What is vacation pay?

Vacation pay refers to a portion of wages that an employee earns while on vacation. In Canada, employees usually start earning vacation pay immediately when they get hired. They can start taking paid vacation days after one year of employment.

Vacation pay entitlements by province

Vacation pay is usually a percentage of the gross wage. Below is a breakdown of provincial vacation entitlement in Canada:

Alberta, British Columbia, and Manitoba

For these provinces, an employee gets two weeks of vacation pay after their first year of employment. After five years of employment, employees are entitled to three weeks of vacation pay. Vacation pay accrues up to 4% for the first five years and 6% after five years of employment.

Northwest Territories and Nunavut

For these regions, employees get two weeks of vacation for the first six years of employment and three weeks of annual vacation after six years of employment. Vacation pay for these two provinces is the same as with Alberta, British Columbia, and Manitoba. The employee gets 4% of the vacation pay for the first five years of employment and earns 6% after five years on the job.

Ontario and Quebec

Workers in these areas earn a 4% vacation pay for the first five years on the job and a 2% increase after five years of employment. As for vacation time in Ontario, employees earn two weeks of annual vacation after their first year of employment, while in Quebec, employees get two weeks for the first five years and three weeks after five years of employment.

New Brunswick and Nova Scotia

Employees in these regions earn a 4% vacation pay for their first eight years of employment. The amount increases to 6% after that. The law mandates employers should guarantee two weeks of vacation time for the first eight years.

Alternatively, the employer can give the employee a day for every month the employee has worked for the first eight years of employment. The employee also gets three weeks of annual vacation after working for eight years or 1¼ days for every month worked after eight years.

Prince Edward Island

Employees in this region earn 4% of vacation pay for the first eight years of employment and 6% afterward. They also get two weeks of annual vacation after the first eight years and three weeks after the eight years have elapsed.

Yukon

Yukon employees are entitled to two weeks of paid vacation after their first year of employment at 4% of their regular wages.

Newfoundland & Labrador

Employees in Newfoundland & Labrador have a right to 4% of vacation pay for the first eight years and 6% after the eight years. They also take two weeks of annual vacation for the first 15 years and three weeks afterward.

Saskatchewan

In Saskatchewan, employees get three weeks of vacation time for the first nine years of employment and four weeks after the nine years. They also earn 6% pay for the first nine years and 8% after nine years.

How to calculate vacation pay for employees

Businesses have no obligation to provide paid vacations for their employees. While this is optional, it is often a good idea to provide employees with vacation pay to boost their morale. It can also help you to attract better employees in the future.

Here is how you can calculate vacation pay for salaried employees:

• Calculate the employees’ wage rate by dividing their yearly salary by the number of hours they worked in the employment year
• Calculate the employees’ vacation time by adding their days off and multiply the figure by the number of hours in their usual workdays
• Multiply the employees’ hourly wage by the number of hours they get for vacation

When to pay for vacation pay

An employee deserves vacation pay 14 days before their vacation time begins. Some employers prefer to pay the entire amount once the employee is through with their entitlement year before taking their vacation. Others opt to add vacation earnings to their employees’ paycheck. In case of employment termination, the employer must pay the employee any vacation pay they owe for the full or partial employment year.

Why vacation pay matters

Vacation pay is a mandatory requirement in each province, so it’s important to give your employees at least the minimum number of days off. Vacation time also ensures employees have time to rest and spend time pursuing personal interests. Employees who use their vacation time often feel less stressed and return to work feeling motivated. Satisfied and motivated employees are more likely to stay with your company, reducing turnover.

Vacation pay in Canada FAQs

What is the difference between vacation time and vacation pay?

Vacation time refers to the time employees take off their normal working days. The annual vacation can be their hiring anniversary date, the end of a calendar year, or a date designated by the company. Employees have to take paid vacations in Canada within four to 12 months of when they earned them.

Some provinces may allow employees to take vacation time once, or in two separate weeks. If an employee’s vacation time coincides with a statutory holiday, an employer must give the employee an extra day.

Vacation pay, on the other hand, is the amount employees receive when they take their vacations. Paid vacations in Canada are defined differently according to the provinces. Generally, employees have a right to a percentage of about 4% or higher of vacation earnings.

Do employers have to pay for unused vacation time in Canada?

If the employer offers vacation time to their employees, they must pay for the time off. Most provinces in Canada have strong regulations regarding payout for any accrued vacation time that their employees don’t use if the company offers the policy.

When the employee leaves or the employer ends their contract, the employer still has to pay for any unused vacation time. British Columbia is the only province with an exception to this rule. In British Columbia, if an employee’s contract is terminated within five days of their hiring, the employer doesn’t have to pay them any vacation pay.

How long do employees have to work for a company before they can take a vacation?

Employees get paid vacations in Canada after their first year of employment. The employees have the right to take the annual vacation in the following year. A company’s policy usually defines vacation entitlement in Canada. It’s possible for employers to offer more paid vacation time than the minimum requirement, and companies can also offer vacation pay before employees work a full year, if desired.

The employer’s vacation policy often determines the employee’s vacation pay. Two weeks of vacation time accrues 4% vacation pay, three weeks of vacation time accrues 6%, four weeks of vacation time accrues 8%, and so on.