Subscribe to our newsletters
Vacation Pay in Ontario: How It Works, How to Calculate It, and When It Must Be Paid
Vacation pay in Ontario is one of the most frequently misunderstood employment standards entitlements. Many employees assume it is automatically included in their salary, and many employers miscalculate it by excluding bonuses or commissions. Under the Employment Standards Act, 2000, vacation pay is mandatory, cannot be waived, and must be paid out in full when employment ends.
Think your vacation pay may not have been calculated correctly?
Vacation pay errors are common, particularly for commission employees and those who have crossed the five-year service threshold. If you believe you are owed unpaid vacation pay, you may be able to file a Ministry of Labour complaint.
Call: 1-800-771-7882 Speak With an Employment LawyerVacation pay and vacation time entitlements in Ontario
Vacation time and vacation pay are two separate entitlements under the Employment Standards Act, 2000. Employees are entitled to both. Vacation time refers to the days off an employee is entitled to take. Vacation pay is the percentage of gross wages paid to compensate the employee while on vacation.
Who vacation pay applies to in Ontario
Vacation pay under the Employment Standards Act, 2000 applies to most provincially regulated employees in Ontario, including full-time, part-time, hourly, salaried, and commission employees. It does not matter whether the employee works a fixed schedule or variable hours. If the employment relationship is covered by the ESA, vacation pay entitlements apply.
How to calculate vacation pay in Ontario
Vacation pay calculation: step by step
Vacation pay for commission employees
Commission employees are fully entitled to vacation pay in Ontario. Vacation pay is calculated on total commission earnings, not just base pay. This is one of the most common payroll errors in Ontario. Employers who exclude commissions from the vacation pay calculation are underpaying their employees and may face Ministry of Labour complaints and orders to repay the shortfall.
Were commissions or bonuses excluded from your vacation pay calculation?
Excluding commissions or non-discretionary bonuses from vacation pay is a common and costly employer error. If you believe your vacation pay was calculated incorrectly, you may be able to file a complaint with the Ministry of Labour.
Find Out If You Have a Claim Or call us: 1-800-771-7882When vacation pay must be paid out in Ontario
| Situation | When vacation pay must be paid |
|---|---|
| Employee takes vacation | Before the vacation begins (unless another structure is agreed) |
| Pay-per-cheque structure | On each regular paycheque as a percentage of wages |
| Scheduled payout dates | On the agreed payout dates, which cannot be delayed indefinitely |
| Employment ends (any reason) | All earned but unpaid vacation pay must be paid out in full at termination |
Common vacation pay mistakes in Ontario
Common employee mistakes
- Assuming vacation pay is automatically included in salary without confirming the calculation
- Failing to review pay stubs to verify the correct percentage is being applied
- Not tracking the five-year service milestone that triggers the increase to 6%
- Overlooking commission or bonus exclusions in vacation pay calculations
Common employer mistakes
- Excluding non-discretionary bonuses or commissions from the gross wage calculation
- Continuing to pay 4% after an employee has crossed the five-year threshold
- Delaying or failing to pay out unused vacation pay at termination
- Treating vacation pay as a discretionary benefit rather than a statutory obligation
Frequently asked questions about vacation pay in Ontario
How much is vacation pay in Ontario?
Under the Employment Standards Act, 2000, most employees earn 4% of gross wages as vacation pay during their first five years with an employer, increasing to 6% after five years of service with the same employer. Vacation pay is calculated on gross wages including regular pay, overtime, and non-discretionary commissions and bonuses.
Is vacation pay mandatory in Ontario?
Yes. Vacation pay is a mandatory entitlement under the Employment Standards Act, 2000. It cannot be waived by agreement between the employer and employee. Employers who fail to pay the correct vacation pay may face Ministry of Labour complaints, orders to repay unpaid wages, and administrative penalties.
What happens to unused vacation pay when employment ends?
All earned but unpaid vacation pay must be paid out in full when employment ends, regardless of whether the employee resigned, was terminated without cause, was dismissed, or was laid off. Employers cannot keep unused vacation pay under any circumstances. It is considered earned wages under the ESA.
Do commission employees get vacation pay in Ontario?
Yes. Commission employees are fully entitled to vacation pay in Ontario. Vacation pay must be calculated on total commission earnings, not just base salary. Excluding commissions from the vacation pay calculation is a common payroll error that can result in underpayment claims and Ministry of Labour complaints.
Can vacation pay be included in every paycheque in Ontario?
Yes, provided it is clearly identified on the pay stub as vacation pay. Employers may structure vacation pay to be included on each paycheque as a percentage of wages, paid before vacation begins, or paid on scheduled payout dates. Earned vacation pay cannot be withheld indefinitely regardless of the structure used.
What can I do if my employer has not paid my vacation pay?
You can file a complaint with Ontario's Ministry of Labour through the employment standards complaints process. The Ministry can order your employer to pay back wages and apply penalties. Limitation periods apply, so acting promptly protects your ability to recover the full amount owed.
Think you may be owed unpaid vacation pay in Ontario?
Whether your employer excluded commissions, failed to update your rate after five years, or did not pay out your vacation pay on termination, our team can help you understand your options and file a Ministry of Labour complaint if needed. Contact us for a confidential consultation.
Call us at 1-800-771-7882 or fill out the form below and we will be in touch.
The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Achkar Law Professional Corporation and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Achkar Law Professional Corporation. ©