New Brunswick Tech Worker with a $220K Severance in NB (2026): Lump Sum vs Salary Continuance Tax Math + EI Timing

New Brunswick's Tax Brackets: Why the Structure Decision Matters Here

New Brunswick has a steep progressive tax structure. The provincial rate hits 20.3% on income above $173,205 — and when you stack it on top of the federal brackets, the combined marginal rate on income above $253,414 lands at approximately 53.3%. On a $220,000 severance stacked on top of even half a year's salary, a significant chunk of the package sits in the highest brackets in the country.

Here is how the 2026 New Brunswick + federal combined brackets stack up for a single filer:

Compare that to Alberta (48% top rate) or even Ontario (53.53%). New Brunswick is in the upper tier nationally — every dollar above $173,205 is taxed at 49–53%. That means the marginal cost of stacking $220,000 on top of an existing salary is steep. For a Calgary engineer with a similar-sized package, the same severance faces 5 fewer percentage points at the top — a meaningful gap.

The Scenario: $105K New Brunswick Tech Worker, $220K Severance, Mid-Year Layoff

Here is the profile. If the numbers are close to yours, the math applies directly. If they are different, the structure is the same — only the dollar amounts change.

Option A: Take the $220K Lump Sum — The Default (and the Expensive One)

Most separation packages present a lump sum as the default. It closes the file on the employer's books and transfers the tax problem to you. Here is what happens:

The income stack

$52,500 (salary earned Jan–June) + $220,000 (lump sum) = $272,500 taxable income in 2026.

Without any RRSP contribution, roughly $166,000 of the severance lands above the $106,717 threshold where New Brunswick charges 17.84–20.3% provincial. Combined with the federal rate, roughly $100,000 of the severance is taxed at 49–53%. And $19,086 of it sits above $253,414, taxed at the full 53.3%.

The tax bill

The incremental tax on the $220,000 severance alone — above what you would have paid on just the $52,500 salary — is approximately $100,000. That is a 45% effective rate on the severance.

EI impact of the lump sum

Service Canada allocates lump-sum severance at your normal weekly insurable earnings. At $105,000/year, your weekly rate is approximately $2,019. The $220,000 lump sum is allocated across 109 weeks ($220,000 / $2,019).

That means no EI for approximately 2 years and 1 month from your last day of work. For a senior developer in Fredericton — where the tech market has grown but remains smaller than Toronto or Vancouver — this allocation period could exceed your job search. But remote work has expanded options significantly. The 2026 maximum EI benefit is $728/week — you do not want a gap before it starts.

Option B: Negotiate Salary Continuance — The Play That Saves $25,000–$35,000

Salary continuance means the employer continues paying your regular salary on the normal payroll schedule until the severance amount is exhausted. On $220,000 at $105,000/year, that is approximately 25 months of payments — running from July 2026 through approximately July 2028.

The tax advantage is calendar-year splitting. Instead of stacking $272,500 into 2026, the income spreads across three calendar years:

With salary continuance, no single year exceeds $106,717 — meaning you stay below New Brunswick's 17.84% provincial bracket on nearly all of the severance, and you never touch the 20.3% top bracket at all. Compare this to the lump-sum scenario, where $100,000 of the severance sits above $173,205 and gets taxed at 49–53%.

The total tax across all three years under salary continuance: approximately $80,000–$85,000 on the same $272,500 of income. The lump-sum tax: ~$114,000. The difference: $25,000–$35,000 in tax savings, for the same gross pay.

The RRSP Shelter: $45,000 at 43–53% Saves $20,000–$24,000

Regardless of whether you take the lump sum or salary continuance, the RRSP contribution is the second-biggest lever. Our Fredericton developer has $45,000 of available RRSP room ($33,810 current year + $11,190 carry-forward).

Under lump sum (Option A)

Contributing $45,000 against $272,500 of income drops taxable income to $227,500. The top $45,000 that was sitting in the 49–53% bracket is sheltered. Tax saving: approximately $22,000–$24,000.

Under salary continuance (Option B)

With $105,000 of taxable income in 2026, contributing $45,000 drops taxable income to $60,000. The deduction lands at approximately 35–43%. Tax saving: approximately $16,000–$19,000.

The RRSP deduction is worth more under the lump-sum scenario because you are deducting at a higher marginal rate. But the combined tax bill (income tax minus RRSP savings) is still lower under salary continuance + RRSP. The optimal structure is salary continuance plus the full RRSP contribution in the highest-income year — or, if you anticipate returning to a $105K+ salary quickly, consider saving some RRSP room for a future high-income year and contributing only the current-year $33,810 now.

EI Timing: Lump Sum vs Salary Continuance Side by Side

The EI rules are federal — and tech workers in New Brunswick are subject to the same EI allocation rules as everyone else. But the interaction with severance structure changes the practical timeline on a $220K package.

On $220K at $105K salary, both options delay EI by roughly 25 months. The EI timing difference between lump sum and salary continuance is minimal for this severance size. The tax difference is where the real money is — $25,000–$35,000 that you keep or lose based on the structure alone.

The New Brunswick Tech Market Factor

Unlike Toronto or Vancouver, New Brunswick's tech market is concentrated in two cities: Fredericton (government tech, cybersecurity, and startups around UNB's Knowledge Park) and Moncton (bilingual tech support and growing SaaS presence). This concentration affects your severance strategy in two ways:

• Job search timeline is longer: Fewer local employers means fewer openings at the senior level. Remote positions expand your options significantly, but salary expectations may shift. Plan for a 6–12 month search rather than the 3–6 month average in Toronto's tech market.
• Relocation changes the provincial tax math: If your next role is in Ontario, Alberta, or BC, you may be moving before December 31. Under Canadian tax law, your province of residence on December 31 determines your provincial tax rate for the entire year. Moving to Alberta (48% top rate) before year-end saves roughly 5 percentage points on every dollar above $173,205 that you earned in New Brunswick. This is worth $5,000–$8,000 on a $220K severance — but only if you genuinely relocate (not just change your mailing address).

The Combined Play: Salary Continuance + RRSP + Strategic Timing

Here is the optimal sequence, step by step, for this scenario:

Total financial impact: the combined play vs the default cheque

Three Mistakes Tech Workers Make with Large Severance Packages

Mistake 1: Assuming the withholding covers the tax

On a $220,000 lump sum, your employer withholds 30% = $66,000. Your actual tax on the severance: ~$100,000. The $34,000 gap arrives as a surprise on your 2026 tax assessment. After years of tidy payroll deductions, most salaried tech workers have never owed CRA anything at filing. This time is different.

Mistake 2: Cashing out the group RRSP alongside the severance

If you cash out a $40,000 group RRSP balance instead of transferring it directly to a personal RRSP, that $40,000 becomes taxable income in the same year as your severance. On top of a $272,500 stack, it is taxed at 53%. A direct transfer (T2033 form) costs $0 in tax. Cashing out costs $21,000. This is the most expensive $40,000 mistake in severance planning.

Mistake 3: Signing without asking for salary continuance

The separation agreement is a negotiation, not a take-it-or-leave-it document. Under New Brunswick common law (and reinforced by the federal Employment Standards framework that many NB tech employers follow), reasonable notice includes the option of salary continuance. The salary continuance structure costs your employer nothing extra and can save you $25,000–$35,000. An employment lawyer can advocate for this on your behalf.

When the Lump Sum Actually Wins

Salary continuance is not always the better choice. The lump sum makes more sense when:

• You have a new position lined up: If you are moving to a new role within 3 months, the lump sum closes the current employment cleanly. Double-dipping on salary continuance while earning elsewhere creates complications.
• You are leaving New Brunswick: If you are relocating to Alberta (48% top rate) or another lower-tax province, taking the lump sum after establishing residency in the new province lowers the provincial tax bite. Province of residence on December 31 determines your provincial tax rate for the entire year.
• You are starting a company: New Brunswick's tech ecosystem has strong startup support through Propel ICT and the NB Innovation Foundation. Having the $220K (after tax) in hand provides the capital buffer you need. The tax cost is real, but the startup flexibility may be worth it.
• Employer stability concerns: If your employer is in financial difficulty — not uncommon in NB tech — the certainty of one lump-sum cheque today may be worth more than the promise of 25 months of salary continuance from a company that might not survive that long. Weigh this against the $25,000–$35,000 tax saving.