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
Curtis v. Medcan Health Management Inc.
2025 ONSC 2902 (CanLII) · 2025-05-14Employment Standards Act Case: Vacation and Public Holiday Pay Dispute
A class action case regarding statutory obligations under the Employment Standards Act, 2000, focusing on vacation pay, public holiday pay, and the defendants' payroll system. The court is examining whether the defendants maintained a reasonable system to ensure proper payment and whether there were breaches of employment contracts and duty to maintain accurate records.
Gazier v. Ciena Canada, ULC
2024 ONSC 865 (CanLII) · 2024-02-08Wrongful Dismissal: 22-Year Employee Awarded 24 Months Notice and Benefits
A wrongful dismissal case involving a 58-year-old employee with 22 years of service. The court determined a 24-month notice period was reasonable, awarded damages for lost bonuses based on actual performance, and compensated for lost benefits and vacation pay. Mitigation efforts were found to be reasonable.
Boyer v. Callidus
2024 ONSC 20 (CanLII) · 2024-01-02Constructive Dismissal: Plaintiff Awarded Damages for Vacation, Bonuses, and Stock Options
A constructive dismissal case where the plaintiff alleged toxic work environment and removal of job responsibilities. The court found no substantial breach of employment contract and deemed the plaintiff to have retired. The case also involved vacation pay, deferred bonuses, and stock options disputes.
Seepersaud-Singh v. Pet Social
2023 ONSC 4174 (CanLII) · 2023-07-18Unpaid Wages, Overtime, and Vacation Pay: Seepersaud-Singh v. Pet Social
A case where a plaintiff claimed she was an employee of Pet Social Inc. and sought unpaid wages, overtime, and vacation pay. The court awarded damages for unpaid wages, overtime, and vacation pay, dismissed claims for unjust enrichment and constructive trust, and denied requests for aggravated and punitive damages.
. Corbo v Cura-Can Health Corp.
2022 ONSC 3279 (CanLII) · 2022-05-31Wrongful Dismissal: Unpaid Wages and Vacation Pay Under ESA
A wrongful dismissal case involving unpaid wages and vacation pay, with a focus on the limitation period under the Employment Standards Act, 2000. The court will determine the applicable limitation period for claims related to unpaid wages and vacation pay.
Lancia v. Park Dentistry
2018 ONSC 751 (CanLII) · 2018-02-07Constructive Dismissal: Employee Resigned Due to Unilateral Changes and Sexual Harassment
A constructive dismissal case where an employee resigned due to unilateral changes in employment terms, vacation pay deductions, and sexual harassment. The court found the employee's resignation voluntary and did not establish constructive dismissal. The employer was ordered to reimburse wrongfully deducted vacation pay.
Martin v Munsee Delaware First Nation, Fisher and Peters
2016 ONSC 620 (CanLII) · 2016-04-27Wrongful Dismissal: Band Administrator Terminated for Financial Misconduct
A wrongful dismissal case involving a band administrator terminated for alleged financial misconduct. The court upheld the termination as a proportionate response to repeated financial breaches, applying the McKinley v. BCTel framework. The administrator also counterclaimed for misappropriation of funds, which was partially allowed.
Gill v. CPNI Inc.
2014 ONSC 6500 (CanLII) · 2014-11-10Unpaid Wages and Vacation Pay: Court Awards Compensation
A case involving unpaid wages and vacation pay, where the court accepted the plaintiffs' calculations and rejected the defendants' deductions under the Employment Standards Act (ESA). The court also ruled that a director could not be held personally liable for unpaid wages and that a counterclaim did not justify a stay of enforcement of the wage judgment.
Plester v. Polyone Canada Inc.
2011 ONSC 6068 (CanLII) · 2011-12-22Supervisor Wrongfully Dismissed: 17 Years of Service, 14 Months' Notice Awarded
A supervisor with 17 years of service was summarily dismissed for breaching workplace safety rules and failing to report the incident. The court found the dismissal disproportionate and awarded damages for wrongful dismissal. The case also addressed the plaintiff's entitlement to statutory notice, reasonable notice period, and vacation pay.
Chartrand v. R. W. Travel Limited
2011 ONSC 2148 (CanLII) · 2011-04-05Workplace Harassment and Vacation Pay: Chartrand v. R. W. Travel Limited
A constructive dismissal case where the plaintiff alleged abusive conduct by the employer, including yelling and derogatory comments, making continued employment intolerable. The court dismissed the constructive dismissal claim but awarded $978 in vacation pay. The court also ruled on costs, ordering each party to bear its own costs.
Kyle v. Price Business Development Corporation
2010 ONSC 3567 (CanLII) · 2010-06-18Termination Case: Reasonable Notice, Vacation and Overtime Pay
A termination of employment case where the court applied Bardal factors to determine reasonable notice, awarded additional salary for notice, and addressed unpaid vacation and overtime pay in accordance with the Employment Standards Act, 2000.
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.
Mellema v. Fishercast Global Corporation
2006 CanLII 15768 (ON SC) · 2006-05-12Wrongful Dismissal: 24-Month Severance Awarded Under Employment Agreement
A merits decision involving a wrongful dismissal case where the plaintiff was terminated without cause and was entitled to 24 months’ severance under the employment agreement. The court resolved ambiguity in the forfeiture clause in favor of the plaintiff and granted summary judgment for damages arising from the breach of the employment agreement. The plaintiff was also found entitled to 10 days’ vacation pay under a separate agreement.
McLaughlin v. Looby Construction Ltd.
2006 CanLII 816 (ON SC) · 2006-01-18Wrongful Dismissal: Court Finds Employee Voluntarily Retired
A wrongful dismissal case where the plaintiff alleged termination after receiving a retirement letter, but the court found he voluntarily retired based on his conduct and statements. The court also ruled on the adequacy of notice and compensation, vacation pay, and mitigation of damages.
Singh v. Y.M. Inc. (Sales)
1999 CanLII 14850 (ON SC) · 1999-11-08Wrongful Dismissal: 14-Year Employee Awarded 12 Months Notice
A wrongful dismissal case involving a mid-level manager employed for 14 years who was terminated without cause. The court determined that a 12-month notice period was reasonable under the Bardal factors. The case also addressed severance pay, vacation pay, bonus miscalculation, and the enforceability of employment agreements.
Grier v. Metro International Trucks Ltd.
1996 CanLII 11795 (ON SC) · 1996-02-19Employment Standards: Vacation Pay and Successor Employer Liability
An employment standards case involving vacation pay and successor employer liability, where a referee's decision was quashed due to reliance on incorrect facts. The matter was remitted for reconsideration based on a corrected statement of facts, applying the flexible functus officio doctrine.
Emery v. Royal Oak Mines Inc.
1995 CanLII 7074 (ON SC) · 1995-06-13Wrongful Dismissal: Senior Executive Awarded 30-Month Notice Period
A wrongful dismissal case involving a senior executive with 29.5 years of service who was terminated. The court determined a 30-month notice period, addressed non-deductibility of pension benefits, awarded damages for loss of lifetime health benefits, and ruled against deducting part-time earnings during the notice period.
NAS Canada Inc. v. Noel (Gen. Div.)
1990 CanLII 6944 (ON SC) · 1990-10-17Employment Termination: Repayment of Overpaid Advances and Vacation Pay
A termination of employment case involving disputes over whether recoverable draws advanced to an employee constitute loans repayable upon termination, and whether an employer is entitled to recover overpaid advances and vacation pay in the absence of an express repayment clause in the employment contract.
Re Ontario Mushroom Co. Ltd. et al. and Learie et al.
1977 CanLII 1117 (ON SC) · 1977-04-12Employment Standards: Mushroom Growers and Vacation Pay Entitlement
A merits decision involving the interpretation of the Employment Standards Act regarding whether mushroom growers qualify for the farming exemption and whether employees with less than 12 months of employment are entitled to vacation pay. The court considered the common understanding of the term 'vegetable' and affirmed the entitlement to vacation pay under s. 30(a) of the Act.
Re Grottoli v. Lock & Son Ltd.
1963 CanLII 142 (ON SC) · 1963-03-27Vacation Pay Dispute: Employee Sues for Unpaid Wages Under Collective Agreement
A merits decision involving a dispute over unpaid vacation pay under a collective agreement. The employee claimed unpaid vacation pay, while the employer argued that s. 34(1) of the Labour Relations Act barred court action. The court held that the common law employer-employee relationship was not abrogated by the collective agreement and that employees may sue for unpaid wages in court.