Vacation in Ontario: 10 Things Employers Need to Know

By Justine Lindner

As many employees take time off from work to enjoy the summer months, employers often have questions regarding the calculation of employees’ vacation pay and the scheduling of their vacation time.

To assist provincially-regulated employers in Ontario, we have compiled a list of the ten statutory vacation requirements employers must meet to comply with Ontario’s Employment Standards Act, 2000 (the “ESA”).

1. The obligation to provide vacation arises upon completion of each “vacation entitlement year”.  An employee becomes entitled to vacation after each 12-month vacation entitlement year, which usually begins on the employee’s hire date. Where the employer establishes an alternative vacation entitlement year, the employee is entitled to a pro-rated period of vacation for the stub period from hire date until the start of the alternative vacation entitlement year.
2. Vacation pay must equal at least 4% of wages. Employees are entitled to a minimum of 4% of the wages they earned during the vacation entitlement year as vacation pay.  “Wages” includes the employee’s regular earnings (including commissions), bonuses or gifts that are not discretionary or which are related to hours work, overtime pay, public holiday pay and termination pay.
3. Vacation pay must be paid as a lump sum before the vacation time. Generally, vacation pay must be paid to an employee in a lump sum before they take the vacation time earned unless one of the following exceptions applies:
   • The vacation time being taken is less than one week.
   • The employee has agreed in writing that vacation pay will be paid on each pay cheque as it accumulates.
   • The employee has agreed in writing to an alternate time for payment.
   • The employee is paid wages by direct deposit.
4. Employees are entitled to 2 weeks of vacation time. Employees are entitled to a minimum of two weeks of vacation time per year upon completion of 12 months of consecutive employment.
5. Employees must take vacation in 1 or 2 week blocks. The ESA requires employers to schedule vacation in 1 or 2 week blocks. An exception to this requirement is available when the employee makes a written request and the employer agrees in writing for the vacation to be scheduled for shorter periods of time. Employers are not required to agree to these requests.
6. Employers may schedule vacation time. Employers may schedule vacation time. The vacation time does not have to be requested by the employee.
7. Vacation must be taken within 10 months of the vacation entitlement year. Employers must schedule the statutory vacation time earned to be taken within 10 months of the completion of the vacation entitlement year.  Be careful of this carry-over period when contemplating “use it or lose it” policies.
8. Vacation must not be scheduled during a period of statutory notice of termination. An employer must not schedule vacation time during an employee’s statutory notice period. An exception is available when, after having received the employer’s written notice of the termination of her employment, the employee agrees to take vacation time during the statutory notice period.
9. Employees on vacation are entitled to public holiday pay. When a public holiday falls within an employee’s vacation time, the employee must receive either (a) a substitute day off work with public holiday pay within 3 months of the public holiday, or with the employee’s written agreement, within 12 months of the holiday, or (b) with the employee’s written agreement, public holiday pay without a substitute day off work.  In order to qualify for public holiday pay, the employee on vacation must work all of their last regularly scheduled day of work before the public holiday and all of their first regularly scheduled day of work after the public holiday.
10. Employees on leaves of absence accumulate entitlement to vacation. In general, the period of time that an employee is away from work because they are taking a leave of absence must be counted towards the employee’s completion of a vacation entitlement year or stub period.

When an employer has a vacation policy or has agreed to vacation-related terms in an employment contract that provide a greater benefit to employees than these minimum statutory requirements, the employer should ensure that it complies with the applicable policy or agreement. A unionized employer must ensure their vacation practices comply with any applicable collective agreements.

If you have any questions regarding vacation requirements in Ontario, please do not hesitate to contact any member of the Labour & Employment Group at McCarthy Tétrault.