Overview - Vacation Time and Vacation Pay - Ontario, Canada

Let's explore the key details regarding vacation time and vacation pay in Ontario.

 

Vacation Time

In Ontario, employees are entitled to a certain amount of vacation time based on their length of employment. The vacation time is the period during which an employee can take time off from work for rest and relaxation. The length of vacation time an employee is entitled to depends on the number of years they have worked for their employer.

According to the Employment Standards Act,2000, employees in Ontario are entitled to the following vacation time:

• After completing one year of employment, employees are entitled to two weeks (10 days) of vacation time.
• After completing five years of employment with the same employer, employees are entitled to three weeks (15 days) of vacation time.

Deadlines for Taking Vacation

The vacation time earned for a vacation entitlement year or a stub period must be taken within 10 months after completing that year or stub period. The employer has the right to schedule vacation as well as an obligation to ensure the vacation time is scheduled and taken before the end of that 10-month period.

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Vacation Pay

In addition to vacation time, employees in Ontario are entitled to vacation pay. Vacation pay is a form of compensation provided to employees for the time they take off work. The purpose of vacation pay is to ensure that employees have the financial means to enjoy their time off without facing financial hardship.

The amount of vacation pay an employee receives depends on their length of employment and is calculated as a percentage of their wages earned during the vacation entitlement period. Generally, the vacation pay rate is 4% of the employee's wages earned during the vacation entitlement period.

However, after completing five years of employment with the same employer, the vacation pay rate increases to 6% of the employee's wages earned during the vacation entitlement period.
In the case where an employee who reaches the five-year employment threshold partway through the vacation entitlement year or stub period, they are entitled to vacation pay calculated at 6% of all the wages earned in the vacation entitlement year or stub period.

 

The gross wages on which vacation pay is calculated include:

• regular earnings, including commissions;
• bonuses and gifts that are non-discretionary or are related to hours of work;
• overtime pay;
• public holiday pay;
• termination pay;
• allowances for room and board; and
• domestic or sexual violence leave pay.

But do not include:

• vacation pay paid out or earned but not yet paid;
• 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.

Deadlines for Paying Vacation

Typically 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 they take 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 pay day for the period in which the vacation falls.
2. When the employee has agreed electronically or in writing that their vacation pay will be paid on each pay cheque as it accrues (accumulates).
   • In this case, the employee's wage statement may show clearly the amount of the vacation pay being paid. This amount must also be shown separately from any other amounts paid.
3. If the employee agrees electronically or in writing, the employer can pay the vacation pay at any time agreed to by the employee.
4. If the employer pays the employee their 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 pay day for the period in which the vacation falls.

When Employment Ends

Upon the conclusion of employment, whether due to an employee's resignation or termination, the individual is eligible for accrued vacation pay that remains unpaid. This encompasses vacation pay earned not only during the ongoing entitlement year or stub period but also from a prior vacation entitlement period.

In cases where an employee's termination occurs within a vacation entitlement period and before completing five years of employment, the individual is entitled to receive vacation pay amounting to 4% of the wages earned during the last partially completed vacation entitlement period. This also includes any outstanding vacation pay from previously completed entitlement periods.

For an employee who attains five years of service with the employer before termination, either prior to or during the last partially completed vacation entitlement period, the entitlement increases to 6% of all wages earned in that period. Again, any outstanding vacation pay from prior entitlement periods is included.

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Conclusion

In Ontario, Canada, vacation time and vacation pay are important benefits that employees are entitled to. Vacation time allows employees to take time off from work for rest and relaxation, while vacation pay provides them with the financial means to enjoy their time off. By understanding the regulations surrounding vacation time and vacation pay, both employers and employees can ensure compliance with the Employment Standards Act and create a positive work-life balance for all.

 

^Resources:

^{https://www.ontario.ca/document/your-guide-employment-standards-act-0/vacation}