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Vacation pay in Canada is at least 4% of an employee’s gross wages for the first years of service, rising to 6% after a set number of years that depends on the province. On $60,000 of wages that’s $2,400 at 4% or $3,600 at 6%, and an employer should set aside about $200 or $300 a month to cover it.
How do you calculate vacation pay?
Multiply your wages for the vacation year by the rate. The vacation year usually runs 12 months from the hire date, or from a date the employer sets. The wages don’t include vacation pay already paid.
Ontario is a typical case. The rate is 4% for the first five years and 6% after that, and if the fifth anniversary falls inside the year, 6% applies to all wages earned in that year. You can try your own numbers in the vacation pay calculator.
| Place | First tier | Higher tier, after completed years |
|---|---|---|
| Ontario, British Columbia, Alberta, Manitoba | 2 weeks, 4% | 3 weeks, 6% after 5 years |
| New Brunswick | 2 weeks, 4% | 3 weeks, 6% after 8 years |
| Nova Scotia | 2 weeks, 4% | 2 weeks, 6% after 7 years; 3 weeks, 6% after 8 |
| Newfoundland and Labrador | 2 weeks, 4% | 3 weeks, 6% after 15 years |
| Saskatchewan | 3 weeks, 5.77% | 4 weeks, 7.69% after 10 years |
| Federal employers | 2 weeks, 4% | 3 weeks, 6% after 5 years; 4 weeks, 8% after 10 |
Quebec, PEI and the territories aren’t in the table, so check your own province’s labour standards page for those. For federally regulated employers, the Government of Canada page on federal vacations and holidays gives the same 4%, 6% and 8% steps.
A worked example on $60,000
An Ontario employee earns $60,000 in the vacation year. Under five years, vacation pay is 4%, so $2,400, which is $200 a month. Reach year five and it becomes 6%, $3,600, or $300 a month.
Nova Scotia shows why the table needs care. At seven years the employee gets two weeks of time off, but the pay is still 6% of $60,000, the same $3,600. The number of weeks and the percentage don’t always move together.
Part-timers count too. Marco in Moncton works 30 hours a week at $22 an hour for the year, so he earns $34,320 (22 times 30 times 52). At 4%, his vacation pay is $1,372.80. It isn’t a favour, it’s part of what the job pays, and it belongs in the budget from the first shift.
How do you account for vacation pay?
Treat it as a cost that builds up while employees work. Each pay period, add the percentage to a vacation liability, then take it down when someone actually goes on leave. Otherwise your books show a surprise the month the whole team takes August off.
You’ll thank yourself at year end.
Payroll rules apply as they would to salary. When vacation pay is paid out while the employee is on leave, you work out EI premiums and CPP contributions the usual way, and vacation pay shows up in the insurable and pensionable earnings boxes on the T4. The payroll deductions calculator shows the CPP, EI and income tax on one cheque, and the take-home pay calculator shows what the employee receives.
Can vacation pay come with each paycheque?
Sometimes. In Ontario it’s allowed only if the employee agreed in writing or electronically, and the pay stub must show the amount on its own line. Rules in other provinces differ, so look up your province before you switch to paying it as you go.
Paying it each cheque changes the books. The liability never builds up, since you settle it every pay period, but the employee still needs the time off. Make sure the time off is given and written down, because paying the money doesn’t cancel the leave.
Common mistakes with vacation pay
- Using calendar-year wages when the vacation year runs from the hire date.
- Counting vacation pay already paid as wages that earn more vacation pay.
- Forgetting that bonuses, commission or overtime may or may not count as wages. It varies by province, so check yours.
- Treating these rates as a ceiling, when your contract may promise more.
Vacation and statutory holidays are two separate entitlements.
Public holiday pay follows its own formula, which the holiday pay calculator covers, and overtime is another matter again.
Where we got these figures
Rates and years of service come from provincial employment standards guides and the federal labour standards pages, gathered in 2026. Ontario details are from the Ontario Guide to the Employment Standards Act, and payroll treatment is from the Canada Revenue Agency‘s vacation pay guidance for employers. Minimums change, so check the current rule before you rely on a figure.
Frequently asked questions
What is the minimum vacation pay in Canada?
In most provinces it is 4% of gross wages at first and 6% after a set number of years. Saskatchewan and federal rules differ.
How much is 4% vacation pay on $60,000?
It is $2,400, or $200 for each month of the year.
Do CPP and EI apply to vacation pay?
Yes. When it is paid while the employee is on leave, CPP and EI are worked out as for salary, and it is reported in the T4 insurable and pensionable earnings boxes.
Can vacation pay be paid on every paycheque in Ontario?
Only if the employee agrees in writing or electronically, and the pay stub shows it separately.
Is vacation pay the same as holiday pay?
No. Statutory holiday pay is a different entitlement with its own formula.
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