How do you terminate an employee in Canada in 2026?
Canada's federal termination is a dual obligation: after 1 year of continuous service, you owe both a graduated notice period and a separate statutory severance payment, and common law can multiply both well beyond the Code's written floors.
· Canada guide
Illustration · Toronto, Canada
Canada has two separate termination obligations for employees past their first 3 months. You owe notice (or pay it out) and severance pay. Both are due at the same time on a without-cause dismissal. Notice starts at 2 weeks for under three years of service. It rises to 8 weeks at 8+ years. 1 extra week accrues per completed year from year three onwards (Canada Labour Code).
Severance is a separate bill. The rate is 2 days of regular wages per completed year of service. The minimum floor is 5 days. Severance is owed once an employee has completed 1 year of continuous employment. There is no cap on total severance under the federal Code. Common law notice is also uncapped and often runs well above the Code's written minimums for long-service employees.
Group terminations involving 50 or more employees at one establishment within 28 days need at least 16 weeks written notice to the Labour Program Head of Compliance and Enforcement before dismissals take effect.
How much notice must you give a federally regulated employee in Canada?
No notice is required for the first 3 months of service. After that, notice is 2 weeks from three months to three years. From year three, add 1 week per completed year. The ceiling is 8 weeks at 8+ years (Canada Labour Code section 230, amended 1 February 2024).
These are the minimum amounts the law requires for federally regulated workplaces. Common law reasonable notice is a separate and often larger obligation. Courts impose it on any termination without cause.
| Continuous service | Statutory minimum notice (federal) |
|---|---|
| Less than 3 months | None |
| 3 months to less than 3 years | 2 weeks |
| 3 years | 3 weeks |
| 4 years | 4 weeks |
| 5 years | 5 weeks |
| 6 years | 6 weeks |
| 7 years | 7 weeks |
| 8+ years | 8 weeks (statutory cap) |
Pay in Lieu of Notice
Instead of working the notice period, employers may pay regular wages for the full notice period. This is called termination pay or pay in lieu of notice. It is subject to income tax and standard payroll deductions. Pay in lieu of notice and statutory severance pay are separate obligations; paying one does not discharge the other.
Common law and the Code's floor
The Canada Labour Code's notice schedule is the statutory floor, not the ceiling. Courts regularly award common law reasonable notice well above the statutory weeks, particularly for long-service, senior, or specialised employees. An employee with ten years service in a technical role may have a common law entitlement to several months of notice, not the eight statutory weeks. This gap is one of the most frequently litigated areas in Canadian employment law.
What procedure is required before dismissing a federal employee?
Employees with 12 months of continuous employment can file an unjust dismissal complaint if they believe they were dismissed without just cause. The complaint must be filed within 90 days of termination (Canada Labour Code section 240).
The federal unjust dismissal route can result in reinstatement. That remedy is not routinely available in provincial employment standards proceedings.
What counts as just cause under federal law
Just cause is not defined in the Code but has been developed through case law and adjudication at the Canada Industrial Relations Board (CIRB). It requires serious, proven misconduct proportionate to the sanction. Courts and adjudicators apply a contextual test; minor disciplinary matters rarely justify summary dismissal. Progressive discipline is expected before termination for conduct or performance reasons.
Protected grounds
Termination must not be connected to pregnancy, union membership or activity, parental leave, medical leave, or any ground protected under the Canadian Human Rights Act, including race, national or ethnic origin, colour, religion, age, sex, sexual orientation, gender identity, marital or family status, genetic characteristics, or disability. A termination that follows shortly after an employee's protected leave is treated with particular scrutiny.
No cause required for pay in lieu
Employers may terminate without stated cause at any time by providing the required notice or pay in lieu, plus statutory severance where owed. However, an employee with 12 months or more of service retains the right to file an unjust dismissal complaint regardless of whether notice was paid. The complaint procedure and the right to elect common law damages are separate tracks; an employee must choose one.
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Confirm the termination basis
Decide whether you are terminating with just cause (requiring documented serious misconduct) or without cause (triggering notice and severance obligations). Without-cause terminations are more common; the Code and common law both set the entitlements.
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Calculate notice and severance
Compute the graduated statutory notice entitlement under section 230 and the separate statutory severance entitlement under section 235. Both are owed on a without-cause termination where the service threshold is met.
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Check group termination rules
If the termination is one of a group of employees, verify whether the total meets the threshold at the single establishment within the counting window. File the advance notice to the Labour Program before announcing the group termination.
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Prepare the termination letter and release
Issue a written termination letter stating the effective date, the notice entitlement (or pay in lieu), and any severance owed, each as separate itemised line items. Prepare a release agreement if enhanced terms are being offered.
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Process final pay and issue the ROE
Run the final payroll covering pay in lieu of notice, statutory severance, and all accrued vacation pay. Issue the Record of Employment (ROE) through Canada Revenue Agency after the last pay period to allow the employee to access Employment Insurance.
How is statutory severance pay calculated in Canada?
Severance pay is owed to employees who have completed 1 year of continuous service. The rate is 2 days of regular wages per completed year of service. The minimum floor is 5 days, regardless of tenure (Canada Labour Code section 235).
There is no cap on total severance under the federal Code. Severance is owed on top of notice. Paying notice does not cover the severance bill.
The dual obligation
Many employers outside Canada assume that paying notice in lieu discharges all termination obligations. In Canada's federal jurisdiction it does not. On a without-cause termination of an employee past 1 year of service, you owe both: the full notice entitlement (or pay in lieu) under section 230, and the separate severance payment under section 235. Both are calculated on regular wages, and both are paid at termination.
What counts as regular wages
Regular wages means the employee's regular rate of pay for their regular hours. It excludes overtime premiums, discretionary bonuses, and allowances not forming part of the regular rate. Commission employees use average weekly earnings over the preceding 12 weeks where commissions form part of base pay.
Interaction with common law
Statutory severance is the floor set by the Code, but courts assess common law wrongful dismissal damages on a different basis entirely: reasonable notice at common law takes into account the employee's character of employment, length of service, age, and availability of comparable employment. Courts do not simply multiply the statutory formula. The Code's statutory severance is a minimum; contracts and common law often produce larger sums.
Group terminations: the 16-week advance notice obligation
A group termination is triggered when 50 or more employees at a single establishment are dismissed within 28 days. You must give at least 16 weeks written notice to the federal Labour Program Head of Compliance and Enforcement before the dismissals take effect.
Individual notice and severance are still owed to each affected employee on top of the group notice requirement.
Terminate 50 or more employees at a single establishment within any 28 days and the group termination provisions apply. The employer must give at least 16 weeks written notice to the Labour Program Head of Compliance and Enforcement before the terminations take effect. Each affected employee still receives individual notice or pay in lieu under section 230, plus statutory severance under section 235 where service thresholds are met.
Source: Norton Rose Fulbright, Greater termination entitlements for federally regulated employees
What the 16-week notice period covers
The 16 weeks advance notice to the federal Labour Program must be in writing and submitted to the Head of Compliance and Enforcement. This notice gives the federal government an opportunity to establish a Joint Planning Committee, which the employer is required to cooperate with in good faith, to explore measures that mitigate the impact on affected workers, such as retraining, redeployment, or early retirement support.
Scope: federally regulated employers only
The group termination rules in the Canada Labour Code apply only to federally regulated employers (banking, interprovincial transport, telecommunications, broadcasting, and other industries within federal jurisdiction). The large majority of Canadian workers fall under provincial jurisdiction. If your workforce spans both, you need to track both the federal and applicable provincial rules for each affected employee.
Minutes of settlement and mutual separation in Canada
There is no mutual-termination framework in Canadian federal law equivalent to France's rupture conventionnelle. Employers and employees can negotiate a departure on agreed terms. The settlement is documented as minutes of settlement, which is a binding release that resolves potential claims and gives the employee a defined payment.
A properly drafted release is the standard way Canadian employers get certainty on termination. It must include consideration beyond the employee's minimum legal entitlements. The employee should have the chance to review it with a lawyer before signing.
Structure of a release agreement
- Termination date, agreed in writing
- Consideration, typically a payment above statutory minimums, described as an "ex gratia" or "without admission of liability" settlement
- Statutory entitlements itemised separately, notice pay and statutory severance listed as distinct line items (they cannot be waived)
- Full and final release of all claims, including statutory, common law, and human rights claims
- Reference terms, agreed wording for future employer references
- Confidentiality and non-disparagement
- Cooling-off acknowledgement, the employee confirms they had the opportunity to seek independent legal advice
The unjust dismissal election
An employee with 12 months or more of continuous service who receives a release must decide whether to sign or file an unjust dismissal complaint. Filing a complaint and signing a release are mutually exclusive: accepting the settlement forecloses the complaint route. Employers should make clear at the time of the settlement offer that the employee has the right to seek independent legal advice before signing, and give a reasonable period (generally at least a few business days) to consider.
How Teamed runs Canadian terminations
Teamed is your legal employer of record in Canada for from $599 per employee per month, with zero FX mark-up in any currency. Teamed's partner entity operates under the Canada Labour Code. Notice calculations, severance, and release processing all run through Teamed's Canadian operations.
We handle the notice-plus-severance calculation, pay-in-lieu processing, group termination filings, and final-pay reconciliation on one platform. Decisions on which staff to dismiss, why, and on what terms remain the client's.
Real HR and legal experts handle your Canadian hires, from the first offer letter through every payroll run. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee, and employer cost passes through at cost, itemised on every invoice.
The split of responsibilities under EOR for Canadian terminations:
| What Teamed handles | What the client decides |
|---|---|
| Notice period calculation against the Code's graduated schedule and the contract | Whether to terminate, why, and on what timeline |
| Statutory severance calculation (2 days per year, 5-day floor) and payment | Whether to offer enhanced termination terms above the Code's floor |
| Pay-in-lieu of notice processing, tax treatment, payroll deductions | The commercial quantum of any ex gratia settlement |
| Release drafting coordination with qualified Canadian employment-law partners | Whether to offer a release and the settlement amount |
| Group termination notice to the federal Labour Program where the threshold is met | The business rationale and timing of any group termination |
| Final payroll: notice, severance, vacation accrual, tax codes, ROE issuance | Communication with the wider team and external press |
The Canada Labour Code applies to federally regulated workplaces. If you hire employees who fall under provincial rather than federal jurisdiction, Teamed tracks both the applicable provincial and federal rules for each person so you don't need to.
EOR payroll, contractor onboarding, and entity setup all live on one platform. A Canadian contractor who converts to PAYE keeps their record, and that same employee can graduate to your own Canadian entity without switching systems. Run the Crossover Calculator to see the month the model flips. EOR is the right model for a first Canadian hire, until it isn't. Start from the Canada hiring overview; each guide here takes one layer of Canadian employment law.
Frequently asked questions
How much notice must you give a federally regulated employee in Canada?
The Canada Labour Code's graduated schedule (as amended February 2024) sets no notice for the first 3 months of service, 2 weeks from three months to three years, then 1 additional week per completed year from year three, capped at 8 weeks at 8 or more years. These are statutory minimums; common law reasonable notice can run significantly higher.
Is severance pay separate from notice in Canada?
Yes. Under the federal Canada Labour Code, notice (section 230) and severance (section 235) are two distinct obligations, both owed on a without-cause termination. Paying notice or pay in lieu does not discharge the severance entitlement. Severance is 2 days of regular wages per completed year of service (minimum 5 days) once the employee has completed 1 year of continuous employment.
When do group termination rules apply in Canada?
Group termination obligations apply when 50 or more employees at a single industrial establishment are terminated within 28 days. The employer must provide at least 16 weeks written advance notice to the federal Labour Program Head of Compliance and Enforcement before the terminations take effect. Individual notice and severance obligations also continue for each affected employee.
When can a federal employee file an unjust dismissal complaint?
An employee who has completed 12 months of continuous service and is dismissed without just cause may file an unjust dismissal complaint under Canada Labour Code section 240 within 90 days of dismissal. The complaint may result in reinstatement to position, compensation, or both. Accepting a settlement release typically forecloses this route, so employees should consider both options before signing.
Does Canada have a probation period with no notice requirements?
The Canada Labour Code does not use the word probation, but no statutory notice is required to terminate an employee who has not yet completed 3 months of continuous employment. Once that threshold is passed, the graduated notice schedule under section 230 applies. Contractual probation periods longer than 3 months are permitted, but statutory notice obligations apply as soon as the threshold is reached regardless of what the contract says.
Canadian employers frequently treat notice and severance as one bill. They are two separate obligations under the federal Code, calculated on different rules. Paying one does not discharge the other, and the common law premium on top of both is the real exposure most employers don't price in at the time of hire.
Canada's federal Code says 8 weeks notice at 8 years, plus 2 days severance per year on top. Two bills, paid together.
Courts add a third: common law reasonable notice, which has no cap and no formula.
Know all three before you start the conversation.
