Vacation (holiday) pay is required by hourly wage earners. The minimum rate of vacation pay in Canada is 4%.
Vacation pay is calculated with each pay period. Vacation pay amount can be allowed to accumulate and banked or it can be paid to the employee with each pay period. The option of accumulating vacation pay or paying with each pay should be negotiated between the employer and employee.
Whichever method is selected, vacation pay accumulating or vacation pay include on each pay the amount of 4% is the same. If the vacation is paid on each pay the deductions are calculated with normal pay and on each pay period. If vacation pay is accumulated, no deductions are made at the time the pay is calculated and the vacation amount is accumulated and banked. When the time comes to pay the vacation pay to the employee is at that time that the deductions are calculated.
Normally employees on salary are not paid 4% holiday pay. The reason being is that since the employee is on salary, the employer will pay the employee throughout the vacation taken. As if the employee was still at work. Again if a mutual agreement is made between the employee and employer, vacation pay of 4% can be calculated in lieu of the employee receiving normal wages while on vacation. In this case o wages are paid while on vacation, the employee receives their banked 4% vacation pay.
As mentioned 4 % is the minimum an employer is required to pay in vacation allowance. The employer has the option to pay more than 4% if the employer wishes to do so.
After 5 years of employment with the employer, the employer is required to raise vacation pay from 4% to 5%. This increase comes on the hiring anniversary after the completion of the 5th year.
