Canada: Time to Evaluate Performance and Spring-Clean Payroll

The days are getting longer and brighter and the temperature is (finally) climbing. It’s official: Spring has sprung!

With the first quarter of the year in the rearview mirror and a certain “out with the old, in with the new” feeling in the air, there is no better time for a little spring cleaning.

Most companies will by now have concrete financial performance metrics and also a good indication of their employees’ productivity. Optimal performance and employee cost management are critical as companies look to forecast successes and curb costs over the next three quarters.

Taking stock of what (and who) is working — and what (and who) is not — is the first step when considering a payroll spring-cleaning.  

Identify the Underperformers

We all know the ones — the people who arrive 10 minutes late every day; ensure they take every coffee, smoke, and lunch break; and don’t mind leaving a pile of work for their co-workers when their next vacation comes around. The ones who spend extra time gossiping in the lunchroom about how Ashley from finance is dating Adam in marketing or who linger in the doorways of their otherwise productive colleagues with little to offer. Employers should assess which underperformers are unlikely to change and consider the costs of offboarding them.

Support Remediable Employees

Among the employers’ toolkit is the strategically timed performance improvement plan (PIP). Outline clear, measurable deficiencies and provide employees with any retraining, resources, or other assistance required to attain improvement milestones in short order.

To be useful, the PIP should make clear that failure to perform will result in dismissal for cause without severance. If an employee makes the cut, your business will run smoother. For those who don’t (and depending on the severity of the issues), employers will have papered their way to a less costly termination for cause.

Reduce Offboarding Costs

If termination clauses are enforceable, companies could pay as little as $0 and up to a maximum of eight weeks of termination pay and benefits coverage, with corresponding statutory severance pay, if applicable. This is a small price to pay to streamline the organization and enhance the workplace culture for a spring refresh.

If contract drafting is outdated or unenforceable, companies can provide working notice (i.e., notifying an employee of their eventual termination weeks or even months down the road), receiving credit for time worked against their reasonable notice/termination pay liabilities. When frustrated and underperforming employees quit in the interim, liability ceases entirely. The result is a net positive, making room for new hires.

Unlike Coffee-Break Carl or Gossipy Glenda, your star employees stand apart from the rest and should be praised and rewarded for quality contributions. With tax season upon us, salary and wage increases are an especially welcome reprieve from strained bank accounts. If short-term cash flow is an issue, a long-term incentive plan could boost morale and provide motivational recognition without immediate costs.

Howard Levitt and Alexis Lemajic are attorneys with Levitt LLP in Toronto. © 2025 Levitt LLP. All rights reserved. Reposted with permission of Lexology.