How Vacation Pay Works in Ontario

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With the holiday season fast approaching, it’s time to think about those get-togethers with family and friends. Maybe you’re thinking of taking some time off work to make the most of them, even if you’re staying local. Whether you’re responsible for providing vacation pay for your team or you’re an Ontario worker curious about your vacation rights and entitlements, use this guide as an introduction to the rules around vacation pay in Ontario.

If you have specific questions about this or any other workplace issues, however, always speak to a reputable lawyer at a Toronto employment law firm to keep yourself protected.

Below are some of the basics of how vacation pay works in Ontario for employees who are not in unionized or federally regulated workplaces. However, perhaps your employment contract offers a greater benefit than the minimums provided in the Employment Standards Act. If that is the case, those terms in your contract become the minimum entitlements.

Who Is Entitled to Vacation Pay?

All workers in Ontario must be paid for a certain number of days of vacation time. This includes contract, part-time, hourly, and temporary employees. The law stipulates that employers must calculate vacation pay as a percentage of an employee’s total gross wages. This includes commissions, bonuses, overtime, and so on. It starts to accrue on an employee’s first day at a new job. Then it continues to build up until it the employer pays it out.

Employees with less than five years on the job are receive a minimum vacation pay of four percent of their gross earnings. Those with five or more years of service earn at least six percent of their gross earnings as paid time off for vacations.

How Many Vacation Days Must Employees Receive?

An employee has to work a full year before they get any vacation time. By law, those who have been working for more than a year but less than five years are have two weeks of vacation time—or vacation pay —for every twelve months they work. Employees with at least five years with the same employer get at least three weeks of vacation in a twelve-month period.

However, under the Employment Standards Act, an employee cannot carry vacation days over from year to year. They have 10 months from the end of the 12-month period in which they earned their vacation time to use it. After this period the employer does not have to give them that time off. Further, an employer can schedule vacation time for an employee who doesn’t do so before the 10-month window.

Paying out Vacation Pay

Typically, an employer will pay out an employee’s vacation time in a lump sum before they take their time off. However, an employer and employee can agree to other ways for the employee to receive pay for time off. However, the agreement must be in writing. For example, it could be a part of the employment contract. Examples include paying out vacation pay the employee earned every pay period in the person’s paycheck. Or the employer could allow an employee to take this pay before they have earned it.

When an employment contract ends, an employer must pay the employee for any unused vacation pay they have earned. If an employee is entitled to notice of termination or pay in lieu of notice, they are also entitled to the vacation pay that accumulates during the notice period.

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