The Employment Standards Act of 2000 regulates terminating employees in Ontario. First, employees should be notified about the termination in advance. Terminating fifty employees implies that this is a mass termination; therefore, Form 1, a notice of informal termination, should be submitted to the employment standards director (Government of Ontario, ESA 58(1)). It is required to put Form 1 on the notice board to inform all the employees who are planned to be terminated soon (Government of Ontario, ESA 58 (5)). Due to this termination being a mass one, the prolongation of the notice period depends on the number of employees terminated. In this case, we will give notice of eight weeks.
The legislated payments due on termination include vacation pay, wages in lieu of notice, severance, and retiring allowances. Vacation pay is usually four percent of gross salary, and it is each employee’s right to a paid vacation (Government of Ontario, ESA 76 (1)). Any accrued vacation pay must be paid at termination with no delay. In addition, we calculate vacation pay on salary, bonuses, overtime, holiday pay, and pay in lieu of notice. Since vacation pay is income, we will deduct income tax, CPP, and EI.
Wages in lieu of notice are given to employees who do not receive written notice per the ESA requirement. In other words, if the employees do not get the notice, it means they must be paid wages in lieu of notice (Government of Ontario, ESA 44). The notice period is calculated in weeks as set by the employment standards. In Ontario, the wages are considered income; hence EI, CPP, and income tax must be deducted.
Severance payment is compensation paid to qualified employees who have been affected. It is given to compensate for the losses that occur when a long-serving employee loses their job. Severance pay is required in Ontario if the employment period exceeds five years and the jobs of fifty or more workers were severed in six months period. One more requirement is that the payroll has a minimum of 2.5 million dollars (Government of Ontario, ESA 64 (1)).
Regarding the given situation, the annual payroll is approximately 12 million dollars; thus, the severance pay needs to be calculated. Severance pay is calculated by adding a one-week wage for an individual full year of service and a one-week wage for part years multiplied by the number of weeks worked. Severance pay cannot be treated as a source of income but as a retirement allowance; hence we will only deduct income tax through lump-sum rates.
Finally, retirement allowances are paid upon employment loss or an employee’s retirement after serving a company for an extended period. Retirement allowance is not treated as an income; thus, we only deduct income tax using lump-sum rates. There are eligible and non-eligible retirement allowances, and the second one provides an opportunity to avoid paying tax; hence we transfer the eligible portion to RRSP (Government of Ontario, Ontario Pensions and Retirement Savings). The non-eligible portion is paid to the employees and income tax deducted. As a company, we will incur mandatory costs such as vacation pay, EI, CPP, and statutory holiday pay.
Overall, the termination of such a vast number of employees would cost a company a lot. According to the Canada labor code, employees under termination have the right to get various payments; thus, the company faces costs connected with the procedure. Firing so many people leads to negative sanctions focused on business from the government, emphasizing the probable irrationality of the measure. This undoubtedly contributes to the employees’ comfort and financial stability.
Works Cited
Canada, Government of Ontario. Employment Standards Act, 2000, S.O. 2000. 2021. Web.
Canada, Government of Ontario. Ontario Pensions and Retirement Savings. 2021. Web.