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Human Resources Advice: Infographic: How to Calculate Vacation Pay

  1. Update: This post was originally published in February 2018 and has been expanded with more information.
    Vacation Pay is Three Weeks for Employees who have Worked for Five Years with the Same Employer.

    In Ontario, there are minimum employment standards around vacation leave that gives rights to employees for time off with pay. While there are some job categories that are exempt, most employers must follow the Employment Standards Act (ESA) when it comes to providing vacation with pay. As of January 1, 2018, vacation time and pay separates employees into two categories based on the number of years an employee has worked with the same employer. Take a look at the difference in the minimum vacation time and pay:

    Minimum Standard Less than 5 years 5 years or more
    Vacation Time Two weeks of vacation time after each 12-month vacation entitlement year Three weeks of vacation time
    Vacation Pay Four percent of the gross wages (excluding any vacation pay) earned in the 12-month vacation entitlement year or stub period (if any) Six percent of the gross wages earned in the 12-month vacation entitlement year or stub period (if any)

    Asan employer, you may choose to provide greater rights and benefits to your employees than the minimum standards set by the ESA. However, you cannot give or pay less than the amounts listed above.

    Infographic: How to Calculate Vacation Pay

    10 Vacation Pay Facts for Ontario Employers 

    At Peninsula, vacation pay is a commonly asked topic that our HR consultants get questions about. Here are ten things to know, in addition to the minimum standards for vacation leave:

    1. A vacation entitlement year is a recurring 12-month period; it can be counted starting from the employee’s hire date or alternatively, around the calendar year. If it’s the latter, you must provide a pro-rated amount of vacation time for the period between the start dates of your employee and your calendar year; this is called a “stub period”.
    2. If an employee does not complete a full vacation entitlement year or stub period, you are not required to provide vacation time. However, employees do earn vacation pay as they earn wages.
    3. Vacation time is still accumulated during a leave of absence, such as Maternity or Parental Leave since there is no break in the employment relationship.
    4. Your employees must take vacation within ten months after completing a vacation entitlement year or stub period.
    5. As an employer, you have the right to schedule vacation and ensure that your employees take the time off before the end of that ten-month period.
    6. Employers must schedule vacation time in blocks: two or three-week blocks, or in one-week blocks of two or three, as dependent on years of service. For shorter periods of time off (i.e. one day), your employee may request to do so, and the agreement can be made electronically or in writing.
    7. For most cases, earned vacation pay must be provided in a lump sum before your employee takes the time off. However, there are several exceptions to this.
    8. Your employee can give up all or some of their vacation time; however, as an employer, you are still obligated to provide them with their earned vacation pay. In this case, you’ll need electronic or written consent in addition to an approval from the Director of Employment Standards.
    9. In cases of termination, you must pay your employee their earned vacation that has not yet been paid. This is required within seven days of the employment ending or on the next pay day.
    10. If your employee asks for a statement of their vacation pay (in writing), you must provide these records within seven days of the request or by the next pay day.


    Do you have questions about vacation pay?

    Our experts can help you develop company policies as well as with any other HR, health and safety, or employment advice you need. To learn more, call an expert today at 1 (833) 247-3652.