Severance Pay
  • One year of continuous employment will be entitled to one week's pay for each completed year of employment. Indeterminate employees will also be entitled to a pro-rated week for a partial year of employment.

  • Everyone, including term workers, with at least one year of continuous employment will be able to choose what to do with their accumulated severance:

    1. immediately cash out the severance they have accumulated, or

    2. keep their accumulated severance and have it paid out when they actually resign or retire, or

    3. immediately cash out part of the accumulated severance and keep the rest of it to be paid when they resign or retire.

  • No one has to resign or retire to receive the cash out right away.

  • But if you decide to cash outall of your severance right away, you will not receive a payment when you resign or retire later.

  • Accumulated severance that is banked and not cashed out immediately will be paid at the salary rate that applies when you actually resign or retire.

  • Under the new agreements severance pay will no longer accumulate in the case of resignation or retirement.

  • Severance pay will continue to accumulate for employees who are forced to leave the public service due to layoff, death, termination on probation or because of incapacity or incompetence.

Compensation Advisors play a key role

  • The federal government's compensation advisors have been the main point of contact for employees receiving severance payouts. They will use an “automated severance pay calculator” to generate personalized forms for most employees.

  • These forms will show:

    • Years of continuous employment

    • Pay as of the second day of the contract

    • An estimate of gross severance pay

  • This form will be used by employees to make their choice on how to receive payment in lieu of severance pay. Completed forms will be returned to your compensation advisor.

Streamlined process to roll-over immediate payments into RRSP

With the full encouragement of PSAC, Treasury Board has arranged a blanket tax waiver with the Canada Revenue Agency, for those rolling over $10,000 or less into their RRSP.

  • The employer will provide all employees with a copy of this form to complete and return to the employer if they wish to go ahead with this roll-over.

  • For employees wanting to roll over more than $10,000 into an RRSP, they will need to contact the Canada Revenue Agency (and Revenu Québec if applicable) and request a tax waiver as quickly as possible. 

  • The following are the federal and provincial income tax forms you need to  complete to request a reduction in tax deductions:

  • After completion of the form, you will receive confirmation from CRA/Revenu Québec. Attach a copy of this confirmation to the personalized form your compensation advisor provides you.

You will be entitled to request that all, or just some, of your immediate payout to be put into an RRSP.

Protection for employees on maternity, parental and other leaves without pay

  • At the request of the PSAC, a special arrangement has been put in place for employees who are on leave without pay where they may be in receipt of EI Benefits. This includes maternity and parental leave, illness, relocation of spouse and compassionate care. This arrangement was put in place because the payments in lieu of severance pay could impact Employment Insurance benefits.

  • If you are on one of these types of leave, you will be able to defer your choice of payout option you wish to receive. If you defer, you will have to make your choice within three months after the end of your leave without pay period, or three months after your Employment Insurance benefits cease, whichever comes first.

Newly-hired indeterminate employees (less than one year)

  • Employees with less than one year of continuous employment are entitled to a pro-rated week for their partial year of service.

  • All recently-hired indeterminate employees that are part of the PA, SV and EB groups will receive a severance cash-out payment that corresponds to the time they worked up to the second day of the new collective agreement.

  • Treasury Board had taken the position that employees with less than one year of continuous employment were not eligible to receive the payments in lieu of severance. PSAC filed a policy grievance in May on this issue and we received word in mid July that Treasury Board will follow our interpretation.


September 22, 2013