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Vacation with Pay

  • ISBN (HTML): 978-1-4435-4490-0
  • ISBN (PDF): 978-1-4435-4491-7
  • ISBN (Print): 978-1-4435-4489-4
  • Issued: September 2010
  • Content last reviewed: November 2011
  • PDF VersionPDF [ 295 Kb / 58 pages | Download Adobe Reader ]

This workbook has been prepared to assist employers and employees in understanding some of their obligations and rights under the Employment Standards Act (ESA) and its regulations. It does not take the place of the ESA and its regulations and it should not be considered to offer any legal advice on your particular situation.

Under the Employment Standards Act (ESA), most employees are entitled to receive two weeks of paid holiday for each 12 months of employment, whether or not active. Most employees are also entitled to vacation pay for their vacation entitlement year equal to four per cent of the wages earned during that year. However, some employees work in jobs that are not covered by the ESA’s vacation with pay provisions. The Special Rule Tool can help you find out if this exemption applies to your situation.


Vacation Time and Vacation Pay

This employment standard has two parts: vacation time and vacation pay. Employees are entitled to two weeks of vacation time after each 12 month vacation entitlement year. Ordinarily, a vacation entitlement year is a recurring 12 month period beginning on the date of hire.

Where the employer has established an alternative vacation entitlement year that begins on a date other than the date of hire, the employee is also entitled to a pro-rated amount of vacation time for the period (called a "stub period") that precedes the alternative vacation entitlement year.

Vacation pay must be at least four per cent of the wages (excluding any vacation pay) earned in the 12-month vacation entitlement year or stub period (where that applies)

Key Definitions

  • Vacation Entitlement Year: The 12 month period over which employees earn vacation.
  • Standard Vacation Entitlement Year: A recurring 12 month period beginning on the date of the employee’s hire.
  • Alternative Vacation Entitlement Year: A recurring 12 month period chosen by the employer to begin on a date other than the employee’s date of hire (i.e. employee hired June 1, but employer selects alternative vacation entitlement year commencing January 1).
  • Stub Period: Period between:
    • Date of hire and beginning of the first alternative vacation entitlement year,
    • End of a standard vacation entitlement year and the beginning of an alternative vacation entitlement year where the employer switches from the former to the latter.
      • Example: if an employer has chosen an alternative vacation entitlement year that runs January 1 to December 31, and the employee was hired on September 1, the stub period will be September 1 to December 31.

IMPORTANT NOTE: An employee’s vacation entitlement year and stub period includes time the employee spends away from work because of: layoff, sickness or injury, leaves of absence (pregnancy, parental, family medical, organ donor, personal emergency, declared emergency and reservist leaves), any other approved leaves where there is no break in the employment relationship.


Vacation Time

Employees earn a minimum of two weeks vacation time upon completion of every 12-month vacation entitlement year. The Employment Standards Act (ESA) does not provide for any increases to the two-week vacation time entitlement, although an employee’s contract of employment or collective agreement may do so.

If the vacation entitlement year is a standard vacation entitlement year, the employee will be entitled to a minimum of two weeks of vacation time after the 12 months following his or her date of hire, and after each future 12 month period.

If an employer establishes an alternative vacation entitlement year, the employee will be entitled to a minimum of two weeks of vacation time after each alternative vacation entitlement year. The employee will also be entitled to a pro-rated amount of vacation time for the stub period preceding the start of the first alternative vacation entitlement year.

An employee's contract of employment or collective agreement may provide a greater right or benefit with respect to vacation time or pay. An employee who does not complete either the full vacation entitlement year or the stub period (if any) does not qualify for vacation time under the ESA. However, employees earn vacation pay as they earn wages. So if an employee who is paid by the hour works even just one hour, he or she is still entitled to an amount equal to four per cent of the hour's wage as vacation pay.

How to Calculate Stub Period Vacation Entitlements

  View Example 1: When the employee has a regular work week

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Example 1: When the employee has a regular work week

The vacation time entitlement for a stub period is calculated as two weeks multiplied by the ratio (R) of the length of the stub period to 12 months.

  • Employee has a regular work week
  • Employee hired September 1 and alternative vacation entitlement year begins January 1.
  • Stub period is September 1 to December 31 (four months)

Calculating Entitlement

  • R = 4 months/12 months
  • 2 weeks x 4/12 = 2/3 of a week.

Therefore, the employee is entitled to 0.67 of a week off in vacation.


View Example 2: When the employee does not have a regular work week

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Example 2: When the employee does not have a regular work week

The vacation entitlement for a stub period is calculated as two weeks multiplied by the average number of days worked per work week during the stub period (A) multiplied by the ratio of the length of the stub period to 12 months (R).

  • Employee does not have a regular work week
  • Employee hired September 1 and alternative vacation entitlement year begins January 1.
  • Stub period is September 1 to December 31 and there are 17 work weeks in the stub period.
  • The employee worked a total of 51 days in those 17 work weeks.

Calculating Entitlement

  • A = 51 days/17 work weeks
  • R = 4 months/12 months
  • [(2 weeks x (51/17)) x (4/12)] = 2 days


Deadlines for Taking Vacation

The vacation time earned with respect to a completed vacation entitlement year or a stub period must be completely taken within 10 months following the completion of the vacation entitlement year or stub period. An employer has the right to schedule vacation for their employees as well as an obligation to ensure the vacation time is scheduled and taken before the end of that 10-month period.

View an Example

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Example

Riley was hired on February 24, 2005. His employer established an alternative vacation entitlement year of July 1 to June 30. The pro-rated amount of vacation time that Riley earned for the stub period of February 24, 2005 to June 30, 2005 must be taken within 10 months of the end of the stub period (that is, within 10 months of June 30, 2005). The vacation time Riley earned for the entitlement year July 1, 2005, to June 30, 2006, would have to be taken within 10 months of the end of the vacation entitlement year (that is, within 10 months of June 30, 2006).


If the deadline under the Employment Standards Act for taking a vacation comes up when an employee is on pregnancy, parental, family medical, organ donor, personal emergency, declared emergency or reservist leave, the vacation must be taken when the leave ends or, if the employer and the employee agree in writing, at a later date.

Likewise, if an employee's contract requires that his or her vacation must be taken within a specified period or be lost, and that period ends while the employee is still on leave, the employee may, despite the contract, postpone the vacation until the leave ends or, if the employer and employee agree in writing, until an even later date.

Foregoing Vacation

An employee can give up some or all of his or her earned vacation time with the employer's written agreement and the approval of the Director of Employment Standards. This approval does not affect an employer's obligation to pay the employee vacation pay; employees may give up vacation time, but not the right to vacation pay.

Scheduling Vacation Time Earned from a Vacation Entitlement Year


IMPORTANT NOTE: Employers are required to schedule the vacation time earned in each vacation entitlement year in a block of two weeks or in two one-week blocks. However, if the employee makes a written request and the employer agrees in writing, he or she can schedule the vacation in shorter periods. In that case, it is necessary to calculate the number of single vacation days the employee is entitled to.


View Example 1: When the employee has a regular work week

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Example 1: When the employee has a regular work week

The employer takes the number of days in the employee's usual work week and multiplies that number by two.

Calculating the entitlement to single vacation days earned:

  • The employee regularly worked Monday, Wednesday and Friday, or three days a week in the preceding vacation entitlement year.
  • The employee is therefore entitled to six single vacation days in respect of that vacation entitlement year.

View Example 2: When the employee does not have a regular work week

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The employer calculates the average number days worked in each week in the most recently completed vacation entitlement year and then multiplies that number by two.

Calculating the entitlement to single vacation days earned:

  • The employee worked a total of 149 days in the preceding vacation entitlement year.
  • There are 52.18 weeks per year.
  • The average number of days worked per week in the year would be: 149 days ÷ 52.18 weeks per year = 2.86 days
  • The single vacation days the employee would be entitled to in respect of that year would be: 2 × 2.86 days or 5.72 days of vacation.

How to Schedule Vacation Time Earned with Respect to a Stub Period

The vacation time earned with respect to a stub period is calculated as single days based on the formulas set out under the heading “Calculating Stub Period Vacation Entitlements.”

If the amount of vacation time earned is between two and five days, the vacation days must be taken consecutively, unless the employee requests in writing that they not be taken consecutively and the employer agrees in writing.

If the amount of vacation time earned with respect to the stub period is more than five days, the first five days must be taken consecutively and any additional days may be taken together with the first five or in a separate period of consecutive days, unless:

  • the employee requests in writing that the vacation days not be taken consecutively; and,
  • the employer agrees in writing.

Vacation Pay

Employees must receive a minimum of four per cent of the wages (excluding vacation pay) they earned in the 12-month vacation entitlement year or stub period for which the vacation is being given.

Example: Suppose Janice earned gross wages of $16,000 in her vacation entitlement year. She is entitled to four per cent of $16,000 as vacation pay, or $640.

If an employee's contract or collective agreement provides a better vacation benefit than the minimum required, the employee may be entitled to a higher percentage of his or her gross earnings for vacation pay. For example, an employee might be entitled under his or her contract to three weeks vacation, with six per cent of gross earnings for vacation pay.

The wages on which vacation pay is calculated include, but are not limited to:

  • Regular earnings, including commissions
  • Bonuses and gifts that are non-discretionary or are related to hours of work, production or efficiency
  • Overtime pay
  • Public holiday pay
  • Termination pay
  • Allowances for room and board

They do not include:

  • Vacation pay
  • Tips and gratuities
  • Discretionary bonuses and gifts that are not related to hours of work, production or efficiency (e.g. a Christmas bonus unrelated to performance)
  • Expenses and traveling allowances
  • Living allowances
  • Contributions made by an employer to a benefit plan and payments from a benefit plan (e.g., sick pay) that an employee is entitled to
  • Federal employment insurance benefits
  • Severance pay

When to Pay Vacation Pay

In most cases, the vacation pay earned during a completed vacation entitlement year or stub period must be paid to an employee in a lump sum sometime before he or she takes the vacation time earned. There are four exceptions:

  1. When the vacation time is being taken in periods of less than one week. In this case, the employee must be paid vacation pay on or before the payday for the period in which the vacation falls.
    • For example, Alvaro is taking vacation from January 1 to January 3, and the normal payday that covers this period is January 30. Alvaro must be given his vacation pay on or before Jan. 30.
  2. When the employee has agreed in writing that his or her vacation pay will be paid on each pay cheque as it accrues (accumulates). In this case, the employee's wage statement must show clearly the amount of the vacation pay being paid. This amount must also be shown separately from any other amounts paid.
    • Alternatively, the employer can provide a separate wage statement for the vacation pay being paid.
  3. If the employee agrees in writing, the employer can pay the vacation pay at any time agreed to by the employee.

  4. If the employer pays the employee his or her wages by direct deposit into an account at a financial institution.
    • In this case, the employee must be paid vacation pay on or before the payday for the period in which the vacation falls.

When Employment Ends

When employment ends (for example, when an employee quits, or his or her employment is terminated), an employee is entitled to be paid the vacation pay that he or she has earned and that has not yet been paid out. In some cases this would include vacation pay earned during a previous vacation entitlement year or stub period as well as the vacation pay earned during the current vacation entitlement year or stub period. Remember that vacation pay is payable on termination pay, but not on severance pay.

IMPORTANT NOTE: The unpaid vacation pay must be paid either within seven days of the employment ending or on what would have been the employee's next pay day, whichever is later.


Paying Vacation Pay Owing when Employment Ends

Example

Jenna was hired on April 1, 2005, and had a standard vacation entitlement year. As of March 31, 2006, she had earned two weeks of vacation time and four per cent of the wages earned in the vacation entitlement year as vacation pay. Her employer scheduled her vacation for the two-week period beginning June 1, and her vacation pay was to be paid prior to the commencement of that vacation. However, Jenna quit her employment on May 15, 2006. When she quit, her employer was required to pay her the vacation pay earned in the vacation entitlement year April 1, 2005, to March 31, 2006, plus the vacation pay earned in her last (incomplete) vacation entitlement year (being four per cent of the wages she earned between April 1, 2005 and May 15).

Vacation and Leaves of Absence

Because the employment relationship continues during a period of pregnancy, parental, family medical, organ donor, personal emergency, declared emergency or reservist leave, the time on leave counts toward the completion of a vacation entitlement year or stub period. For example, an employee on leave for some or even all of a vacation entitlement year would still have earned a full two weeks of vacation time by the end of the vacation entitlement year. The vacation pay earned during that vacation entitlement year would be a minimum of four per cent of any wages actually earned during the year.

Where an employee's contract provides that paid vacation is earned through active service (e.g. 1.5 paid vacation days for each month of service or three weeks paid vacation for each year of service) an employee on leave may not have earned either vacation time or pay while on leave according to the contract. However, the employer must ensure the employee receives the greater of:

  • the vacation time and pay that was earned under the contract; or
  • the minimum vacation time and vacation pay he or she would have earned under the ESA.

Contract of Employment Provides Greater Right to Vacation Based on Active Service

Ingrid's contract of employment provides that she earns two paid vacation days for every month of active service. In other words, vacation time and vacation pay are earned together through active service. Ingrid is on a pregnancy and then parental leave for a total of six months of her vacation entitlement year. Although Ingrid's length of service continues to accrue while she is on pregnancy and parental leave for purposes of the Employment Standards Act (ESA), she is not credited with active service while on leave for purposes of the contract.

At the end of her vacation entitlement year, her employer determines that she has earned 12 paid vacation days under her contract of employment. Because she regularly works five days a week, she has earned enough vacation time under her contract to exceed the two-week minimum required under the ESA. In addition, the employer is able to show that 12 days of regular wages exceeds four per cent of the wages she had actually earned during the vacation entitlement year.

Employees Must Receive at least Two Weeks of Vacation Time (Four-percent Pay)

Tony earns three weeks of paid vacation for every year of active service. He is on a parental leave for eight months of his vacation entitlement year. Under his contract of employment, Tony earned one-third of the three weeks paid vacation he would otherwise earn in a year. In other words, he earned one week of paid vacation for the vacation entitlement year. However, his employer must ensure that Tony receives at least the minimum Employment Standards Act vacation entitlements of two weeks of vacation time and four per cent vacation pay. The employer will therefore have to provide Tony with another week of vacation time and ensure the week of vacation pay earned under the contract is not less than four per cent of the gross wages he had actually earned in the vacation entitlement year.

When Vacation Records Are Requested

Employers are required to keep records of:

  • the vacation time earned since the date of hire but not taken before the start of the vacation entitlement year;
  • the vacation time earned and vacation time taken (if any) during the vacation entitlement year (or stub period); and,
  • the balance of vacation time remaining at the end of the vacation entitlement year (or stub period).

The employer must also keep records of:

  • the vacation pay paid to the employee during the vacation entitlement year (and stub period, if any);
  • the amount of wages on which the vacation pay was calculated; and,
  • the period of time to which those wages relate.

These records must be made no later than seven days after the start of the next vacation entitlement year (or first vacation entitlement year if the records relate to a stub period) or the first pay day after the stub period or vacation entitlement year ends, whichever is later.

Employees may request a statement in writing containing the information in the employer's vacation records. The employer is required to provide the information no later than:

  • seven days after the request; or,
  • the first pay day after the employee makes the request, whichever is later, subject to the following:

If the employee asks for information concerning the current vacation entitlement year or stub period, the employer is required to provide the information no later than:

  • seven days after the start of the next vacation entitlement year (or first vacation entitlement year in the case of a stub period); or
  • The first pay day after the stub period or vacation entitlement year ends, whichever is later.

IMPORTANT NOTE: The employer is required to provide the information with respect to a vacation entitlement year or stub period only once.


If the employee has agreed that vacation pay that accrues during a pay period will be paid on the pay day for that pay period, the employer does not have to:

  • make or keep records of the amount of vacation pay paid during a vacation entitlement year or stub period or the amount of wages on which that vacation pay was based
  • provide a statement setting out vacation pay and vacation time information contained in the employer’s records as discussed above

The employer needs to:

  • report the vacation pay that is being paid separately from the amount of other wages on each wage statement; or,
  • provide a separate statement setting out the vacation pay that is being paid.

The employer must also keep a record of the vacation pay information set out in the wage statement or separate statement, as the case may be.

Vacation Pay Checklist

Do you keep records of vacation time and vacation pay for three years after they are made?

Yes No

 

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