Use this calculator to determine the amount of severance pay that is owing. Employees who are covered by the ESA, and who have at least five years' employment with their employer, are entitled to severance pay when their employment is severed, if: The employer has an annual payroll of at least $2.5 million, OR Hi, If I receive a lump sum severance package what rate of any of tax must my company deduct in Ontario? I have heard it is tiered and topped at 30%, is this correct? Also, if it is taxed this way before it is paid out will I be taxed on it again along with my gross income? For example, if I get a $15,000 severance and I earn $70,000 in a year, will I be taxed on the original 15K as a Overview: A retiring allowance ( also called Severance Pay), is an amount paid to officers or employees when or after they retire from an office or employment, in recognition of long service or for the loose of office or employment. It is recorded on the T4 in Box 14 and 66. Retiring Allowance must be taxed even