost bonuses during the notice period, the key dispute was how the bonus amounts should be calculated:
- Canaccord argued that the court should simply average Warren’s bonuses from the three years before his termination.
- Warren argued that the court should instead compare his compensation to other managing directors who performed similar roles during the notice period.
The court’s decision
Siding with the employee, the court adopted the comparator approach.
Evidence showed that:
- Other managing directors in the mining group received bonuses of approximately $3 million in strong market years.
The court concluded that:
- Warren would likely have earned comparable bonuses had he remained employed.
Why This Decision Matters for Employees?
From an employee’s perspective, this case is quite significant. It reinforces a critical shift:
- Courts are increasingly willing to look forward not just backward when assessing bonuses
Rather than weighing the average of past earnings, courts can consider using compensation of a comparable employee during the notice period as evidence of what the dismissed employee likely would have earned had they remained employed.
In industries affected by economic cycles, this means:
- Severance may reflect future earning potential, not just past averages
- Market conditions during the notice period matter
- High-performing industries (e.g., finance, mining, tech) may see significantly higher damage award
Bonus Compensation and Economic Cycles
Timing matters.
If an employee is dismissed:
- Just before a market upswing, or
- During a period of improving business conditions
They may still be entitled to damages that reflect that growth, even if prior earnings were lower.
What Means for Your Severance Package?
If a significant portion of your compensation comes from bonuses or incentives, your severance package may be undervalued if those amounts are excluded or minimized.
A proper assessment should consider:
- Your compensation structure
- Comparable employee earnings for bonuses, etc.
- Market conditions during the notice period
Key Takeaways
- Bonuses are often included in severance
- Courts look at total compensation, not just salary
- Future earning potential can be considered
- Comparator evidence may increase damages
People Also Ask
Are bonuses included in severance pay in Ontario?
Yes. Bonuses are included in severance if there is a reasonable expectation the employee would have received them during the notice period.
Do discretionary bonuses count toward severance?
They can. Even discretionary bonuses may be included if they were regularly paid or if the employee had a reasonable expectation of receiving them.
How are bonuses calculated in wrongful dismissal cases?
Courts may use historical averages or compare the employee’s compensation to similar employees to estimate what would have been earned during the notice period.
What is the comparator approach in severance cases?
The comparator approach looks at what similar employees earned during the notice period to determine what the dismissed employee likely would have received.
What if my employer excluded bonuses from my severance?
Your severance may be undervalued. Employers often exclude bonuses, but courts frequently include them when calculating full compensation.
Is severance based only on salary in Ontario?
No. Severance is based on total compensation, which can include bonuses, commissions, and other incentives.
Do commissions and incentives count in severance?
Yes. Commissions and other variable compensation are often included if the employee would likely have earned them during the notice period.
Get Legal Advice Before Accepting a Severance Offer
Severance packages are often presented as final, but they rarely reflect the full legal entitlement, especially when bonuses are involved.
The employment lawyers at Whitten & Lublin can help you assess whether your severance properly accounts for all components of your compensation and whether you may be entitled to more.
If you are looking for employment lawyers and would like more information about what Whitten & Lublin can do for you, please contact us online or call 416 640 2667.
