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Ways to Improve Employee Motivation for Small Businesses Without Spending Money
Vacation pay is three weeks for employees who have worked for the same employer for five years.
In Ontario, there are certain employment guidelines regarding vacation leave that give employees paid vacation rights. Although some job categories are exempt, most employers must follow the Employment Standards Act (ESA) when it comes to providing paid time off.
It is important to note that vacation and salary are different from salary and vacation entitlement.
Effective January 1, 2018, Vacation and Compensation divides employees into two groups based on the number of years an employee has worked for the same employer. Here are the main differences in minimum vacation time and pay:
- Employees who have worked for less than five years earn two weeks of vacation after each 12-month vacation entitlement year, calculated on the basis of four percent of their gross pay (excluding any vacation pay) earned in the 12-month vacation entitlement year or the stub period (if applicable).
- Employees who have worked five years or more earn three weeks of vacation, calculated on the basis of six percent of their gross wages earned during the 12-month vacation entitlement year or stub period (if applicable).
As an employer, you can offer more rights and benefits to your employees than the minimum standards set by the ESA. However, it cannot be less than the amounts indicated above.
10 facts about vacation pay for Ontario business owners
Here are ten things to know, in addition to the minimum standards for annual leave:
A vacation entitlement year is a recurring 12-month period that can be counted from the employee’s hire date or alternatively, throughout the calendar year. If it’s the latter, you must allocate a prorated vacation sum for the time between your employee’s start dates and your calendar year; this is called a “buffer period”.
You are not required to grant vacation if an employee does not complete a full vacation entitlement year or stub period. However, employees earn vacation pay as they earn their salary.
Vacation time is accumulated during an authorized leave, such as parental leave or maternity leave since there is no break in the employment relationship.
Your employees must take vacation within ten months of the end of a vacation entitlement year or stub period.
As an employer, you also have the right to plan vacations and ensure that your employees take leave before the end of this ten-month period.
Employers should schedule their vacation time in blocks: two- or three-week blocks, or one-week blocks of two or three, depending on years of service. For shorter leave periods (i.e. one day), your employee can request this and the agreement can be made in writing or electronically.
In most cases, earned vacation pay must be paid out in a lump sum before your employee takes their vacation. However, there are several exceptions to this.
Your employee may not use all or part of their vacation; however, as an employer, you are still obligated to pay them their earned vacation pay. In this case, you will need electronic or written consent and approval from the Director of Employment Standards.
In the event of termination, you must provide your employee with the vacation pay they have earned. This is required within seven days of termination or the next payday.
If your employee requests a vacation pay statement (in writing), you must provide the statement within one week of the request or by the next payday.
If you’re still wondering how to calculate vacation pay or have questions such as what to do with seasonal employee annual leave, it’s always a good idea to get expert help. HR.
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