Purpose
The purpose of this page is to provide information about the Canadian Vacation Pay.
Overview
This wiki page provide details about the process of Vacation Pay for Canada, the wages included and configuration aspects.
Introduction
Most employees who have worked at the same company for at least one year have the right to take at least two weeks of paid vacation every year. If an employee does not take a vacation, the employer is legally obligated to pay the employee vacation pay, which is equal to a certain percentage of an employee's gross wages for the year.
For the purposes of calculating vacation pay, gross wages include:
- Regular earned wages, as well as commissions
- Bonuses and gifts that are related to work hours, production or efficiency
- Allowances for room and board
- Overtime pay
- Termination pay
Wages not included:
- Tips and gratuities
- Bonuses and gifts that are not related to work hours, production or efficiency (such as a Christmas bonus unrelated to performance)
- Expenses and traveling allowances
- Contributions made by an employer to a benefit plan and payments from a benefit plan that an employee is entitled to
The rate at which vacation pay is calculated is generally based both on the seniority of the employee and on company policy. The current statutory minimum rate of vacation pay is based on the individual provincial legislation of vacationable earnings.
Vacation pay can either be calculated at the statutory minimum rate (legal minimum) or at a company-specific rate (company policy). The company-specific rates are usually higher than the statutory minimum rate.
If the employee doesn’t work for a full year he/she earns vacation pay for every hour worked. So even if an employee works one hour, he or she is entitled to 4% of the hour's wages as vacation pay.
If an employee quits or have his or her employment terminated before receiving all of the vacation pay earned, then the employer is required to pay the remaining vacation pay no later than seven days after the last day of employment.
Common Terms
Vacation entitlement year
Most employees earn two weeks of vacation with pay after each 12 months of employment. This 12-month period is called the "vacation entitlement year".
Vacation deduction year
The deduction year – the year in which the vacation can be taken.
Configuration
All configuration steps for Vacation Pay are found under Payroll Canada -> Vacation Pay. The User Guide available is the best resource for configuration.
Related Content
Related Documents
Documentation at Service MarketPlace: Vacation Pay