Vacation pay in Ontario: What You’re Owed and When

Under Ontario’s Employment Standards Act, 2000 (Part XI), vacation pay is earned wages, not a discretionary bonus. Your employer must pay out any accrued vacation pay when your employment ends, no later than seven days after termination or on your next regular pay day, whichever comes later.

• Employees with fewer than five years of service: two weeks of vacation time and at least four per cent vacation pay
• Employees with five or more completed years: three weeks and at least 6% vacation pay
• Vacation pay can appear on each paycheque (with a written agreement) or as a lump sum paid before your vacation begins
• On termination, all accrued vacation pay must be paid within seven days or on the next regular pay day, whichever is later

Key takeaways

Table of Contents

• What does the Employment Standards Act guarantee for vacation pay in Ontario?
• How to calculate your vacation pay: formulas and worked examples
• When must your employer pay vacation pay?
• What happens to vacation pay when your employment ends?
• What should your pay stub show, and what records can you request?
• Common misunderstandings and what to do if you’re shorted
• Why clean payroll records protect everyone
• T-Ledgers makes accurate vacation pay straightforward for employers
• Sources
• FAQ

What does the Employment Standards Act guarantee for vacation pay in Ontario?

Part XI of the ESA (ss. 33–41.1) sets out two connected entitlements: vacation time and vacation pay. They are separate. You can be entitled to vacation pay even if you never take a day off.

The entitlements are built around a vacation entitlement year, which is typically the 12-month period starting on your hire date. Once you complete that year, your entitlement crystallises. If your employment ends before the year is complete, the partial period is called a stub period, and you still earn vacation pay on wages earned during it.

Your employment contract or a collective agreement can provide more, and as Samfiru Tumarkin LLP notes, senior roles and negotiated contracts commonly do.

Statistic to know: The five-year threshold is measured at the end of the vacation entitlement year, not mid-year. Reaching your five-year anniversary partway through a vacation year can change how that entire year’s vacation pay is calculated.

How to calculate your vacation pay: formulas and worked examples

The base formula is straightforward:

The ESA Policy and Interpretation Manual (Part XI) is clear that previously paid vacation pay is excluded from the gross wages base. Gross wages include regular pay, overtime, commissions, and non-discretionary bonuses. Discretionary bonuses are excluded.

Three worked examples

1. Salaried employee (under five years): Annual salary of $60,000. Vacation pay = $60,000 × 4% = $2,400 per year.
2. Hourly employee with overtime (under five years): Earned $28,000 in regular wages plus $2,000 in overtime during the entitlement year. Total gross = $30,000. Vacation pay = $30,000 × 4% = $1,200.
3. Commission employee (five or more years): Earned $75,000 in commissions and base pay combined. Vacation pay = $75,000 × 6% = $4,500.

Pro Tip: Build a simple spreadsheet using your year-to-date gross wages from each paycheque. Multiply by your applicable rate and compare to what your employer has paid. A payroll calculation tool can make this faster and reduce errors.

When must your employer pay vacation pay?

The default rule under the ESA is that vacation pay must be paid in a lump sum before your vacation begins. There are four exceptions that allow alternate timing:

• Payment at a time agreed upon by the employer and employee
• Payment on each regular pay day if there is a written agreement to do so
• Payment at a time set out in a collective agreement
• Payment at another time approved by the Director of Employment Standards

The written-agreement option is common, particularly for hourly and part-time workers. If your employer pays vacation pay on each paycheque, they must show it as a separate line item on your wage statement. A lump-sum amount buried in your regular pay does not satisfy the ESA requirement.

Steps to Justice confirms that vacation pay can be added to each paycheque with a written agreement, but the employer must separately identify it. Acceptable payment methods include direct deposit, cheque, or cash.

Pro Tip: If your employer pays vacation pay on each paycheque, ask for a copy of the written agreement and keep it. Without it, that arrangement may not be legally valid, and you could be owed a separate lump sum before each vacation.

What happens to vacation pay when your employment ends?

Vacation pay is earned wages. When employment ends, for any reason, your employer must pay out all accrued vacation pay. Ontario’s payment of wages rules state that outstanding wages, including vacation pay, must be paid no later than seven days after employment ends or on the employee’s next regular pay day, whichever is later.

This includes:

• Vacation pay earned but not yet paid during completed entitlement years
• Vacation pay accrued during any stub period (the partial year up to your last day)
• Vacation pay calculated on termination pay itself, where applicable

Employers sometimes treat accrued vacation pay as discretionary and withhold it on termination. This is wrong. As Samfiru Tumarkin LLP cautions, vacation pay is a statutory wage — withholding it is a violation of the ESA, and employees have the right to file a claim to recover it.

Common employer errors to watch for:

• Failing to pay vacation pay on the final paycheque
• Forcing employees to use vacation time during a notice period without paying it out separately
• Omitting overtime or commissions from the gross wages used to calculate vacation pay

What should your pay stub show, and what records can you request?

Under ESA s. 41.1 and s. 15.1, employers must maintain records showing vacation time earned, vacation pay earned and how it was calculated, the wages used as the calculation base, and vacation pay paid during each entitlement year or stub period.

Your pay stub should include:

• A separate line for vacation pay (or a separate written statement if paid on each paycheque)
• The gross wages used to calculate vacation pay for that period
• The pay period dates

If vacation pay is paid on each paycheque under a written agreement, the employer must separately identify it on the wage statement, per the ESA Policy Manual (Part V). You can request a written statement of your vacation pay records from your employer at any time. They are generally required to respond within seven days or by the next pay day.

Record-keeping note: Employers who pay vacation pay on each paycheque must still show it separately on the wage statement — a combined gross pay figure is not sufficient.

Common misunderstandings and what to do if you’re shorted

Your contract may entitle you to more, and you should check it.

If you believe your vacation pay has been underpaid or withheld, here are your next steps:

• Ask payroll in writing. Send an email requesting a breakdown of your vacation pay earned, paid, and outstanding. Keep a copy.
• Request your vacation records. You are entitled to see the records your employer must maintain under s. 41.1.
• Calculate what you’re owed. Use your gross wages and the applicable rate (4% or 6%) to verify the amounts.
• Keep copies of everything. Paycheques, pay stubs, written agreements, and any employer responses.
• File an ESA claim with the Ontario Ministry of Labour if the issue is not resolved. Claims can be filed online and typically cover up to two years of unpaid wages. Include your pay stubs, employment contract, and your own calculation.
• Seek legal or payroll advice if the amount is significant or your employer disputes the claim. Practitioners like those at Samfiru Tumarkin LLP can assess whether your contract provides superior entitlements.

For remote workers or those with non-standard pay arrangements, reviewing CRA guidelines for remote workers can also clarify how payroll reporting should be structured.

Why clean payroll records protect everyone

Accurate vacation pay records are not just a legal obligation. They prevent disputes before they start. When payroll is set up correctly from day one, with separate vacation pay lines, clear accrual tracking, and written agreements on file, both employers and employees have a shared record to refer to. Most vacation pay disputes we see arise not from bad intent but from poor record-keeping: a missing written agreement, a combined pay line, or a final paycheque that omits the stub-period calculation.

Pro Tip: Keep a personal log of your year-to-date gross wages and the vacation pay shown on each paycheque. A simple spreadsheet updated monthly takes minutes and gives you everything you need to verify your entitlement at any point, including on termination.

T-Ledgers makes accurate vacation pay straightforward for employers

Vacation pay errors are among the most common ESA compliance issues for small businesses, and the consequences range from Ministry of Labour claims to back-pay liability. T-Ledgers offers flat-rate payroll services that include correct vacation pay accruals, separate pay-stub line items, written-agreement setup, and final-pay calculations that account for stub periods and termination pay.

For employers who want a broader compliance review, T-Ledgers’ virtual CFO service covers payroll structure, ESA obligations, and bookkeeping that keeps your records audit-ready. There are no hourly surprises: one flat rate, one team, and payroll that works the way the ESA requires. Contact T-Ledgers to get your vacation pay setup reviewed before a claim lands on your desk.

Sources

The following primary and practitioner sources are the best places to verify your entitlements and get further guidance:

• Ontario

For questions about payroll planning and tax efficiency for professional firms, this resource on reducing taxes for professional service firms offers relevant context on budgeting for payroll obligations.

This article is general information, not a substitute for advice from a qualified lawyer. Consult a qualified legal professional about your own circumstances before acting on anything here.

FAQ

What is the vacation pay rate in Ontario?

How is vacation pay calculated for salaried employees in Ontario?

A $60,000 annual salary with under five years of service yields $2,400 in vacation pay.

When must vacation pay be paid after termination in Ontario?

All outstanding vacation pay must be paid within seven days after employment ends or on the employee’s next regular pay day, whichever date comes later.

Does vacation pay apply to bonuses and commissions in Ontario?

Yes. Non-discretionary bonuses and commissions are included in the gross wages used to calculate vacation pay. Discretionary bonuses are generally excluded.

What can I do if my employer has not paid my vacation pay?

Ask payroll in writing for a breakdown, request your vacation records under ESA s. 41.1, calculate what you are owed, and if unresolved, file a claim with the Ontario Ministry of Labour. You can recover up to two years of unpaid vacation pay through an ESA claim.

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