Sources of income after job loss
Compensation you may receive
If you lose your job, your employer may owe you certain kinds of pay. Your provincial or territorial government oversees how much you should receive.
To find out what your employer may owe you, look over any documents that outline your salary and terms of dismissal.
These documents may include:
- the letter of offer given to you when you got your job
- an employee handbook
Types of compensation
Your employer may owe you one or more of the following.
Severance pay is money your employer owes you when you lose your job through no fault of your own. The amount of money you get depends on how long you worked for your employer.
Termination pay is money your employer pays you instead of giving you advance notice that you’ll lose your job. For example, instead of telling you that your job will end in two weeks, your employer gives you termination pay and you leave your job that day.
In some cases, your employer may owe you both termination pay and severance pay.
If you earn a salary instead of an hourly wage, your employer may owe you for vacation days you didn’t use.
If you earn an hourly wage, your employer may give you a percentage of your annual pay as vacation pay. This is usually between 4% and 6% of your pay.
Getting paid if your employer becomes bankrupt
You may still be able to get unpaid wages or termination pay if your employer becomes bankrupt or is subject to receivership. You may be eligible to get money through the Wage Earner Protection Program.
Employment Insurance (EI)
EI may help you with your finances until you find a new job. It provides regular benefits if you lose your job through no fault of your own. EI pays a percentage of your previous income, up to a certain amount.
Apply for EI as soon as you stop working because it takes time for benefits to start.
Record of employment
Make sure you ask for a Record of Employment from your employer as soon as you lose your job. You may apply for EI before you get your Record of Employment, but you’ll need to provide it before you get EI benefits.
Other sources of income
Temporary, part-time or casual work can provide you with income until you find a new job.
Note that any money you earn could affect the amount of EI benefits you may get.
Remember that you must pay income tax on all the income you earn each year. Your employer will often deduct income tax from your pay. Note that the amount your employer deducts may not equal the full amount of income tax that you owe. Be sure to save money to pay your income tax when it's due.
Using your savings
If you’ve saved money in an emergency fund, use it now to help pay for living expenses while you search for a new job.
Remember to start building your emergency fund again once you’ve got more income. It should cover living expenses for three to six months.
Avoid using money you’ve saved for retirement or education unless you urgently need money to cover living expenses or make debt payments.
Borrowing from your life insurance policy
You may choose to borrow from your permanent life insurance policy to help cover living expenses while you search for a new job.
Permanent life insurance policies often have a cash value. Your insurance company may let you use the cash value of your policy to take out a loan.
Note that if you don’t repay the loan, the cash value of the insurance policy will be less. This means the money your beneficiaries get upon your death will be less. The money you get if you cash in the policy will also be less.
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