Laid Off? 10 Steps to Take Immediately After a Job Loss

Canada’s unemployment rate has risen to 7.1%, the highest in four years, and workers across many industries are feeling the effects. Losing a job is stressful: beyond the emotional impact, you often face urgent decisions about legal rights, taxes, insurance, investments, and cash flow. This guide summarizes key considerations after a termination to help you plan your next steps.

Statutory vs. common-law severance

Every province and territory provides statutory minimum payments to employees who are dismissed without cause. This statutory entitlement, commonly called termination pay, typically applies after about three months of continuous employment and is intended as a basic safety net. Termination pay is usually calculated as a set number of weeks’ pay per year of service up to a provincial maximum.

Separate from statutory termination pay is severance pay, which reflects potential common-law entitlements—what you might be awarded by a court. Severance beyond the statutory minimum is not calculated by a single formula; it depends on factors such as length of service, age, position, and other individual circumstances.

Employers and employees often prefer to resolve terminations without litigation, so settlements commonly land somewhere between the statutory minimum and a full common-law amount. An employer’s severance offer is not binding on you; you can consult an employment lawyer to evaluate whether the package is fair or whether you should negotiate for more.

Should you take a lump sum or salary continuance?

Severance packages typically come in two forms: a one-time lump-sum payment, or salary continuance where regular payroll deposits continue for the severance period. Each option has tax and cash-flow implications.

If you are offered a lump sum, you may be able to defer receipt of some or all of the payment into a subsequent calendar year. Deferring can reduce the overall tax hit because Canada’s progressive tax system may tax a large, single-year payment at a higher marginal rate. Carefully consider timing — particularly if the payout arrives late in the year — and verify whether deferral is allowed under your agreement.

Another option is to contribute part or all of a lump-sum to a registered retirement savings plan (RRSP) if you have contribution room. Directing funds to an RRSP is generally done pre-tax, which reduces taxable income for the year the contribution is made. Note that contributing to an RRSP reduces your immediate tax withholding but does not create an additional tax refund later; it simply shifts when and how the income is taxed.

New EI rules can help

Most people who are terminated qualify for Employment Insurance (EI) benefits. The federal government introduced temporary changes for new claims beginning in March 2025, which have been extended through April 11, 2026. Under these temporary measures, some people can apply for EI immediately following termination, even when they receive lump-sum separation payments such as severance, vacation pay, or sick-leave credits that would normally delay EI eligibility.

Normally, there is a one-week waiting period after salary continuance ends, and lump-sum separation earnings can trigger an additional delay. The temporary EI rules remove that waiting period in some cases and may also extend benefit weeks for certain long-tenured workers.

Under the temporary measures, eligible claimants may receive up to 45 weeks of regular EI benefits plus an additional 20 weeks if they qualify as long-tenured workers. To meet the long-tenured worker criteria, applicants must generally:

• Have received fewer than 36 weeks of regular or fishing EI benefits in the three years before the start of the current claim
• Have paid at least 30% of the annual maximum EI premiums for at least seven of the 10 years before the year the claim starts (the EI maximum for 2025 is $695 per week)

Are you still entitled to benefits?

Most employer-sponsored benefits — life, disability, and medical insurance — end when your employment does, although some plans extend coverage for a short period tied to your termination pay. Group life insurance benefits are often extended for the number of weeks you receive salary continuance or termination pay, while group disability coverage usually ends on your last working day.

Certain group life policies permit you to convert employer coverage to an individual policy without providing new health evidence, which can be valuable if your health has deteriorated. If you are in good health, buying a new individual life insurance policy may provide better long-term value.

Replacing disability insurance can be more difficult, because private disability policies typically require evidence of insurability and, if you are not working, underwriting may be stricter. If you depend on disability coverage, seek advice promptly to explore conversion or alternative options.

Although losing medical coverage can be worrying, immediately buying a new policy isn’t always the most economical choice. Private health insurance is priced to cover claims across all insured people, so premium costs may exceed what you would pay if you handled routine out-of-pocket medical expenses. Evaluate likely costs and the convenience of coverage before committing to a replacement plan.

Dealing with pensions and group RRSPs

If you belong to a defined benefit (DB) pension plan, you may be offered a lump-sum commuted value instead of future monthly pension payments. Some or all of that amount may be transferable on a tax-deferred basis to a locked-in retirement account (LIRA). Not all DB plans permit commuted value transfers, and some restrict transfers by age (for example, only available under age 55).

Keep in mind that commuted values fluctuate with interest rates: lump-sum offers tend to be larger when interest rates are lower and smaller when rates are higher. A lump-sum transfer is generally best for investors with a higher risk tolerance or specific financial needs; otherwise, the predictable monthly pension may be preferable.

Group RRSP balances are usually transferred to a personal RRSP when employment ends, and these transfers can be completed on a tax-deferred basis from one RRSP to another. Confirm transfer rules and deadlines with your plan administrator.

Get help

Being laid off is difficult, and the financial and legal choices that follow can be confusing. This overview highlights the main issues to consider—severance structure, tax timing, EI eligibility, benefits continuation, and retirement savings options—so you can make informed decisions and know when to seek professional advice from an employment lawyer, financial planner, or insurance specialist.

Read more Ask a Planner columns:

• Why late-career savers need to be careful with RRSPs
• Taxes halved their inheritance. Could anything be done?
• Retirement taxes explained: Withholding, clawbacks, and other surprises
• Insurance for self-employed Canadians: What coverage do you need?