Severance, Vacation Pay and EI: What Delays Your Claim

The normal rule: separation money is spread over the following weeks

EI treats most money paid "because of a layoff or separation" as earnings, even though you're no longer working. Service Canada doesn't simply subtract the lump sum from your benefits. It allocates it: starting with the week your job ended, it fills each week up to your normal weekly earnings until the money runs out. Every week that's fully covered is a week with no EI payment.

What counts as separation money, according to canada.ca's earnings guidance:

• severance pay
• vacation pay paid out because you were laid off or let go
• pay (wages) in lieu of notice
• closure bonuses and other separation or retirement bonuses
• unused sick leave credits paid out when you leave
• wrongful dismissal damages, in most cases

Two things matter: the allocation starts from the week of the separation, not the week the cheque arrives, and it uses your normal weekly earnings, not the EI maximum. A slow severance cheque doesn't make the allocation start later.

An example under the normal rules

Sam earns $1,200 a week. He's laid off on Friday, September 4, 2026, and gets $2,400 in vacation pay plus $6,000 in severance: $8,400 of separation money in total.

• $8,400 ÷ $1,200 = 7 weeks. Under the normal rules, the 7 weeks starting with the week of his layoff are filled with his own money, and EI pays nothing for them.
• Any leftover amount smaller than a full week is applied to the next week, and earnings in that week reduce that week's benefit.
• His waiting period and first payment move later by the same amount. The money delays his claim; it isn't added on top of his benefits.

Compare two people with the same $8,400. Someone earning $700 a week would see it fill 12 weeks; someone earning $2,100 a week, 4 weeks. Allocation is measured in your own paycheques, so the same lump sum delays a lower earner longer.

Sam's layoff date is an illustration of the normal rule. A claim like his, starting in 2026, actually falls under one of the temporary pilots described below. Canada.ca's examples show that allocated weeks can also extend the 52-week benefit period, so the delay doesn't always cost weeks. It does always cost time with no EI income, which is why the suspension matters.

What no longer delays your claim: the temporary suspension

To respond to tariff-related layoffs, the federal government has temporarily switched off the allocation of separation money. As of today it works in two back-to-back pilot projects:

Under Pilot Project No. 25, money paid or payable because of a layoff or separation is not counted as earnings for EI if your benefit period begins in that window, or if the allocation would first fall in it. Canada.ca lists the money covered: vacation pay, pay in lieu of notice, severance pay, closure bonuses and sick leave credits. If Sam's claim starts in the window, all $8,400 is ignored, his benefits start right away, and the one-week waiting period is also waived under the same pilot.

The same pilot also waives the waiting period for the same window, and adds up to 20 extra weeks for eligible long-tenured workers on claims starting before June 12, 2027. Each of these measures is temporary and has its own dates.

This is not permanent. Unless the government extends it again, claims starting after October 9, 2027 go back to the normal rules. Check the temporary measures page on canada.ca for your dates before you plan around it.

What the suspension does not change

• You still declare everything. The application asks about vacation pay, severance, pay in lieu of notice and pensions, and your employer reports separation payments on your ROE. Leaving them out can cause delays or an overpayment later.
• The 4-week rule still applies. Some people assume severance means they can't claim yet, so they wait. Apply within 4 weeks of your last day of work. Under the normal rules, the allocation sorts out the timing; under the pilot, there's nothing to wait for.
• Work while on EI still counts. The suspension covers money from the job you lost. Pay from new work during your claim is reported and deducted as usual; see working while on EI.
• Vacation pay that isn't separation money is unaffected. Vacation pay tied to a scheduled vacation or shutdown is allocated to that vacation period. Vacation pay added to every paycheque counts in the period it was earned.
• Some other income is still deducted. Pension payments arising from employment are earnings for EI. Your own RRSP or RRIF withdrawals, OAS, inheritances and lottery winnings are not.
• Tax doesn't change. Severance and EI are both taxable. A large severance plus EI in the same year can push your net income above the benefit repayment threshold; see EI and taxes.

How much will you actually get?

Once allocation is out of the way (or suspended), the normal calculation applies. In 2026, regular benefits pay 55% of your average insurable weekly earnings over your best 14–22 weeks, up to $729 a week before tax, for 14 to 45 weeks depending on your hours and your region's unemployment rate. Sam earns well above the 2026 maximum insurable earnings of $68,900, so he would receive the $729 maximum. The numbers for your area are on the regions page, and how much EI will I get? walks through the formula.

Every claim is decided by Service Canada, not by MyEI. MyEI is an independent information and estimate tool and is not affiliated with Service Canada or the Government of Canada. For your own file, call Service Canada at 1-800-206-7218 or start from canada.ca/en/services/benefits/ei.html.