In Ontario, vacation pay is a legal entitlement for employees. It is the amount of money an employee receives while taking time off from work for a vacation. As an employer, it is important to understand how vacation pay is calculated and how much you are required to pay your employees.
What Is Vacation Pay?
Vacation pay is a benefit that employers provide to their employees in Ontario. When an employee takes time off from work for a vacation, they are entitled to receive a certain amount of money as vacation pay. The amount of vacation pay an employee receives depends on their length of service and their rate of pay.
How Much Vacation Pay Are Employees Entitled To?
In Ontario, employees are entitled to at least two weeks of vacation time after working for one year with the same employer. They are also entitled to receive at least four percent of their total earnings as vacation pay. This means that if an employee earns $50,000 per year, they are entitled to receive at least $2,000 as vacation pay.
Calculating Vacation Pay
To calculate vacation pay in Ontario, you need to know the employee’s rate of pay and length of service with the current employer. The rate of pay includes both regular wages and any other forms of compensation such as commissions or bonuses.
Here’s how you can calculate vacation pay:
1. Determine the employee’s total earnings from the past 12 months. 2. Multiply the total earnings by four percent (0.04) to calculate the amount of vacation pay owed.
3. Add any additional payments such as commissions or bonuses earned during that period. 4. Divide the total by the number of days worked during that period.
Example Calculation
Let’s say an employee earns $25 per hour and works 40 hours per week for 52 weeks:
Hourly rate = $25
Weekly earnings = $1,000
Annual earnings = $52,000
Vacation pay owed = $52,000 x 0.04 = $2,080
Additional payments earned during that period = $500
Total earnings for vacation pay calculation = $52,500
Number of days worked during that period = 260
Vacation pay owed per day worked = $2,080 + $500 ÷ 260 = $9.23
When Is Vacation Pay Paid?
Employers in Ontario are required to provide vacation pay to their employees on each payday. If an employee takes a vacation, the vacation pay owed can be paid out before or at the start of the vacation.
- Employees who have been with an employer for less than five years are entitled to two weeks of vacation time and four percent of their total earnings as vacation pay.
- Employees who have been with an employer for five years or more are entitled to three weeks of vacation time and six percent of their total earnings as vacation pay.
Conclusion
Calculating vacation pay can be confusing for employers in Ontario, but it is important to understand how it works. Employees are entitled to at least two weeks of vacation time and four percent of their total earnings as vacation pay.
Employers must provide this benefit on each payday and can choose to pay it out before or at the start of the employee’s vacation. By following these guidelines, employers can ensure they are providing their employees with the correct amount of vacation pay.