Retiring Allowance

When an employee is terminated they may be able to characterize some of the compensation they receive from their former employer as a retiring allowance for tax purposes. A retiring allowance is intended to compensate an employee for their long service to an employer or the loss of their employment. Tax is withheld on a retiring allowance at a different rate than on notice damages. Read our blog on Tax Treatment of Wrongful Dismissal Awards for more information.