Understanding vacation entitlements under the Employment
Standards Act, 2000 can be confusing for employers.
Vacation pay and vacation time are two separate
issues in Ontario. Most employees are entitled to vacation pay,
which must be at least four per cent of the employee's gross
wages earned in the 12-month vacation entitlement year, whether or
not they take the vacation time. Employees cannot give up their
entitlement to vacation pay.
Vacation pay must generally be paid to the employee in a lump
sum before the vacation begins; on each pay day, if agreed to in
writing by the employee; on or before the pay day for which the
vacation falls; or at a time agreed to in writing by the
Most employees are also entitled to at least two weeks of
vacation time after each 12-month vacation
entitlement year. Employers have an obligation to facilitate and
schedule vacation time within 10 months after the vacation
entitlement year during which the vacation time is earned.
Employees can only forgo vacation time with both the permission of
the employer and the approval of the Director of Employment
Standards, pursuant to the Employment Standards Act, 2000
s.41(1) If the Director approves and an employee's employer
agrees, an employee may be allowed to forego taking vacation to
which he or she is entitled under this part. 2000, c. 41,
s. 41 (1)
This means that if both employee and employer agree that the
employee will not take vacation time, they must submit their
request to the Director of Employment Standards for approval.
Approval must be sought for each new vacation entitlement year
where the parties are seeking to forgo vacation – the
Director of Employment Standards will not grant a blanket
Some employees prefer to forgo vacation time to earn additional
income. However, if employers want employees to take the vacation
time to which they are entitled, employers can require their
employees to do so. In order for the employee to forgo the vacation
time, the employee needs both the employer's agreement and the
approval of the Director of Employment Standards.
Upon termination of employment, employers are obligated to pay
to the employee all vacation pay that the employee has accrued but
that has not yet been paid out. Vacation pay is payable on
termination pay paid in lieu of notice under the Employment
Standards Act, 2000, but not on severance pay.
Employers are required to maintain records of vacation pay and
vacation time for three years after they are made.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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