Severence Pay

[sexualbanana]

I got let go by my work on Monday at a marketing agency. I get a two week severence and my previous week's pay, which is fine by me. My salary sucked anyways.

I just received my pay stub and noticed that they put my severence on top of my salary. I thought I was going to get two sepeaate cheques/stubs. But I guess putting them on top of each other put me in a higher tax bracket and they taxed the shit out of that. In short, instead of receiving two cheques/stubs over a course of 3 weeks for $2800, I receive one cheque/stub for $1700.

This is the first time I've been in this kind of situation, but is that right? I thought I'd get a full two-week severence, not half.

[kenny]

It will all work out the same whether they split it into two cheques or give you one larger cheque at the end of the year when you do your taxes. Your annual income determines what tax bracket you fall under, not your income per pay period.

[lint]

You would not receive a check for your full severance, it would be taxed at source as well. Shouldn't be a $1100 difference though. By combining them into one check, you'll take a marginally higher tax hit that will be remedied come tax time. The CRA knows the time value of money, and they get their cut first.

[lint]

Originally posted by kenny
It will all work out the same whether they split it into two cheques or give you one larger cheque at the end of the year when you do your taxes. Your annual income determines what tax bracket you fall under, not your income per pay period.

It will even out at the end of the year, but one larger cheque will result in more taxes being taken off at source vs two smaller cheques. The tax tables are based on extrapolating annual incomes based on each pay.

[BrknFngrs]

Originally posted by kenny
It will all work out the same whether they split it into two cheques or give you one larger cheque at the end of the year when you do your taxes. Your annual income determines what tax bracket you fall under, not your income per pay period.
:werd: I had a similar situation where two cheques got rolled into one and I got taxed significantly more. Like kenny said, it'll all work out when you file your return for the year.

[Euro838]

I'm pretty sure it's common practice to pay you the amount owed on the next pay period so they basically will end ties with you. Can't see a reason why they would want to spread it over a longer period.

[Thaco]

doesn't matter, it'll work out when you file your taxes.