Vacation Pay in Canada (2026): Rates by Province, What Counts and How to Pay It

Vacation pay is one of the most common payroll errors in Canada, because every province sets its own rate, its own service thresholds and its own list of what counts as wages. This guide is for small business owners, bookkeepers and employees who want to get it right in 2026. It covers the 4% and 6% rules and the jurisdictions that go higher, the difference between vacation time and vacation pay, when the money must be paid, what happens when someone leaves, how the CRA taxes it, and worked examples in Canadian dollars.

Quick answer

Most Canadian employees earn vacation pay of at least 4% of gross wages with two weeks of vacation, rising to 6% with three weeks after a set period of service — 5 years in Ontario, B.C., Alberta and Manitoba, 3 years in Quebec. Saskatchewan starts at 3/52 (5.77%), and federally regulated employees reach 8% after 10 years. Vacation pay is earned from day one and must be paid out when employment ends.

• Ontario: 4% under 5 years, 6% from 5 years

• Vacation pay is owed even if the employee leaves before completing a year

• What counts as wages differs — Alberta and Manitoba exclude overtime; Ontario includes it

• Paying it on each cheque usually needs the employee's written agreement

• It's taxable: deduct CPP/QPP, EI and income tax and report it on the T4

Vacation time vs vacation pay

Employment standards laws give employees two separate rights. Vacation time is the paid time off itself — usually two weeks after each completed year of employment. Vacation pay is the money, calculated as a percentage of the employee's gross wages over the year. The two are linked but not interchangeable, and confusing them causes most of the complaints employment standards officers see.

The key difference is timing. Vacation time is earned only once an employee completes a vacation entitlement year (or, in Ontario, a stub period). Vacation pay, by contrast, accrues on every hour worked from the first day. In Ontario's words, it is earned "with every hour worked", even if the employee never completes the year. That's why a part-timer who quits after four months is still owed 4% of everything they earned, though they never became entitled to any time off.

The other consequence is that paying the money doesn't cancel the time. If you pay vacation pay on every cheque, the employee is still entitled to take two weeks off — unpaid at that point, since the pay has already been received. B.C.'s government guidance is blunt about it: employees can't skip taking their vacation and just receive the pay. Ontario allows an employee to give up vacation time only with the employer's agreement and approval from the Director of Employment Standards, and even then the vacation pay itself can never be waived.

Vacation pay rates by province and territory in 2026

The table below shows the minimum vacation time and vacation pay in each jurisdiction. Rows for New Brunswick, Prince Edward Island, Newfoundland and Labrador and the three territories are from an employer-industry summary updated on 8 October 2026, because those governments' pages blocked our checks — confirm them on the official links at the end before relying on them.

Two quirks stand out. Saskatchewan is the most generous province: three weeks from the first year, paid at three fifty-seconds of annual wages, and four weeks after 10 years. Quebec cut its threshold for three weeks from five years to three on 1 January 2019, so older guides that still show five years are wrong. Collective agreements and employment contracts can always give more than these minimums, and when they do, the better term is enforceable.

Ontario

Ontario's Employment Standards Act gives two weeks of vacation and 4% vacation pay to employees with less than five years of employment, and three weeks and 6% once they reach five years. An employee who crosses the five-year mark partway through a vacation entitlement year gets 6% on all the wages earned in that year, not only the wages after the anniversary.

The vacation entitlement year is normally the 12 months from the hire date. Employers can set an alternative year — for example, the calendar year — and the period before it starts is a "stub period" with pro-rated time: two weeks multiplied by the stub's length in months over 12. Vacation must be taken within 10 months after the year or stub period ends, in blocks of at least a week unless the employee asks in writing for shorter periods.

Quebec

Quebec's Act respecting labour standards uses a reference year that runs from 1 May to 30 April unless an agreement or decree sets other dates. An employee with less than a year of service gets one day per full month of service, up to two weeks; from one year, two weeks; and from 3 years of uninterrupted service, three weeks. The indemnity is 4% of gross wages earned in the reference year, or 6% from three years. An employee with two weeks may ask for a third week without pay. Quebec generally expects the indemnity to be paid in a single amount before the vacation starts.

Federally regulated employers

Banks, airlines, interprovincial trucking, telecoms and other federally regulated private-sector employers follow the Canada Labour Code. It is the only regime with a third tier: 4% and two weeks after one year, 6% and three weeks after five consecutive years, and 8% and four weeks after 10 consecutive years. Vacation must start no later than 10 months after the end of each year of employment, and the employer can schedule it with at least two weeks' notice.

What counts as "wages" for vacation pay

The percentage is only half the calculation. The other half is the base, and provinces disagree on what belongs in it — particularly overtime and public holiday pay. Getting this wrong across a whole workforce can mean underpaying everyone by a few dollars a week for years.

What goes into the vacation pay base

Jurisdiction	Overtime	Holiday pay	Other notes
Ontario	Included	Included	Commissions, non-discretionary bonuses and termination pay in; tips, discretionary bonuses, expenses and severance out
Alberta	Excluded	Excluded	Termination pay, unearned bonuses, tips and allowances also out
Saskatchewan	Included	Included	Vacation pay itself also counts as wages
Manitoba	Excluded	Included	Pay in lieu of notice and prior vacation pay out
British Columbia	Not listed	Included	Commissions, required paid sick days and previously paid vacation pay in
Nova Scotia	—	Included	Vacation pay isn't counted in the wages used to calculate it
Federal	Included	Included	Every form of payment for work performed; tips excluded

Ontario

Overtime

Included

Holiday pay

Included

Other notes

Commissions, non-discretionary bonuses and termination pay in; tips, discretionary bonuses, expenses and severance out

Alberta

Overtime

Excluded

Holiday pay

Excluded

Other notes

Termination pay, unearned bonuses, tips and allowances also out

Saskatchewan

Overtime

Included

Holiday pay

Included

Other notes

Vacation pay itself also counts as wages

Manitoba

Overtime

Excluded

Holiday pay

Included

Other notes

Pay in lieu of notice and prior vacation pay out

British Columbia

Overtime

Not listed

Holiday pay

Included

Other notes

Commissions, required paid sick days and previously paid vacation pay in

Nova Scotia

Overtime

—

Holiday pay

Included

Other notes

Vacation pay isn't counted in the wages used to calculate it

Federal

Overtime

Included

Holiday pay

Included

Other notes

Every form of payment for work performed; tips excluded

In Ontario, the base includes regular earnings, commissions, non-discretionary bonuses, overtime, public holiday pay, termination pay and pay for domestic or sexual violence leave. It excludes tips and gratuities, discretionary bonuses unrelated to hours or productivity, expense and travel allowances, benefit plan payments, EI benefits, severance pay and vacation pay already paid.

Alberta takes a narrower view: vacation pay is calculated on wages excluding overtime, general holiday pay, termination pay, unearned bonuses, tips and allowances. Manitoba excludes overtime and pay in lieu of notice but includes general holiday pay. Saskatchewan counts almost everything, explicitly including overtime, public holiday pay and vacation pay. The federal Code includes every form of payment for work performed, except tips.

B.C. is unusual in one respect: its guidance says total wages include previously paid vacation pay, so last year's vacation pay forms part of this year's base. Nova Scotia goes the other way and says vacation pay is not counted in the wages used to calculate it. That's the kind of detail a national payroll setup needs to handle province by province.

How to calculate vacation pay

For hourly and variable-pay employees, the method is the same everywhere: add up the eligible wages for the vacation year, then multiply by the rate. For salaried employees who simply keep receiving their salary while on vacation, most employers pay the regular salary for the vacation weeks and then check, at year end, that the total is at least the statutory percentage of the eligible wages. Alberta spells out the salaried method: weekly vacation pay is the monthly wage divided by 4.3333.

Calculating vacation pay for an employee

1. 1

   Identify the jurisdiction and rate

   Province where the employee works, or the Canada Labour Code if you're federally regulated. Check years of service — the rate steps up at 3, 5, 8, 10 or 15 years depending on the jurisdiction.

2. 2

   Add up the eligible wages

   Total gross wages for the vacation year or stub period, then add or remove overtime, holiday pay, bonuses and commissions according to your province's rules.

3. 3

   Multiply by the rate

   4% for two weeks, 6% for three weeks, 8% for four federally — or 3/52 and 4/52 in Saskatchewan.

4. 4

   Subtract anything already paid

   If vacation pay was paid on each cheque or as advance vacation, deduct it so you don't pay twice.

5. 5

   Pay it on time and show it on the pay stub

   Before the vacation, on each cheque by agreement, or with final pay — and keep the record of how you calculated it.

Worked examples in C$

1. Ontario hourly employee. Priya, a warehouse worker in Mississauga with three years of service, earned C$41,200 in regular wages, C$1,800 in overtime and C$1,000 in public holiday pay in her vacation entitlement year. All three count in Ontario, so her base is C$44,000 and her vacation pay is C$1,760 (4%). Tips, if she received any, would be left out. Ontario's own guide uses a simpler case: C$16,000 in wages produces C$640 at 4% or C$960 at 6%.

2. Ontario employee reaching five years. Marco hits his fifth anniversary eight months into his vacation entitlement year, during which he earns C$50,000. Ontario applies 6% to all the wages in that year, so he is owed C$3,000 — not 4% on the first eight months and 6% on the rest.

3. Alberta employee with overtime. A Calgary installer earns C$48,000 in regular wages, C$3,000 in overtime and C$1,500 in general holiday pay. Alberta excludes the overtime and holiday pay, so the base is C$48,000 and vacation pay at 4% is C$1,920. The same earnings in Ontario would produce C$2,100, because all C$52,500 would count.

4. Alberta salaried employee. An office manager in Edmonton earns C$5,200 a month. Her weekly vacation pay is C$5,200 ÷ 4.3333, or about C$1,200, so two weeks of vacation are paid at about C$2,400 — the same as her normal salary for that period.

5. Saskatchewan. Saskatchewan's own example: an employee with C$25,000 in salary and C$3,000 in commission has C$28,000 in wages. Multiplied by 3/52, that's C$1,615.38 for three weeks of vacation. After 10 years, the same wages at 4/52 give C$2,153.85 for four weeks.

6. Quebec. A Laval bookkeeper with four years of uninterrupted service earned C$45,000 in the reference year ending 30 April. She is entitled to three weeks of vacation and an indemnity of 6%, or C$2,700, paid before she leaves.

7. Federally regulated employee. A bank teller with 11 years of service earned C$60,000 in her year of employment. Under the Canada Labour Code she gets four weeks and 8%, or C$4,800.

When vacation pay must be paid

The default rule in most provinces is a lump sum before the vacation starts, with set exceptions.

• Ontario: a lump sum before the vacation begins; for vacation taken in periods of less than a week, by the pay day for that period; on each pay cheque, or at any other time, if the employee agrees in writing or electronically; and, where wages are paid by direct deposit, by the pay day for the vacation period.
• British Columbia: at least seven days before the vacation starts, or on every cheque if the employer and employee agree in writing.
• Alberta: at least once a month or every pay period, or at least one day before the vacation if the employee asks — and in all cases no later than the next regular pay day after the vacation begins.
• Manitoba: at the employer's choice, but no later than the last working day before the vacation and within 10 months of being earned; paying it on each cheque is allowed.
• Nova Scotia: at least one day before the vacation; or added to each cheque; or built into the hourly rate. If it's built into the rate, the rate must be at least the minimum wage plus 4% (or 6%). With the C$17.00 an hour minimum, that means at least C$17.68 an hour for an employee on 4%.
• Federal: up to 14 days before the vacation, or during or right after it where that's the established practice.

Paying vacation pay on each cheque is popular with employers of part-time and casual staff because it removes the year-end accrual. If you do it, show the amount as a separate line on every pay stub — "vacation pay 4%: C$40.00" on a C$1,000 cheque — and keep the signed agreement where your province requires one. Without both, an employment standards officer may treat the money as part of the regular wage and order you to pay vacation pay again.

Paying out vacation pay when employment ends

Vacation pay that has been earned but not paid is owed when employment ends for any reason — resignation, dismissal with or without cause, layoff or the end of a contract. It's calculated on the wages earned since the employee was last paid vacation pay, plus any unused vacation from a completed year.

Ontario requires payment within seven days after employment ends or on the next regular pay day, whichever is later. An employee who quits seven months into her vacation year, having earned C$24,500, is owed C$980 (4%). Ontario also requires vacation pay on termination pay, but not on severance pay.

British Columbia requires all vacation pay owed on the last cheque; employees who worked five calendar days or less aren't entitled to vacation pay. Alberta gives the employer a choice of paying within 10 consecutive days after the end of the pay period in which employment ended or within 31 consecutive days after the last day of employment, and does not let employers force staff to burn vacation during a notice period unless both agree. Manitoba and Nova Scotia require payment within 10 working days and 10 days respectively. Federally regulated employers have 30 days. In Quebec, the indemnity covers both untaken vacation from the reference year that ended on 30 April and vacation accrued in the current one.

Deadline to pay out vacation pay after employment ends

Last cheque

British Columbia

Later of 7 days or next pay day

Ontario

10 days / 10 working days

Nova Scotia / Manitoba

10 days after the pay period or 31 days after the last day

Alberta (employer chooses)

30 days

Federally regulated employers

The final vacation payout also matters for Employment Insurance. It's reported on the employee's Record of Employment in the vacation pay field, and Service Canada uses it when processing any EI claim.

How vacation pay is taxed

Vacation pay is employment income. The CRA's rules depend on how you pay it:

• When the employee takes the vacation, calculate CPP and EI as you would for regular salary. For income tax, use the tax table for the vacation period if you pay the vacation separately — a weekly table for one week off — or the regular table if it's included in a normal pay.
• When vacation pay is paid on each cheque or cashed out instead of time off, EI is calculated as for regular salary, but income tax and CPP use the CRA's bonus or irregular-payments method.

Report the amount on the T4 in box 14 (employment income), box 24 (EI insurable earnings), box 26 (CPP/QPP pensionable earnings) and, for Quebec employees, box 56 (PPIP insurable earnings). Our payroll deductions guide has the 2026 CPP, CPP2 and EI rates you'll need for the calculation.

Common mistakes and how to avoid them

Using 4% for everyone. Long-service employees move to 6% (or more), and the move often happens mid-year. Put each employee's hire date and next threshold date into your payroll system, and check Quebec's three-year rule and Saskatchewan's 3/52 if you have staff there.

Leaving out overtime or commissions in Ontario. Ontario and Saskatchewan include overtime and holiday pay in the base; commission is included in most provinces. Many generic payroll setups calculate vacation pay only on the regular-earnings code.

Calling it "included in the rate" without proof. A higher hourly rate that supposedly includes vacation pay will usually be treated as regular wages unless your province permits it and the pay stub and agreement show the split.

Not scheduling the time off. Paying vacation pay on each cheque doesn't excuse the employer from giving vacation time within 10 months (Ontario, Nova Scotia, federal) or 12 months (B.C.).

Forgetting the record. Ontario requires a record of vacation time and pay, including how it was calculated, and an employee can ask for a written statement. Keep it with your payroll records.

Vacation pay setup checklist

0/7

• Confirm the jurisdiction for each employee (province of work or federal)
• Record each hire date and the date the rate steps up
• Map every earnings code: in or out of the vacation pay base
• Decide when you'll pay — before vacation, each cheque, or monthly — and get written agreements where required
• Show vacation pay as its own line on pay stubs
• Track vacation time owed and the deadline to take it
• Pay all accrued vacation pay with final pay and report it on the ROE

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Official links

• Ontario — vacation (ESA guide)Rates, base, timing, termination
• Federal — annual vacationCanada Labour Code 4%/6%/8%
• British Columbia — vacationTime off and vacation pay
• Alberta — vacation payCalculation and payout
• Saskatchewan — calculating vacation pay3/52 and 4/52
• Manitoba — vacations fact sheetRates and timing
• Nova Scotia — vacation time and pay4%, 6% from year 8
• CNESST — annual vacation (Quebec)Quebec reference year and indemnity
• CRA — vacation pay and public holiday paymentsDeductions and T4 reporting

What to do next

Check the vacation pay base and rate for each employee before your next pay run, especially anyone approaching a service anniversary. If you pay hourly staff, make sure overtime and public holiday pay are treated the way your province requires, and review our guide to overtime pay in Canada for the hours side of the calculation. Then generate clear pay stubs showing vacation pay as its own line with our free salary slip generator.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

Is vacation pay 4% or 6% in Canada?

Both, depending on the province and length of service. Most jurisdictions start at 4% of gross wages with two weeks of vacation and move to 6% with three weeks — after 5 years in Ontario, B.C., Alberta and Manitoba, after 3 years in Quebec and from the start of year 8 in Nova Scotia. Saskatchewan starts at 3/52 (5.77%), and federally regulated employees reach 8% after 10 years.

Is vacation pay paid out when an employee quits or is fired?

Yes. Vacation pay is earned on every dollar of wages from the first day, so it can't be forfeited by quitting, being dismissed or leaving before the year ends. In Ontario it's due within seven days of the end of employment or on the next regular pay day, whichever is later. B.C. requires it on the last cheque; the federal rule is within 30 days.

Can an employer pay vacation pay on every cheque?

In most provinces, yes, if the employee agrees. Ontario requires the agreement in writing or electronically; B.C. requires a written agreement; Manitoba and Nova Scotia allow it if the pay stub shows it clearly. The employee still gets the vacation time off — it just isn't paid again when taken. Quebec generally requires a lump sum before the vacation.

Is overtime included in vacation pay?

It depends on the province. Ontario and Saskatchewan include overtime and public holiday pay in the wages that vacation pay is calculated on. Alberta excludes overtime and general holiday pay, and Manitoba excludes overtime but includes general holiday pay. Check your province before you set up the payroll code.

Is vacation pay taxable in Canada?

Yes. The CRA treats vacation pay as employment income, so you deduct CPP or QPP, EI and income tax and report it in box 14 of the T4. If the employee takes the vacation, deduct as for regular pay; if it is paid each cheque or cashed out instead of time off, use the bonus method for income tax and CPP.

Can an employee give up vacation and take the money instead?

Generally not. Vacation pay can't be waived, and most provinces also require the time off to be taken — B.C. says employees can't skip vacation and just receive the pay. Ontario allows an employee to forgo vacation time only with the employer's agreement and the Director of Employment Standards' approval, and the pay is still owed.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 12 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Your guide to the Employment Standards Act: Vacation — Government of Ontario · accessed 12 October 2026
2. 2.Annual vacation (federal labour standards) — Employment and Social Development Canada · accessed 12 October 2026
3. 3.Vacation — Government of British Columbia · accessed 12 October 2026
4. 4.Vacation pay — Government of Alberta · accessed 12 October 2026
5. 5.Calculating and paying vacation pay — Government of Saskatchewan · accessed 12 October 2026
6. 6.Vacations fact sheet — Manitoba Employment Standards · accessed 12 October 2026
7. 7.Vacation time and vacation pay — Government of Nova Scotia · accessed 12 October 2026
8. 8.Les vacances annuelles — Éducaloi · accessed 12 October 2026
9. 9.Vacation pay and public holiday payments — Canada Revenue Agency · accessed 12 October 2026
10. 10.Vacation entitlement by province in Canada: the 2026 employer compliance guide — Employment Hero · accessed 12 October 2026