Key takeaways
- Two numbers to know: 4% and 6%. In most of Canada, employees get two weeks of vacation and 4% vacation pay after their first year, rising to three weeks and 6% once they reach a service threshold. That threshold ranges from 3 years in Quebec to 15 years in Newfoundland and Labrador. Saskatchewan starts higher, at three weeks and 5.77%.
- Your province sets the rules. Vacation pay depends on where your employees work, not where your head office is. If you have teams in more than one province, you need to apply more than one set of rules.
- Vacation time and vacation pay are two different things. An employee may be entitled to two weeks off, but the pay that comes with them is calculated separately, based on wages earned over the year.
- What counts as “wages” varies by province. Commissions and non-discretionary bonuses usually count. Tips count in Quebec, but not in Ontario or Alberta. Alberta also leaves out overtime.
- Vacation pay is earned wages. No matter how an employee leaves, the vacation pay they’ve accrued belongs to them.
Vacation pay looks simple: a small percentage, once a year. In reality, it’s one of the calculations employers get wrong most often. Here’s how to get it right.
Pay-related mistakes are the most common source of employment standards complaints. In Quebec alone, according to the CNESST’s report on the application of labour standards, monetary complaints (those involving wages and other money owed) made up 33% of all labour standards complaints in 2024, ahead of dismissals and prohibited practices.
Part of the challenge is that there’s no single set of vacation pay rules in Canada. Each province sets its own, and federally regulated businesses follow the Canada Labour Code. The principles are the same everywhere. The numbers aren’t.
What exactly is vacation pay?
Vacation pay is the amount you pay an employee to cover their annual vacation. It’s calculated as a percentage of the wages they earned over a 12-month period. Ontario calls this period the vacation entitlement year, while Quebec calls it the reference year. Same idea.
“Vacation” actually covers two separate things that are easy to mix up: time and money. The time is the leave itself, meaning the number of weeks off an employee is entitled to. The money is the vacation pay, a percentage of their wages that they receive for that time off. The two are calculated independently. An employee might get two weeks off, but the amount that comes with them depends on what they earned, not on how many days they take. And the same goes for everyone, whether they work full-time, part-time, or seasonally.
Wages from that 12-month period are the basis for the calculation, and that’s often where the mistakes begin, as you’ll see below.
Vacation pay rules in Canada, province by province
Everything starts with two questions: which rules apply to your employee, and how many years have they worked for you without a break in employment? The answers set both the length of their vacation and their vacation pay rate.
Here are the minimum standard, province by province:
| Jurisdiction | Vacation to start | Starting rate | When it goes up |
|---|---|---|---|
| Federal (Canada Labour Code) | 2 weeks | 4% | 3 weeks / 6% after 5 years 4 weeks / 8% after 10 years |
| British Columbia | 2 weeks | 4% | 3 weeks / 6% after 5 years |
| Alberta | 2 weeks | 4% | 3 weeks / 6% after 5 years |
| Saskatchewan | 3 weeks | 5.77% | 4 weeks / 7.69% after 10 years |
| Manitoba | 2 weeks | 4% | 3 weeks / 6% after 5 years |
| Ontario | 2 weeks | 4% | 3 weeks / 6% after 5 years |
| Quebec | 2 weeks (1 day per month worked in the first year) | 4% | 3 weeks / 6% after 3 years |
| New Brunswick | 2 weeks | 4% | 3 weeks / 6% after 8 years |
| Nova Scotia | 2 weeks | 4% | 3 weeks after 8 years (the 6% rate starts a year earlier) |
| Prince Edward Island | 2 weeks | 4% | 3 weeks / 6% after 5 years (since June 30, 2026) |
| Newfoundland and Labrador | 2 weeks | 4% | 3 weeks / 6% after 15 years |
The territories have their own rules. In the Northwest Territories and Nunavut, for example, the step up comes after 6 years.
Two more things to keep in mind. First, in most provinces, protected leaves like parental leave don’t break an employee’s continuous service. Second, most provinces also set a deadline for taking vacation once it’s earned, such as within 10 months in Ontario, or 12 months in BC and Alberta.
💡 With variable schedules, tracking vacation accrual for hourly employees by hand quickly becomes a headache. Time and attendance software keeps count automatically, while a spreadsheet tends to let errors slip through.
Quebec vs. other provinces
Quebec does things differently. Employees get their third week of vacation after three years of service, while in most other provinces, including Ontario, Alberta, and British Columbia, they have to wait five years. That means an employee who moves to another province may see their entitlement change, and an employer with teams in more than one province can’t apply the same rule everywhere.
Going beyond the minimum
These numbers are minimums. Nothing stops you from offering more, and many employers do so to stay competitive. Just keep one thing in mind: if you commit to more in an employment contract or a company policy, you have to honour it. You can’t go back to the legal minimum later.
Which wages count toward vacation pay?
The table gives you the rate. That leaves the real question: what amount do you apply it to? The answer is the employee’s vacationable wages for the 12-month period, and the definition isn’t the same everywhere.
Here’s how it generally breaks down:
- Usually included: regular wages, commissions, and non-discretionary bonuses (bonuses tied to hours worked, sales, or performance).
- Usually excluded: discretionary bonuses (like a holiday gift), expense reimbursements, and vacation pay already paid out.
- Depends on the province: tips count in Quebec but are excluded in Ontario and Alberta. Overtime counts in Ontario and BC but is excluded in Alberta. Stat holiday pay counts in Ontario but is excluded in Alberta.
Let’s look at an example. Alice has worked at your store in Hamilton, Ontario, for two years. During the last vacation entitlement year, she earned $32,000 in wages, including commissions. Since she has less than five years of service, her rate is 4%.
$32,000 × 4% = $1,280 in vacation pay for her two weeks off.
Three years later, Alice reaches five years of service and is entitled to three weeks off and a 6% rate. On wages of $35,000:
$35,000 × 6% = $2,100 in vacation pay for her three weeks off.
The most common mistake isn’t the percentage. It’s what gets left out, or wrongly included. In most provinces, gross wages aren’t just base pay, and leaving out commissions or performance bonuses means shortchanging your employees on vacation pay. That’s exactly the kind of gap that ends in a complaint.
In industries where commissions, overtime, or tips make up a big share of pay, like restaurants or retail, getting the definition right matters even more.
Vacation pay calculation, step by step
Once you have the right numbers in hand, calculating vacation pay takes four steps.
- Confirm which rules apply. Use the rules of the province where the employee works, or the Canada Labour Code if your business is federally regulated.
- Add up vacationable wages for the 12-month period. Include everything your province counts, such as regular wages, commissions, non-discretionary bonuses and, depending on the province, overtime, stat holiday pay, or declared tips.
- Find the right rate. Check how many years of continuous service the employee has and compare it to your province’s threshold.
- Multiply vacationable wages by the rate. The result is the vacation pay you owe the employee for their annual vacation.
Here’s an example to tie it all together. Olivier has been a cook at your restaurant in Ottawa for six years. Over the last vacation entitlement year, he earned $41,000 in regular wages and $2,500 in overtime pay. He also received $3,000 in tips. In Ontario, overtime counts but tips don’t, so his vacationable wages are $43,500. With more than five years of service, his rate is 6%.
$43,500 × 6% = $2,610 in vacation pay.
If you’d forgotten to include the $2,500 in overtime, you would have paid $2,460, which is $150 less than Olivier is owed. It’s a small error for one employee. Multiplied across a whole team and several years, it can turn into a serious amount.
The same Olivier would get a different result elsewhere. In Alberta, overtime is excluded, so his vacation pay would be based on $41,000 only. In Quebec, his declared tips would count, bringing the base to $46,500. Same employee, same pay, three different calculations.
👉 Instead of crunching every number by hand, payroll preparation software pulls together wages, overtime, and bonuses, and applies the right rate for you.
When and how to pay vacation pay
The general rule across Canada is that vacation pay is paid before or at the start of the vacation. In practice, it usually works one of two ways. Either the employee’s regular pay simply continues during their vacation (the most common setup for employees on a steady salary), or you pay their vacation pay separately, just before their vacation starts.
Many provinces also allow you to pay vacation pay on every paycheque, often with the employee’s written agreement, as in Ontario. Quebec is stricter, generally limiting this option to seasonal employees and those with highly variable schedules. Some industries, like construction, have their own rules. Check the rules in each province where you have employees.
Whichever method you choose, vacation pay should be shown clearly on the pay stub. In many provinces, it’s a legal requirement, and it’s always your best protection if there’s ever a disagreement: a written record beats a he-said-she-said every time.
Vacation pay myths vs. facts
Vacation pay comes with its share of misconceptions. Here are a few of the most common ones, cleared up.
“My part-time employees aren’t entitled to vacation pay.” False. Employment status makes no difference. Part-time, casual, or seasonal, they all earn vacation pay on their wages, at the same rate as everyone else.
“If an employee doesn’t take their vacation, I don’t have to pay anything.” False. Vacation pay is earned wages. Even if the employee doesn’t take their time off, you still owe them the vacation pay they’ve accrued.
“Vacation pay is just 4% of base pay.” Not quite. The rate depends on the province and the employee’s years of service, and the base usually includes more than regular pay, such as commissions and non-discretionary bonuses. Base pay alone often gives you an amount that’s too low.
“I can cancel vacation pay for an employee who leaves on bad terms.” False. Vacation pay is owed no matter how the employee leaves. You can’t reduce it or hold it back, whatever the reason for their departure.
What happens when an employee leaves
Vacation pay doesn’t disappear when someone leaves. In fact, an employee’s departure is one of the moments when a mistake costs the most, because everything is settled in a single payment that’s easy to check after the fact.
When an employee leaves, whether they quit or are let go, you have to pay out all the vacation pay they’ve accrued that hasn’t been paid yet. That includes the vacation pay for any completed year that hasn’t been paid, plus the vacation pay accrued since the start of the current year, based on wages earned up to their last day. Each province sets a deadline for this final payment, so check yours.
Extended leaves deserve a special mention. During parental or medical leave, the employee generally keeps building continuous service, but how vacation pay accrues during these periods varies by province. This is one area where it’s better to check than to assume.
Vacation pay isn’t a gift. It’s owed.
Vacation pay isn’t a perk you hand out. It’s money your employees have already earned, dollar by dollar, shift by shift. Calculating it in full isn’t doing anyone a favour. It’s simply giving each person what’s already theirs. Nothing more, nothing less.
What are the vacation pay rules in Canada?
Vacation pay rules in Canada are set by each province, and by the Canada Labour Code for federally regulated businesses. Across most of Canada, employees earn 4% vacation pay and two weeks of vacation after their first year, rising to 6% and three weeks after a set number of years of service. That threshold ranges from 3 years in Quebec to 15 years in Newfoundland and Labrador. Saskatchewan starts at three weeks and 5.77%.
How do you calculate vacation pay in Canada?
Add up the employee’s vacationable wages for the 12-month period, according to your province’s definition, then multiply that total by the applicable rate, such as 4% or 6%, depending on years of service. The result is the vacation pay you owe.
What's the difference between 4% and 6% vacation pay?
The rate is tied to the length of vacation. In most provinces, 4% corresponds to two weeks of vacation and 6% to three weeks. Employees move from 4% to 6% once they reach the service threshold set by their province, for example 5 years in Ontario, BC, and Alberta, or 3 years in Quebec.
How does Quebec vacation pay work?
Quebec vacation pay is 4% of gross wages for employees with less than three years of continuous service, and 6% from three years on, with two and three weeks of vacation respectively. Unlike Ontario or Alberta, Quebec includes declared tips in the wages used for the calculation.
Are part-time employees entitled to vacation pay?
Yes, in every province. Employment status doesn’t affect the right to vacation pay. Part-time, casual, and seasonal employees all earn vacation pay on their wages, at the same rate as full-time employees.
Do tips and bonuses count toward vacation pay?
It depends on the province and the type of payment. Commissions and non-discretionary bonuses usually count. Discretionary bonuses usually don’t. Tips count in Quebec, but are excluded in provinces like Ontario and Alberta.
Do you have to pay vacation pay to an employee who leaves?
Yes, in every case. Vacation pay is earned wages. When employment ends, the employer must pay out all accrued vacation pay that hasn’t been paid yet, regardless of why the employee left, within the deadline set by the province.
When do you have to pay vacation pay?
In most provinces, vacation pay is paid before or at the start of the vacation. Many provinces, including Ontario, also allow it to be paid on every paycheque, usually with the employee’s written agreement. Quebec generally limits this option to seasonal employees and employees with highly variable schedules.
