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The ins and outs of vacation pay

Posted by on Jun 11, 2012 in Compensation, HR Issues, Legal, Moneyville | 0 comments

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June 11, 2012
By Sheryl Smolkin
ImageSunseekers relax on a beach in Destin, Fla. The Employment Standards Act determines the minimum holiday time you get each year.

Canadians treasure beautiful spring and summer weather. In the winter we travel south in droves, but as the temperature goes up and the days grow longer we count the hours until we can head for the cottage, the beach or the nearest park.

The Employment Standards Act says Ontario employers have to give employees a minimum of two weeks paid vacation after one year. However unlike most other provinces (except Prince Edward Island) there is no requirement that employees receive an additional week of vacation after several years of service (i.e. B.C. and Quebec: 3 weeks after 5 years). Nevertheless, many employers are more generous.

Related: This company offers unlimited vacation

At first glance statutory vacation rights seem quite straightforward, but like any other legislative provisions, the devil is in the details. Here are some things you should know to avoid any misunderstandings with your boss.

1. Who is entitled to vacation?  Full-time, part-time, temporary, seasonal, term contract employees and student employees are eligible. However, there are job-specific exemptions.  For example, students on an approved work-experience program are not eligible for vacation time.

2. How is vacation pay calculated?If you are entitled to two weeks of vacation, vacation pay is 4  per cent of your total annual gross wages. Some employers add the 4 per cent to each paycheck. Others continue paying a regular salary during employee time off.

It’s also important to distinguish between vacation time and vacation pay. You become entitled to vacation time off after one year of service but accrue vacation pay from the very first day of employment.

Simply paying salary during vacation periods may not be sufficient, since in addition to regular earnings and commissions, “gross wages” on which vacation pay is calculated includes non-discretionary bonuses; overtime pay; public holiday pay; termination pay; and allowances for room and board. So if you earned considerable overtime in a vacation period your vacation pay should also reflect those amounts

3. Does vacation accrue during leaves? Because you are still considered to be employed during a period of pregnancy, parent, family medical, organ donor or reservist leaves you generally continue to accumulate vacation time when you are away.

However, if your contract says you have to be at work to accrue paid vacation, you may not earn either vacation time or pay when you are on leave. But when you return at the end of your leave, you must be credited with at least the statutory minimum vacation time and pay.

For example, if your contract provides active employees with three weeks of paid vacation and you take a one year maternity/parental leave, on your return you must be credited with at least two weeks of paid vacation.

4.When can vacation be taken? Employers have to schedule the vacation period earned each year in a block of two weeks or two one week blocks unless you make a written request and your employer agrees in writing to schedule vacation in shorter periods. In practice many employers allow employees to take all or part of their vacation in one day increments if they wish to do so.

Vacation time earned with respect to a completed vacation entitlement year must be taken within 10 months following the end of the period. There are significant differences in how companies deal with employee requests to carry vacations over to the next year.

Related: Can the boss cancel your vacation?

5.What happens if I quit? If you quit or are terminated you are entitled to be paid any vacation pay you have earned. The sum must be paid either within seven days of the employment ending or on what would have been your next pay day – whichever is later.

Where you receive statutory termination pay (up to 8 weeks if you were employed eight years or more) the vacation pay calculation should factor in this period. Therefore if you get 12 vacations days a year, on termination after eight years you will get a vacation payout that includes an additional 2 days over and above any other vacation accrued, but not taken.This requirement does not apply to statutory severance pay (up to 26 additional weeks).


For further information or clarification of the vacation rules, see vacation pay   and  to fiIe a claim, see “I think my boss is wrong.”
Related: Should you go on vacation if you are in debt?

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