Vacation Entitlements - A Right to Relaxation
For many people vacation provides an important opportunity to relax and recharge. Whether looking to book an international cityscape or simply spend some downtime with friends and family, it is important to understand vacation entitlements.
Throughout Canada, employment standards legislation entitles all employees to a minimum amount of vacation per year. In Ontario, the applicable legislation is the Ontario Employment Standards Act (the "ESA"). Under the ESA, employees' vacation entitlement is divided into: (i) vacation time, and (ii) vacation pay. It is important to note that vacation time and vacation pay are distinct and separate entitlements.
(i) Vacation Time
Basic Entitlements:
Vacation time is the amount of time off work that employees are entitled to each year for vacation purposes.
For the first five years of employment, employees are entitled to two weeks of vacation time per year. After five years of employments, employees are entitled to three weeks of vacation time per year.
Taking Vacation Time:
Pursuant to the ESA, employers can choose when their employees use their vacation time. However, the employer must provide vacation time within 10 months of the vacation year ending and the vacation time must be scheduled in whole week blocks, unless the employee agrees otherwise.
That being said, it is common practice for employers and employees to mutually agree on times for the employee to take vacation. Employees may request to take vacation in less than whole week blocks.
(ii) Vacation Pay
Basic Entitlements:
Vacation pay is calculated as a function of the wages earned by the employee. Employees begin to earn vacation pay as soon as they start working.
Employees who have worked for their employer for 5 year or less are entitled to receive vacation pay equal to 4% of their wages. After five years of employment, employees are entitled to receive vacation pay equal to 6% of their wages.
For the purposes of calculating vacation pay, "wages" is defined broadly to include regular wages (e.g. salary), overtime pay, holiday pay, commission and non-discretionary bonuses. It does not include tips or gratuities, business expenses and travelling allowances, discretionary bonuses, or contributions towards benefit plans. No vacation pay is earned on those payments/benefits.
Receiving Vacation Pay:
Employers have two options on how to pay vacation pay:
- In a lump sum before the employee takes his or her vacation; or
- On each paycheque as the employee's vacation pay accrues. The employer an only do this if the employee agrees, and the paystub states how much vacation pay is being paid for that pay period.
Vacation Entitlements on Termination:
When an employee is terminated, they are entitled to receive the wages they have already earned, including any accrued vacation pay.
Additionally, the ESA requires employers to provide employees with a minimum amount of notice prior to termination. During the notice period, the employee is entitled to receive their regular wages, including vacation pay. Alternatively, an employer can provide pay in lieu of notice, in which case the pay in lieu must also include vacation pay.
Contractual Vacation Entitlements:
The ESA outlines the minimum vacation entitlements. Employees may have additional vacation entitlements under an employment agreement, or, if unionized, pursuant to a collective agreement. In such a case, the employee is entitled to receive their greater contractual entitlements.
Conclusion:
Understanding vacation is important. Employees are encouraged to take the time to learn about their vacation entitlements, including doing a review of their employment agreement for any additional entitlements. On the flipside, employers should always ensure their vacation practices are compliant with the ESA requirements. This may involve periodically revisiting existing policies and employment agreements to ensure they remain up to date.
For further information on vacation requirements and entitlements in Ontario, please do not hesitate to contact Lee Workplace Law.
