Vacation Pay in Ontario: What You Need to Know

by | Oct 12, 2022 | Employment Law

Vacation Pay in Ontario: Introduction

With Thanksgiving weekend around the corner, the unofficial start of the holiday season begins. As we look ahead and start making plans, holiday shopping and sending out invitations, another important consideration is booking your vacation at work if you haven’t done so already.

Which makes this a good time to review vacation rights such as employee entitlements, employer obligations and the minimum requirements to qualify for vacation pay in Ontario. If you have questions about vacation or other rights in the workplace, are having issues at work or have been offered a new or changed role with an employer, speak with one of the leading employment lawyers in Ontario. We offer free consultations, and our experience can help protect you in the workplace.

Disclaimer: The information in this guide and everywhere else on this website is for general information only and is not intended to provide legal advice of any kind. No lawyer-client relationship is created by accessing or otherwise using Ertl Lawyers’ website or by communicating with a lawyer or staff member. If you need legal advice, contact an experienced Toronto employment lawyer at Ertl Lawyers. We’re more than happy to speak with you.

Please note that the information below is based on the legal minimums contained in Ontario’s Employment Standards Act (ESA) regarding vacation pay for provincial, non-unionized employees in Ontario. Your employment contract or collective bargaining agreement may provide a larger amount of vacation pay or a longer period of time off.

Also note that there are some provincially-regulated occupations that are exempt from the minimums in the ESA and have special rules regarding workplace entitlements, including vacation pay.

Employees working in federally-regulated industries, like airlines, banks, postal services and others, are entitled to the vacation pay minimums outlined in the Canada Labour Code.

A. Vacation Pay in Ontario – the Basics

There are two basic components to employer-provided vacation pay in Ontario:

  • Vacation Pay – The amount of money you’re entitled to when taking a vacation (or at other times, more details below.)
  • Vacation Time – The amount of time off you are entitled to for vacation.

All employees in Ontario are entitled to vacation pay. This includes part-time, temporary, seasonal and contract workers. As you will see in the section below, however, not all employees can qualify to take time off for a vacation.

Minimum Vacation Pay Entitlements in Ontario

As soon as you start working with an employer in Ontario, you begin earning vacation pay. Employees who have been at their workplace for less than 5 years earn 4% of their total gross earnings as vacation pay. Gross earnings include bonuses, commissions and overtime before taxes or other deductions.

If you’ve been with your employer for over 5 years, you are entitled to a minimum of 6% of your gross wages as vacation pay.

These legal minimums were increased for employees with five years of service or longer at the beginning of 2018. The increased vacation pay and vacation time entitlements do not apply to time worked before January 1, 2018.

Two women set the table for a family Christmas dinner

Vacation Time Entitlements in Ontario

Employees are also entitled to a minimum amount of vacation time off every 12 months after they have been with their employers for at least a year. An employee earns vacation days over the course of every 12-month period they work (known as the vacation entitlement year.)

A vacation entitlement year can begin and end every year on the anniversary of an employee’s start date (this is called a standard vacation entitlement year). Vacation entitlement years can also be a 12-month period starting on a different date, like January 1st, for example. This is known as an alternative vacation entitlement year.

The time an employee works between their hire date and the first day of an alternative vacation entitlement year is known as the stub period. Vacation entitlements for a stub period are pro-rated based on the ratio of the time worked compared to the 12-month vacation entitlement year. There is also a stub period if/when an employer decides to switch from a standard vacation entitlement year to an alternative vacation entitlement year and vice versa.

Employees with 1 to 5 years of service with the same employer are entitled to a minimum of 2 weeks of vacation per year, and employees who have worked 5 years or longer for the same employer are entitled to a minimum of 3 weeks of vacation a year.

Vacation Pay and Time Off Entitlements When an Employee is on Leave

If an employee takes a leave of absence or goes on a legally protected leave, such as:

  • Sick leave;
  • Ontario parental leave and pregnancy leave;
  • Bereavement leave;
  • Child death leave;
  • Crime-related child disappearance leave;
  • Critical illness leave;
  • Domestic or sexual violence leave;
  • Family caregiver leave;
  • Family medical leave;
  • Family responsibility leave;

the time away from work still counts toward both the employee’s length of service and their vacation entitlement year.

Calculating Vacation Days Earned, Vacation Pay and Vacation Entitlements for Stub Periods in Ontario

Calculating the amount of vacation pay you’re entitled to is fairly straightforward; multiply the gross annual income you earned in your vacation entitlement year by .04 or .06, depending on if you’ve completed five consecutive years of service or not.

You can also calculate the number of vacation days you have earned fairly easily. Simply multiply the number of days you worked in a week during your vacation entitlement year by either 2 or 3, depending on how many weeks you are entitled to.

In other words, if you are a full-time employee that works a standard five-day, Monday to Friday schedule, you are entitled to 10 days of vacation if you’ve been at your job between 1 and 5 years and 15 days if you’ve been with your employer for 5 years or longer.

If your schedule fluctuates and you don’t work a consistent number of days from week to week, your employer calculates your vacation days by using the average number of days you worked each week during your most recently completed vacation entitlement year and multiplies that number by either 2 or 3.

An employer calculates their employee's vacation pay

Calculating Vacation Entitlements for Stub Periods

Your vacation entitlements for a stub period are calculated by using a ratio of time worked during the stub period to a 12-month vacation entitlement year. Express the time worked as a number in months and divide it by 12 months to get the stub period ratio for your pro-rated entitlements.

To calculate the vacation time accrued during a stub period, multiply the ratio by the amount of vacation time you are entitled to.

For example, if you were hired less than five years ago on October 1st, and your employer uses an alternative vacation entitlement year of January 1st, your stub period is 3 months, making the stub period ratio 3/12. To find out how much time off you earned during that stub period, you would multiply 2 weeks by 3/12:

2 * 3/12 = 2 * 1/4 = 0.5

In this example, you would be entitled to half a week’s vacation for the stub period.

To calculate the vacation pay earned during a stub period, multiply the stub period ratio by the total gross income earned in the vacation entitlement year, then multiply the result by either 4% or 6% to find out how much vacation pay you earned during the stub period.

Using the above example, if you earned $75,000 in gross income during your most recently completed vacation entitlement year, you would calculate your vacation pay for the stub period this way:

$75,000 * 3/12  = $18,750

$18,750 * 4% = $750.00

This is the most straightforward example for calculating the vacation pay earned during a stub period. For more complex scenarios and more detailed information on calculating vacation days, stub pay entitlements and other rules regarding vacation pay in Ontario, visit the Government of Ontario’s guide to vacation entitlements under the ESA.

Getting Vacation Pay, Taking Vacation and other Rules Around Vacation Pay in Ontario

Vacation pay can be paid out in one of two ways. First, your vacation pay can be calculated and “banked” or held by the employer until the time which you elect to take vacation. You then request your employer pay out your “banked” vacation pay. It must be paid out in a lump sum payment right before an employee goes on vacation unless they agree in writing to receive it at another time.

The second way in which vacation pay can be paid out is consistently throughout the year on your regular pay cheque. You may notice on your pay stub that you receive your 4% or 6% vacation pay on the hours you worked being paid to you on every pay cheque.  This means that when you do elect to take vacation, you don’t receive a lump sum payment of vacation pay as you’ve been paid it on each pay cheque received.

Other important rights and obligations related to vacation time and vacation pay in Ontario include:

  • Earned vacation time must be taken within 10 months of the vacation entitlement year. If not, an employee must receive their vacation pay at the end of that 10-month window (subject to an alternate agreement in writing.)
  • The vacation time provided by the ESA can not be carried over beyond the 10 months. However, many employers provide more vacation time than the ESA and/or allow their employees a longer window to use their vacation days.
  • If an employee does not schedule their vacation time within 10 months of the vacation entitlement year, an employer is allowed to schedule their vacation time for them.
  • An employer is not allowed to schedule vacation days for an employee after they have given that employee notice of their intention to terminate the employment. An employee may, however, agree to take vacation during the notice of termination period.
  • Employees are also entitled to statutory holiday pay for public holidays while they are on vacation. As with all other employees, however, to qualify for stat holiday pay, they must work their last scheduled workday before going on vacation and their first scheduled workday when returning from vacation.
  • An employee can “opt-out” of taking time off for vacation by agreeing to do so in writing, but all employees must be paid vacation pay.

One last note regarding vacation pay entitlements in Ontario – an employer is obligated to provide vacation pay on all wages an employee earns up to their last day of employment.

This means that if an employer decides to let an employee go and to pay them the wages they would have earned in lieu of working during the notice of termination period, they must include vacation pay as part of the termination pay, regardless of whether the employee is someone who is entitled to severance pay or not. Check out our severance pay calculator to learn more about termination and severance pay, get an idea of how severance pay is calculated and find out how much severance you might be entitled to at your current job.

David Ertl Lawyer
About David Ertl
David Ertl, LL.B, has practiced employment and disability law for over 20 years. He is also a certified workplace investigator, former adjunct professor, and has written extensively in the areas of employment law, disability insurance, and tribunal practice and procedure.


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