Authors: Stephanie McDonald and Baldeep Sodhi
With summer around the corner, many of us are counting down the days to that much-needed vacation, whether it’s soaking in the charm of European cities, hiking the mountains in Japan, or just kicking it back at the cottage. But before you book that flight or gas up the car, take a minute to understand how your vacation pay actually works. It’s part of your compensation, knowing the basics can help you make the most of your time off without surprises. Let’s break down what you need to know about vacation pay and time in Ontario, so you can fully enjoy your break (and get paid properly while doing it!)
Vacation Pay vs. Vacation Time
When it comes to taking time off work, there’s one thing you definitely don’t want to be confused about, how you’re getting paid. In Ontario, vacation pay and vacation time, often get used interchangeably. This is where many people get confused, and for good reason. Knowing how each one works helps you plan better and avoid surprises while ensuring sure you’re receiving what you’re entitled to.
Vacation time is the actual time you take off work each year. This is the break you’re entitled to under Ontario’s Employment Standards Act (ESA). Your time off depends on how long you’ve worked for your employer, if you’ve worked for your employer for less than five years, then you are entitled to 2 weeks of vacation each year. If you’ve worked for five or more years, then you’re entitled to three weeks of vacation each year. You earn vacation time over the year, and you typically become eligible to take it after completing one year of employment. That said, some employers allow you to take vacation sooner or offer more than the minimum, always check your employment contract.
Vacation pay, on the other hand, is the money you receive to cover that time off. It’s meant to make sure you’re not losing income while you’re away. Under the ESA, employees with less than five years of service must receive at least 4% of their gross wages as vacation pay. If you’ve been with the company for five years or more, that increases to 6%. These are just the minimum, some employers offer higher percentages or additional vacation benefits, depending on the role and industry.
Now, here’s where things get interesting. How vacation pay is paid out can vary between workplaces, it’s something you’ll want to be clear on. In some cases, employers include vacation pay on every pay cheque. So you’ll see an extra 4% or 6% added to each pay period, but that means when you take vacation you’ve already been paid for it. You won’t get another pay cheque while you’re off. In other cases, employers hold back on your vacation pay and pay it out as a lump sum when you actually go on vacation, so you’re still receiving income while you’re away. Neither approach is wrong, but it’s important to know which method your employer uses so you can plan accordingly.
One final note, remember that you’re entitled to both vacation time and vacation pay. Employers can’t avoid paying vacation pay if you don’t take your time off. They also can’t reduce or withhold vacation pay due to job performance or other reasons. It’s part of your compensation, you deserve to enjoy your time off without worrying about how you’ll be paid. Failing to provide proper vacation entitlements can lead to penalties.
Scheduling and planning for vacation: Set yourself up for a smooth getaway
Taking a break shouldn’t feel like a hassle. With a little planning, you can set yourself up for a stress-free vacation where you’re not checking emails from a beach chair.
Here’s how to prep like a pro:
- Plan: Try to schedule your vacation well in advance. Not only does this increase the chance of getting the dates you want, but it also gives your manager and coworkers time to prepare for your absence.
- Get approval: Before you book those flights, make sure your time off is officially approved by your manager and fits with your team’s workload and schedule.
- Send a reminder: A week or two before your vacation (or more depending on the circumstances), give your team a quick reminder that you’ll be away. This helps everyone stay aligned and avoids last-minute surprises.
- Create a handover document: Summarize any ongoing projects, upcoming deadlines, or important tasks that may need attention while you’re gone. Keep it simple and focused, just so it’s enough to keep things moving while you’re away.
- Delegate tasks: Assign anything urgent or time-sensitive to a team member who can cover for you. Make sure they’re comfortable with what’s expected and have everything they need to step in.
- Out-of-office message: Let people know when you’ll be away, that you’ll have limited access to your email, and who they can contact in your absence.
A bit of an upfront effort helps you enjoy your time off without feeling like you’ve left a mess behind. Plus, it builds trust with your employer and shows that you’re thoughtful about your responsibilities, even while you’re off the clock.
Carry-over vacation: Use it or lose it?
You might be thinking about saving up all your vacation days for a long getaway, maybe a month in Europe, or some quality time away from work. While that sounds great, the rules around carrying over vacation time in Ontario are a bit more limiting than many realize.
Under the ESA, employees are required to take their vacation time within 10 months of the vacation entitlement year in which it was earned. In other words, you can’t just keep banking vacation endlessly. If you don’t use your vacation within that 10-month window, your employer must pay you out, but you can’t just roll it over forever. This means that holding onto your vacation time in hopes of using it all at once later on may not always be an option.
Here’s where things get a little more flexible. The ESA only sets the minimum standards. If your employer gives you extra vacation time beyond the minimum requirements, for example, more than 2 or 3 weeks, they may have a carry-over policy. Allowing you to keep some unused time for future use. However, this is entirely up to your employer and must be clearly outlined in your employment contract. These additional benefits are not protected under the ESA, so they can be limited, capped, or even removed if your contract allows it.
Review your employment contract or talk to an employment lawyer if you’re unsure. While the ESA guarantees a baseline, anything beyond that depends on what your employer agrees to offer. At Workplace Sage Legal, we’re here to help you understand and protect the vacation entitlements you’ve worked so hard to earn.
Conclusion
Vacation time isn’t just a perk, it’s part of your overall compensation and well-being. Whether you’re planning a staycation, beach getaway, or just some time to catch up on rest, it pays to understand how vacation time and vacation pay work in Ontario. By knowing the difference between vacation pay and vacation time and staying on top of your employer’s carry-over policy, you can enjoy your time off stress-free. Don’t leave benefits on the table, use your time, take your rest, and return recharged. After all, you’ve earned it!
