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What the Employment Standards Act Says About Vacation Pay

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Everyone can use some time away from work, and in Ontario, employees are entitled to paid vacation time. The Employment Standards Act (ESA) states the regulations employers have to follow in regards to vacation pay and time. It is up to employers to make sure they’re complying with the Act.

Who is eligible for Vacation Pay in Ontario?

The Employment Standards Act sets the rules on vacation time and vacation pay in Ontario. Employees working from the same employer for under 5 years are eligible for two weeks of paid vacation per year. Those who have been employed for over 5 years are entitled to three weeks. Some jobs are not covered by the ESA and employees are therefore exempt from receiving vacation pay. In those workplaces that are covered by the ESA, employers must provide employees with paid vacation time.

Calculating Ontario Vacation Pay

According to the Employment Standards Act, vacation pay is calculated based on an employee’s gross wages. For employees that have worked less than five years, vacation pay must be at least 4% of their gross wages earned in a 12-month entitlement year or stub period. Employees with five or more years of employment are entitled to 6% of gross wages earned. Employers may provide their employees with more vacation pay or time if they wish.

Paying Vacation Pay

Generally, the Employment Standards Act says that employers must pay employees their vacation pay in a lump sum before their vacation starts. However, an employer can pay vacation pay on the next regular payday if they pay it by direct deposit or if the employee is taking less than one week of vacation. If an employer and employee both agree to another payment schedule this is also acceptable.   Employers can also add vacation pay to an employee’s wages each month, in which case employees would not be paid before taking a vacation. Employers should be aware that when an employee leaves the workplace, either due to termination or quitting, they are still required to pay out any vacation pay owed.

Ontario Employers and Vacation Pay

Calculating vacation pay and managing vacation time can be challenging for a busy small business owner. Free your time and get employer support from our HR experts by calling 1 (833) 247-3652 today. We’ll help you ensure your employees get the right amount vacation pay and that your business is complying with the Employment Standards Act.

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