Vacation Pay in Ontario: Employee Rights

What is vacation pay in Ontario?

Vacation pay in Ontario is money that employees receive for the time they are away from work on vacation.

This pay starts accumulating as soon as an employee begins working — ensuring that individuals maintain financial stability while taking time off work.

Vacation pay is defined by the province’s Employment Standards Act (ESA).

What is the difference between vacation pay and vacation time?

Vacation pay and vacation time are related, but distinct concepts:

• Vacation pay: Is the amount of money employees in Ontario receive while they are on vacation. It’s a percentage of the wages earned by the employee during the “vacation entitlement year.”
• Vacation time: Employees earn vacation time with each hour worked. It is the time off that employees are entitled to take, and it accumulates over time based on the length of their employment and the hours they’ve worked.

How is vacation pay calculated in Ontario?

Vacation pay in Ontario is calculated as a percentage of the employee’s total wages earned during the vacation entitlement year.

Total wages used for calculating vacation pay include:

• Regular wages (salary and commission)
• Overtime wages
• Statutory holiday pay
• Bonuses (that meet the definition of wages)
• Termination pay

Previously paid vacation pay isn’t part of “total wages” when determining vacation pay in the province.

How much is vacation pay?

• 1 to 4 years: At least 4% of total wages, starting on the 1st day of employment.
• 5 years or more: At least 6% of total wages, starting at the beginning of the 5th year.

Example: Ali’s Vacation Pay in Ontario

Ali starts working for the company on January 1, 2014.

• Years 1 to 4: From January 1, 2014, to December 31, 2017, Ali earns 4% of his gross wages as vacation pay.
• At 5 years: Starting January 1, 2018, Ali earns 6% of gross wages as vacation pay each year.

This ensures Ali receives appropriate vacation pay based on his length of employment in Ontario.

When did 6% vacation pay start in Ontario?

The 6% vacation pay started in Ontario for employees with five or more years of service in jobs ending on or after December 31, 2017.

Employers weren’t obligated to increase the vacation pay to 6% for employment ending before this date.

Is it mandatory to pay vacation pay in Ontario?

Yes, it’s mandatory for employers to provide vacation pay in Ontario.

All employees, full-time, part-time, or casual, are entitled to vacation pay as per the guidelines set by the ESA.

Temporary and staffing placement employees are also covered by the province’s  vacation rules.

They are entitled to a minimum of 4% or 6% (depending on the length of employment) of the wages earned as vacation pay, even if the employment relationship is short-term.

When will my vacation pay be paid out?

Vacation pay can be paid out in various ways, such as:

• Paid in a lump sum before the employee takes vacation time.
• Paid on each paycheque as a separate item.
• Paid on the regularly scheduled payday during or immediately following the vacation.

Do I get paid for unused vacation in Ontario?

Yes, employees in Ontario are entitled to get paid for unused vacation.

However, the ESA prevents workers from hanging on to unused vacation days indefinitely. If you don’t use your vacation within 10 months of the entitlement year, you must be paid out.

It’s important to note that the ESA only sets out the statutory minimum guidelines for vacation pay in the province.

Companies can outline their own vacation policy regarding unused days in their employment contracts.

Vacation pay and termination in Ontario

When you are fired or lose your job in Ontario, your employer must give you the vacation pay you have earned but not yet been paid out.

This pay should be provided within seven days of termination or on what would have been your next payday.

But that’s not all you may be owed. If you are fired “without cause” in Ontario (for any reason outside of serious misconduct) you are entitled to a full severance package.

Severance in Ontario can be as much as 24 months’ pay, and is calculated using factors like your age, position and length of employment.

A wrongful dismissal occurs when your employer doesn’t offer you the proper amount of severance pay, which happens often in Ontario.

A termination “for cause” means that you were let go for serious misconduct or insubordination, and your employer legally doesn’t have to provide you with a severance package.

However, this type of termination is often incorrectly used by employers, meaning you may still be owed substantial compensation.

Lost your job?

When you are fired, laid off or let go from your job, it’s crucial to consult an experienced employment lawyer at Samfiru Tumarkin LLP before accepting a severance offer.

Signing your termination papers prematurely may cause you to forfeit essential rights — including proper severance pay and vacation pay.

Employers often impose deadlines to pressure employees into accepting insufficient severance packages.

However, your legal right to a complete severance package isn’t bound by these arbitrary deadlines. You have up to two years from the termination date to claim your full severance — as much as 24 months’ pay.

At Samfiru Tumarkin LLP, our skilled team of employment lawyers consistently deliver proven results for countless clients across Ontario.

We work diligently to protect your rights and provide necessary guidance through employment-related issues.

If you are a non-unionized employee in Ontario (or Alberta and B.C.) facing job loss or workplace challenges, contact us or call 1-855-821-5900 to get the advice you need and the compensation you deserve.