Are Bonuses, Commissions, Benefits, and Equity Included in Severance?

When an Ontario employee is terminated without proper notice, the first number most people look at is base salary. That makes sense. Base pay is usually the most visible part of compensation.

But for many employees, base salary is only part of the picture.

Bonuses, commissions, health and dental benefits, pension or RRSP matching, car allowances, stock options, RSUs, LTIPs, vacation pay, and other compensation can make up a significant portion of what the employee actually earned. The key question is this:

During the notice period, does the employer have to compensate the employee for more than base salary?

In many Ontario wrongful dismissal cases, the answer may be yes.

At Vanguard Law, our Ontario employment lawyers regularly review severance packages where the employer has calculated the offer based only on base pay, while ignoring other valuable compensation. A proper severance package review should examine the employee’s full compensation structure, not just their salary line.

What Is the Notice Period?

In Ontario, there are two major notice concepts.

First, the Employment Standards Act, 2000 sets minimum statutory notice or termination pay. Under the ESA, employers must maintain certain wages and benefit contributions during the statutory notice period, and if the employee is paid other than by time or has no regular work week, the ESA uses an averaging approach for regular wages.

Second, many non-unionized employees may be entitled to more than ESA minimums under common law “reasonable notice,” unless a valid employment contract limits them. Vanguard Law’s wrongful dismissal lawyers assess both ESA minimums and potential common-law entitlements, including bonuses, commissions, benefits, and contract terms.

In plain English: the notice period is meant to place the employee in the financial position they would have been in if the employer had given proper notice instead of ending the employment immediately.

That can include more than salary.

The Core Rule: Look at Total Compensation

Ontario courts generally look at what the employee would likely have earned during the reasonable notice period had they remained employed.

That means the analysis often includes:

• Base salary

• Bonuses

• Commissions

• Benefits

• Pension or RRSP contributions

• Stock options, RSUs, or other equity

• Car allowances

• Phone allowances

• LTIPs or other incentive compensation

• Other recurring compensation tied to the job

A severance offer that ignores non-base compensation may undervalue the claim.

Bonuses During the Notice Period

Bonuses are one of the most common disputes.

An employer may say: “You were not actively employed on the bonus payment date, so you do not get the bonus.”

That argument is not always enough.

In Matthews v. Ocean Nutrition Canada Ltd., the Supreme Court of Canada confirmed that a dismissed employee may receive damages for a bonus that would have been earned during the reasonable notice period, unless the employment contract or bonus plan clearly removes that common-law entitlement. The Supreme Court’s public summary explains that Mr. Matthews was treated as an employee during the notice period for this purpose and was entitled to the bonus payment triggered during that period.

The practical question is usually a two-step analysis:

1. Would the employee have received the bonus if they had worked through the notice period?

2. Does the employment contract or bonus plan clearly and unambiguously remove that entitlement after termination?

If the answer to the first question is yes, and the plan language is not strong enough to remove the right, the employee may have a claim for the bonus as part of wrongful dismissal damages.

Commissions During the Notice Period

Commissioned employees should be especially careful.

A termination package may offer several weeks or months of base salary while ignoring sales commissions that were historically earned, already in the pipeline, or likely to be earned during the notice period.

Depending on the facts, commission damages may be calculated using:

• Historical average commissions

• Commissions on closed sales

• Commissions on pending deals substantially completed before termination

• Expected commissions during the reasonable notice period

• The wording of the commission plan

If commissions were a regular and important part of compensation, the severance package should not simply pretend they do not exist.

For employees in sales, recruitment, real estate support, finance, insurance, software, medical devices, and other commission-heavy roles, this can be the difference between a weak package and a fair package.

Benefits, Insurance, and RRSP Matching

Benefits can also matter.

Under the ESA, employers must continue required benefit plan contributions during the statutory notice period. If an employer fails to make those contributions, the unpaid contribution amount can be treated as unpaid wages under the ESA.

Common-law damages may also include the value of lost benefits during the reasonable notice period, depending on the circumstances.

This can include:

• Health and dental coverage

• Long-term disability coverage

• Life insurance

• Pension contributions

• RRSP or DPSP matching

• Employer-paid premiums

• Health spending accounts

This issue becomes especially serious if the employee or a family member has medical expenses, disability concerns, or prescription drug costs. A severance package that ends benefits immediately may expose the employee to financial risk.

Stock Options, RSUs, LTIPs, and Equity Compensation

For executives, managers, tech employees, and senior professionals, equity can be a major part of compensation.

The legal analysis depends heavily on the plan wording. Courts will look at whether the equity would have vested, been exercised, paid out, or triggered during the notice period. They will also examine whether the plan clearly limits post-termination rights.

This area is document-heavy. Employees should gather:

• Employment agreement

• Stock option plan

• RSU plan

• LTIP or STIP documents

• Award letters

• Vesting schedules

• Termination letter

• Recent compensation statements

Vanguard Law’s severance package review page specifically notes that value is about more than base pay and may include benefits continuation, bonus and commission eligibility, vacation pay, and equity or stock plans.

“Active Employment” Language Is Not Always the End of the Story

Many compensation plans say that an employee must be “actively employed” on a certain date to receive a bonus, commission, or equity payout.

That wording matters, but it is not always decisive.

The issue is whether the language clearly removes the employee’s common-law right to damages for compensation they would have earned during the notice period. Courts often distinguish between claiming the bonus itself and claiming damages because the employer failed to provide reasonable notice.

That difference is important.

An employee may not technically be “active” after termination, but the legal fiction in wrongful dismissal damages asks what would have happened had the employer given proper notice.

Common Employer Mistakes

Employers often make mistakes when calculating severance, including:

• Offering only base salary

• Ignoring bonuses that historically paid out

• Excluding commissions without reviewing the commission plan

• Cutting off benefits too early

• Ignoring pension or RRSP matching

• Assuming “active employment” wording automatically defeats all claims

• Overlooking equity vesting during the notice period

• Using an unenforceable termination clause

For employers, the safest approach is to review the full compensation package before termination. Vanguard Law also advises employers on termination risk and wrongful dismissal response through its wrongful dismissal defence services.

Practical Steps for Employees

If you have been terminated, do not evaluate the severance offer based only on the headline salary number.

Before signing, gather:

1. Your employment contract

2. Termination letter

3. Severance offer

4. Bonus plan

5. Commission plan

6. Benefits booklet

7. Equity or stock plan documents

8. Recent pay stubs

9. T4s and bonus statements

10. Emails or letters about compensation targets

Then ask:

• Does the package include my bonus?

• Does it include commissions?

• Are benefits continued?

• Is RRSP or pension matching included?

• What happens to stock options or RSUs?

• Does the release make me give up these claims?

• Is the termination clause enforceable?

• Am I being offered ESA minimums only, or a proper common-law amount?

If you work in Toronto or the GTA, Vanguard Law’s Toronto employment lawyers can help assess whether the offer reflects your actual legal entitlements.

Bottom Line

During the notice period, severance may involve much more than base salary.

Bonuses, commissions, benefits, pension contributions, equity, allowances, and other non-base compensation may all be part of the calculation, depending on the employment contract, compensation plan language, and the facts of the case.

Before you sign a release, make sure the offer accounts for your full compensation.

Vanguard Law helps employees across Ontario review severance packages, assess wrongful dismissal claims, and negotiate for fair compensation. If your offer ignores non-base salary, book a consultation with Vanguard Law before signing.

Disclaimer: This blog is for general information only and is not legal advice. Employment law is fact-specific. Speak with an Ontario employment lawyer about your situation.