Vacation Pay

What is Vacation Pay?

Vacation pay is governed by Section 35.2 of the Employment Standards Act, 2000, S.O. 2000, c. 41, as amended (ESA), and states that vacation pay must be at least four (4) percent of the earnings (excluding any vacation pay) earned by an employee during the twelve (12)-month vacation entitlement period.

For example, if, during the vacation entitlement year, an employee earned gross earnings of $30,000.00, then the employee is entitled to 4% of $30,000.00, which is $1,200.00.

What is Included in Vacation Pay?

Section 35.2 of the ESA establishes the statutory minimum for vacation pay.  An employment contract or collective agreement may state that an employee is entitled to a higher percentage of gross earnings.  The gross earnings on which vacation pay is calculated include the following:

    •    Regular earnings, including commissions, fluctuating, and variable pay;
    •    Performance and merit-based bonuses;
    •    Non-discretionary gifts;
    •    Overtime, public holiday, and termination pay; and
    •    Accommodation and meal allowances.

What is Excluded from Vacation Pay?

Although vacation pay and severance pay are considered earnings (wages) under the ESA, they are not included in the calculation of vacation pay.  The following are also excluded from the vacation pay calculation:

    •    Tips and gratuities;
    •    Discretionary bonuses (unrelated to performance or merit);
    •    Travelling and living expenses;
    •    Employer contribution to a benefit plan and benefit plan payments (sick                  leave payments); and
    •    Federal employment insurance benefits.

Employment and Labour Laws are not always straightforward, but whether you are an employee or an employer, understanding your rights and duties will only stand to benefit you. Reach out to an employment lawyer or labour lawyer today if you have any questions and be sure to get what you deserve and safeguard yourself for the future. The lawyers at Vey Willetts LLP have a proven track record and are happy to assist.  

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