Vacation Pay — Ontario Employment Law
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About Vacation Pay
In Ontario, vacation pay and vacation time are two distinct but related entitlements that can often cause confusion for employees. Understanding the difference is crucial to ensuring you receive your full compensation. Under Ontario's Employment Standards Act, 2000 (ESA), vacation pay is a financial entitlement, while vacation time is the paid time off work.
Most employees are entitled to a minimum of two weeks of vacation time after every 12-month period of employment. This increases to three weeks if you have been with the same employer for five years or more. The financial component, vacation pay, is calculated as a percentage of your gross wages earned during that 12-month period. The minimum rate is 4% of gross wages, which corresponds to the two-week entitlement. Once an employee reaches five years of service, this minimum increases to 6% of gross wages, corresponding to the three-week entitlement.
'Gross wages' typically includes your regular salary, commissions, some bonuses, and overtime pay. However, it generally does not include things like tips and gratuities, unless they are managed and paid out by the employer. Many disputes arise from employers incorrectly calculating vacation pay by excluding certain types of earnings.
Upon termination of employment, for any reason, an employer must pay out all outstanding vacation pay that has been earned but not yet paid. This is a common area where errors occur, especially in wrongful dismissal situations where vacation pay must also be calculated on termination and severance pay. Because the definition of 'wages' for vacation pay purposes can be complex and depends on your specific compensation structure, reviewing your situation with a professional can be invaluable if you suspect a miscalculation.
Frequently Asked Questions
What's the difference between vacation pay and vacation time in Ontario?
Vacation time is the period you are entitled to be off work (minimum 2 weeks, or 3 after 5 years). Vacation pay is the money you are owed, calculated as a percentage of your gross wages (minimum 4%, or 6% after 5 years). Your employer must provide both.
Does my vacation pay get calculated on my bonus and commissions?
Generally, yes. Under the ESA, vacation pay is calculated on 'gross wages,' which usually includes most earnings like commissions and non-discretionary bonuses. If your employer is excluding these, they may be underpaying you.
My employer wants to pay out my vacation pay but not give me time off. Is this allowed?
Yes, but only if you agree in writing and it is approved by the Ministry of Labour. The default rule under the ESA is that employees must be given their vacation time. An employer cannot unilaterally force you to take pay in lieu of your vacation days.
I was terminated. When do I get my final vacation pay?
Your employer must pay all outstanding wages, including accrued vacation pay, within seven days of your employment ending or on what would have been your next regular pay day, whichever is later.
Is there a deadline to claim unpaid vacation pay?
Yes. Under the Employment Standards Act, 2000, there are time limits for filing a claim. Generally, you have two years to file a claim with the Ministry of Labour for unpaid wages, including vacation pay.
When should I consider talking to an employment lawyer about my vacation pay?
You should consider seeking legal advice if your employer refuses to pay your accrued vacation pay, consistently miscalculates it (e.g., by excluding commissions), or if you believe it wasn't properly included in your final pay after termination.
Common Scenarios
- A long-term employee is laid off and their severance package correctly includes termination pay, but fails to account for their vacation pay entitlement at the higher 6% rate.
- A restaurant server's vacation pay is only calculated on their hourly wage, excluding the significant, employer-managed portion of their tips and gratuities.
- An employee quits their job and the employer attempts to withhold their final accrued vacation pay, claiming it is forfeited because the employee didn't provide two weeks' notice.
- A company's payroll system has been incorrectly set up for years, only calculating vacation pay on base salary and excluding all overtime pay for hundreds of employees.
- An employee notices on their pay stub that vacation pay is being accrued, but their requests to schedule the actual time off are repeatedly denied by their manager.
What You Should Know
- Regularly review your pay stubs to confirm that your vacation pay is being accrued at the correct rate (4% or 6%) and is calculated on your total gross earnings, including overtime and bonuses.
- Keep written records of any agreements with your employer regarding taking pay in lieu of vacation time, as verbal agreements can be difficult to enforce.
- Remember that upon termination, vacation pay is owed on your final wages and also on any termination pay or severance pay you are entitled to under the ESA.
- Do not accept an employer's 'use-it-or-lose-it' policy for vacation pay. While they can have policies about when you must take your vacation time, the financial entitlement to vacation pay cannot be taken away.
- If you suspect a systemic issue with vacation pay calculation at your company, especially over several years, consulting with an employment law expert can help clarify the scope of the problem and potential recovery options.
Featured Cases
D. v. Bank of Nova Scotia
2026 ONSC 1793 (CanLII) · 2026-03-31Class Action: Bank of Nova Scotia Vacation Pay Certification
This is a certification motion in a class action lawsuit brought by Home Financing Advisors against the Bank of Nova Scotia regarding employment standards compliance under the Canada Labour Code. The court addressed whether common issues existed concerning the calculation of vacation and statutory holiday pay, specifically whether the bank's disclosure methods were confusing under the Kinch test. The motion also considered expert evidence admissibility and limitation periods for accrued entitlements. Certification was granted for the proposed class.
D. v. D.M. et al.
2025 ONSC 4486 (CanLII) · 2025-07-31Limitation Periods: Addition of Defendants in Wrongful Dismissal
This is a procedural appeal from a Small Claims Court decision regarding the addition of a corporate defendant after the expiration of the two-year limitation period under the Limitations Act, 2002. The court addressed whether the limitation period was discoverable at the time of wrongful termination and whether claims for unpaid vacation pay were barred by the limitation period.
C. v. Medcan Health Management Inc.
2025 ONSC 2902 (CanLII) · 2025-05-14ESA Class Action: Vacation & Holiday Pay Compliance
This is a class action proceeding addressing whether the defendant maintained a reasonable system to ensure proper payment of statutory vacation and public holiday pay under the Employment Standards Act, 2000. The court is determining common issues related to ESA compliance, breach of employment contracts, and the scope of discovery and document production relevant to these statutory obligations.
N. v. The Bank of Nova Scotia
2025 ONSC 2354 (CanLII) · 2025-04-16Bank of Nova Scotia Class Action: Vacation Pay Certification
This is a certification motion in a class action lawsuit against The Bank of Nova Scotia concerning employment contracts and the calculation of vacation and holiday pay. The court granted certification on consent, determining that common issues existed regarding whether incentive awards and variable compensation constitute 'wages' under the Canada Labour Code. The proceedings also involved a partial discontinuance of claims related to unused vacation days and an amendment to the pleadings to narrow the scope of the claim.
B. v. Callidus
2024 ONSC 20 (CanLII) · 2024-01-02B. v. Callidus: Constructive Dismissal & Retirement Damages
This case addresses whether the plaintiff was constructively dismissed or voluntarily retired after alleging a toxic work environment and removal of responsibilities. The court applied the test from Potter v. New Brunswick Legal Aid Services Commission and found the plaintiff failed to prove a substantial breach of the employment contract, deeming the plaintiff to have retired. Consequently, the plaintiff was awarded damages for unused vacation pay, unpaid deferred bonuses, and lost stock option value.
S.-S. v. Pet Social
2023 ONSC 4174 (CanLII) · 2023-07-18Unpaid Wages & Overtime: Employment Standards Award
This is a merits decision regarding an employment standards dispute where the plaintiff alleged she was an employee entitled to unpaid wages, overtime, and vacation pay. The court found that an employment relationship existed and awarded damages for the statutory entitlements, while dismissing alternative claims for unjust enrichment, constructive trust, and aggravated damages due to lack of evidence or legal basis.
S. v. RBC Insurance Agency Ltd.
2023 ONSC 1439 (CanLII) · 2023-03-02Class Action: Employment Standards & Variable Compensation
This is a certification motion for a proposed class action against insurance agencies alleging non-compliance with employment standards legislation. The central issue is whether the defendants' compensation policy properly calculated vacation and public holiday pay on variable compensation. The court granted certification subject to modifications, addressing issues of limitation periods, representative plaintiff adequacy, and the feasibility of aggregate damages.
C. v. RBC Dominion Securities
2022 ONSC 5862 (CanLII) · 2022-12-29Class Action Certification: ESA Vacation Pay Non-Compliance
This is a certification motion in a proposed class action alleging systemic non-compliance with Employment Standards Act obligations regarding vacation and public holiday pay for commissioned employees at RBC Dominion Securities. The court granted certification, finding that the absence of a class-wide system to record and report ESA-required obligations provided sufficient evidence of systemic non-compliance and commonality among class members. The court also found the representative plaintiff suitable and imposed a start date on the class definition to ensure manageability.
A. v. TST-CF Solutions LP
2022 ONCA 808 (CanLII) · 2022-11-21Court of Appeal Upholds Dismissal and Awards Vacation Pay
The Court of Appeal for Ontario dismissed the appeal regarding the trial judge's findings on whether the employee was actually terminated or constructively dismissed, affirming the trial judge's assessment of damages including working notice and mitigation. However, the court allowed the cross-appeal to vary the judgment, ruling that the trial judge had misunderstood evidence regarding the employee's entitlement to carry forward and be paid for unused vacation under the Canada Labour Code.
. C. v Cura-Can Health Corp.
2022 ONSC 3279 (CanLII) · 2022-05-31Unpaid Wages & Vacation Pay: ESA Limitation Periods
This is an employment standards dispute concerning unpaid wages and vacation pay brought under the Employment Standards Act, 2000. The case addresses the application of limitation periods to such statutory claims.
B. v. UBS Securities Canada Inc.
2018 ONCA 190 (CanLII) · 2018-02-27Appeal Dismissed: Wrongful Dismissal Damages Upheld
The Court of Appeal for Ontario dismissed the appeal in a wrongful dismissal action concerning the calculation of damages for an employee terminated without cause. The court upheld the trial judge's decisions that deferred bonuses constituted part of the employee's wages for vacation pay purposes under the Employment Standards Act, 2000, and that the employer's bonus plan did not unambiguously exclude entitlement to deferred bonuses during the reasonable notice period. The court also upheld the trial judge's discretion to award prejudgment interest on a lump sum basis and to determine costs based on partial indemnity rates.
L. v. Park Dentistry
2018 ONSC 751 (CanLII) · 2018-02-07Constructive Dismissal Claim Fails; Vacation Pay Awarded
This case addressed whether an employee's resignation amounted to constructive dismissal following unilateral changes to employment terms, including vacation pay deductions and alleged sexual harassment. The court applied the Potter test and found that the employer's provision of 18 months' working notice and a signing bonus constituted valid consideration for the new contract, and the resignation was deemed voluntary rather than a constructive dismissal. While dismissing claims for sexual harassment and constructive dismissal, the court ruled that the employer improperly deducted vacation pay, ordering reimbursement of $3,763 plus interest.
Joss Covenoho v Pendylum Inc.
2016 ONSC 4969 (CanLII) · 2016-08-16ESA Section 97 Bar on Civil Proceedings & Short-Term Termination
This case addresses whether a civil claim for vacation pay, public holiday pay, and overtime is barred by the Employment Standards Act, 2000, and whether an employee with less than three months of service is entitled to statutory notice of termination. The court determined that Section 97 of the ESA does not preclude the civil action for unpaid wages and that Section 54 does not require notice for employees employed for less than three months. Additionally, the court found that clear termination provisions in the plaintiff's fixed-term contract allowed for immediate termination without further liability.
K. v Dufferin Communications Inc. c.o.b. as Evanov Radio Group
2015 ONSC 6610 (CanLII) · 2015-10-23Vacation Pay in Commissions: CLC Compliance
This is a judicial review or appeal concerning an employee's claim for unpaid vacation pay under the Canada Labour Code. The central issue was whether the employer could satisfy its statutory vacation pay obligations by including such pay within commission payments without explicit evidence or adjustment. The court addressed whether the employment agreement could override statutory minimums and whether the claim was statute-barred under the Limitations Act, 2002.
K. v. Dufferin Communications Inc.
2015 ONSC 1742 (CanLII) · 2015-03-19Vacation Pay Limitation Periods: Canada Labour Code
This is a summary judgment application concerning entitlements to vacation pay under the Canada Labour Code. The court addressed whether the claim was barred by limitation periods.
G. v. CPNI Inc.
2014 ONSC 6500 (CanLII) · 2014-11-10Unpaid Wages & Director Liability: G. v. CPNI Inc.
This is a merits decision regarding a claim for unpaid wages and vacation pay brought by former employees against their employer. The court accepted the plaintiffs' evidence establishing the amounts owed and rejected the employer's attempt to deduct amounts from wages under the ESA due to lack of evidence of theft or loss. Additionally, the court held that the corporate director could not be held personally liable for the unpaid wages because the statutory precondition of an unsatisfied execution against the corporation was not met.
C. v. R. W. Travel Limited
2011 ONSC 2148 (CanLII) · 2011-04-05C. v. R.W. Travel: Constructive Dismissal & Vacation Pay
This case addresses a claim for constructive dismissal based on alleged workplace harassment, including abusive conduct and derogatory comments by the employer. The court dismissed the constructive dismissal claim, finding the evidence did not meet the objective standard for intolerable working conditions. However, the plaintiff succeeded in a claim for unpaid vacation pay under the Employment Standards Act, resulting in a monetary award.
C. v. Ontario Public Service Employees Union
2009 CanLII 31595 (ON SC) · 2009-06-18A labour law dispute involving the Ontario Public Service Employees Union concerning entitlements to vacation pay and pensions within the public sector.
Textron Financial Canada Limited v. Beta Limitee/Beta Brands Limited
2007 CanLII 43908 (ON SC) · 2007-10-18Vacation Pay Priority in Bankruptcy: BIA vs ESA
This is a procedural and substantive ruling in a bankruptcy and insolvency proceeding concerning the priority of claims for vacation pay owed to employees. The court determined that the Bankruptcy and Insolvency Act (BIA) prevails over provincial Employment Standards Act (ESA) deemed trusts and statutory liens, meaning vacation pay claims do not rank ahead of a secured creditor's perfected security interest.
Wronko v. Western Inventory Service Ltd.
2006 CanLII 34211 (ON SC) · 2006-10-11Constructive Dismissal: Employer Unilaterally Changes Termination Clause
A constructive dismissal case where the employer unilaterally changed the termination clause of the employment contract, and the employee refused to accept the new terms. The court also addressed a dispute over vacation pay, awarding the employee $6,977 in vacation pay with prejudgment interest.