Vacation Pay - Understanding what you are owed

Have you recently left a job and are trying to figure out how much vacation pay you are owed? Are you employed but confused about how much vacation time you are entitled to?

The most common inquiries I get are about vacation pay issues

The most important in principle to remember is that vacation time is different than vacation pay. Everyone is entitled to a minimum of 2 weeks away from work for every 12 months they work. They may be entitled to be paid for the full 2 weeks they are away, something less than the 2 weeks that they are away or they may be entitled to more vacation pay than time off .

The Employment Standards Act states that everyone is entitled to vacation pay at a minimum rate of 4 percent.  4 percent is equivalent to 2 weeks wages if you earn a full year’s income without interruption.  Neither vacation pay or time off increases with seniority under the Act.

Let’s imagine, however, that in a 12-month period, you are off work because of illness for 4 months  and are not paid by the company during that time.  

At the end of that year, you will have earned 2 weeks off from work. You will only have earned, however, 4 percent of your actual earnings from the company. Since you only earned your regular salary for 66 percent of the year, only 6.6 of those 10 working days off will actually be paid.

Unless your company has a policy that states otherwise, during a maternity leave you accumulate time off but not vacation pay. You will have at least 2 weeks vacation time to take by the end of a 12 month leave but  may not get paid for it.

Vacation pay is payable on all monies you received from your employer other than tips and gratuities, completely discretionary bonuses unrelated to your hours of work, efficiency or productivity, expenses and traveling allowances or contributions to benefits plans. You do not get vacation pay on vacation pay but you do get it on statutory holiday pay.

This means that you earn a minimum of 4% vacation pay on overtime, commissions, or any bonuses you receive that are not completely discretionary. If the bonus is based on company performance, or your personal performance, whether subjective or objective, vacation pay at the rate of 4% must be paid.

Knowing that, let’s imagine that you have worked a full 12 months. You have also worked a considerable amount of overtime. By the end of that 12 months, you have earned 2 weeks off but may be entitled to 3 or 4 weeks vacation pay or more depending on how much overtime you have worked. The same would apply if you  earned commissions or bonuses based on performance.

Your employer must allow you to take the time off and pay  vacation pay by no later than the end of the 10-month period following the 12-month period in which the vacation pay was earned. Technically, that means the employer could refuse to allow you to take your vacation or pay you any vacation pay until the 22^nd month after you started the job. (Nobody actually does this).

People are often confused when they leave a job as to how much vacation pay they are owed. Let’s imagine that you were with the company for 10 years and as a result of company policy you were entitled to 4 weeks of vacation a year.

You’ve gotten used to thinking that as of every January 1^st, you have new vacation that you have earned that you can book for some time during that year. You resign your employment on January 30^th. Don’t they owe you 4 weeks vacation? It depends. The question I will ask will be, “Did the employer allow you to take vacation during the first 12 months of your employment?” If the answer is yes, then you are only owed 1/12^th of your 4 weeks paid vacation.

Let’s imagine that you started your new job on January 1^st 10 years ago. Most employers will not actually require an employee to work all the way through the summer and to their anniversary date without allowing them to take a vacation. Most employers will let an employee take their 2 weeks vacation during that first summer. Technically, if the employee returned from their paid vacation that first year and quit, the employer would have overpaid them by about a week since they had only earned half of their 2 weeks paid vacation.

If you had such an employer, that means that when you got to your first anniversary date, you would have no vacation time or money in the bank. You used and were paid for all the vacation you earned during the first 12 months the previous summer. As of your first anniversary, you are at a zero and if you quit that day, you are owed nothing.

You only start earning new paid vacation as you start working through your second year. If this continued year and after year, that means that on the January 1^st of your 10^th anniversary, unless there was any unused vacation carried over, you are at a zero. Since you only worked one month before you were terminated or resigned, you have earned 1/12^th of 8 percent of a full year. Put another way, you have earned 8 percent of your wages between January 1^st and the date you left  a month later.

Finally, if you are feeling sad that you used up all your vacation and have to toil until next year without a break, remember that it is better than the permanent vacation that comes after a pink slip.