Employers may not appreciate alternatives such as salary and benefit continuance or working notice
Most organizations conduct every single termination the same way, regardless of whether it is the result of a downsizing, poor performance, a restructuring, the elimination of a role or department, or some other reason.
What I have observed in my years of practice is that most employers handle every termination the same way because they don't realize they have other options. They're often shocked to learn that while employment laws are often quite protective of employees, when it comes to terminating the employment relationship, the employer is entitled to decide how the termination will be done.
What do I mean by options? Here are a few:
- lump sum payment
- salary and benefit continuance
- salary and benefit continuance with a cap
- open-ended salary and benefit continuance
- working notice
- working notice combined with a lump sum
- working notice combined with salary and benefit continuance
Employment standards legislation sets the absolute minimum amount of notice of dismissal or pay in lieu / termination pay that is required. It generally gives the employer the option of providing notice or compensation.
Beyond that, it comes as a surprise to many that the common law has a similar approach: in fact, the assumption is that an employer will provide notice of dismissal. That is why we always speak in terms of the number of weeks or months of notice. And the starting point is that the notice to be provided means working notice; in other words, the employee will continue to work until the end of the notice period, at which time their employment will end.
I recognize that working notice is not viable in many circumstances. However, I encourage employers to consider whether it will be viable before automatically offering pay in lieu of notice. I have found that working notice works quite well in circumstances where, for example, a role is being eliminated or an entire department is being shut down.
In that context, the employer can indicate that they need the employee's assistance during the transition period. Of course, it often helps to add a sweetener by providing that if the individual continues to work throughout the period of working notice, they will receive a payment at the end. For example, if the employer determines that six months is an appropriate notice period, it can ask the individual to work for two months in order to assist in the transition and then provide the remaining four months by way of a lump sum or salary and benefit continuance.
Many employers also routinely offer lump sum payments and then complain about the exorbitant cost of dismissals and the impact on cash flow. They are unaware that they have every right to provide pay in lieu of notice by offering salary and benefit continuance, which has less impact on cash flow. Furthermore, given that the common law provides that earnings that are received through replacement employment are to be deducted from an individual's entitlement to pay in lieu of notice, the salary and benefits continuance can be capped if the individual finds a new job.
To begin with, I always advise our clients to consider whether working notice is viable for a given dismissal. If it is, then we can consider how to structure the balance of the package. If it is not, we can assess whether a lump sum would make sense, or whether salary and benefit continuation would be more efficient. Lastly, we determine whether to include a “clawback” or cap, which can end the salary payments and benefits if the employee finds new work, often with a payment representing a portion of the balance.
If you are wondering about the reference to an “open-ended salary and benefit continuance,” that is something that I often recommend when the employee in question will be entitled to a substantial amount of notice but it is likely that they will find new employment before the notice period expires. In those circumstances, I have sometimes worked with clients to simply advise the employee that their salary and benefits will continue for a specified period of time and the situation will then be reassessed, rather than committing to a total notice period. This can be quite effective.
The bottom line is that as the employer, you have options when it comes to dismissal. Do not simply proceed in the same manner every time. Rather, take the time to assess the situation, and your options, and determine the most strategic approach. And you do not have to treat every employee the same way; there may be good reason to provide working notice in one case and a lump sum payment in another, and there is nothing wrong with doing so.