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Running a small business in Canada is rewarding but it also comes with challenges and responsibilities.

One big part of these responsibilities is understanding employee vacation policies and statutory holidays. Knowing these rules will help you follow the law and also help to build a great place to work and strong team bonds.

In this post, we'll simplify the key details about vacation policies and rules for employers.

If you'd rather see Joe explain these in detail, check out the video below 👇

No matter if you pay your workers hourly or by salary, or if your business is in British Columbia or Nova Scotia, this guide can help. After reading it, you’ll understand the complicated rules about Canadian employee vacations.

We'll also explain how statutory holidays affect employees. We have helpful references too, no matter what province or territory you're in.

So, let's get started. We're here to help you feel more sure when handling these important parts of your business.

Employers' Responsibilities for Employee Vacation Policies

As an employer, it’s your responsibility to make sure your workers get their fair share of vacation time and pay. It's all about knowing and following the rules set by federal and provincial regulations.

Here are some of the general responsibilities you need to be aware of:

‍Vacation Time: Usually, you must give at least two weeks of vacation each year. This depends on the province and how long someone has worked for you. The minimum vacation time may also get longer the more years a person works for you.

‍Vacation Pay: In most provinces, vacation pay must be at least 4% of the gross wages an employee has earned in the 12 months preceding their vacation. This percentage may increase with an employee's length of service.

‍Providing Vacation: Employers are responsible for scheduling vacation times. In many cases, vacation time can be given in one continuous period, unless the employee requests to take their vacation in shorter periods.

‍Record Keeping: Employers are required to keep detailed records. These must include the vacation time and vacation pay of each employee.

These are just general guidelines, and actual responsibilities may vary by province. 

Vacation Policies for Hourly Employees

For hourly employees, vacation policies might seem a bit complicated at first, but they don't have to be.

One common approach is to pay out vacation pay on each paycheque. This method is straightforward and easily manageable. It also helps to keep things transparent for your employees.

When using this method, the vacation pay is calculated as a percentage of the gross wages an employee has earned in the pay period. 

The vacation rate can be whatever you agree upon with your employee as long as it meets the minimum requirements for your province.  This is most often either 4% or 6% as a minimum depending on employee tenure and the specific rules in your province.

For example, if an hourly employee earned $500 in a week, their vacation pay for that week would be $20 if their vacation pay rate is 4%.

This approach has several benefits:

• Simplicity: It's a clear-cut method and easy to calculate with each pay period.
• Financial planning: It provides a consistent and predictable addition to the employee's regular income. This can be helpful for their personal financial planning.
• Less administrative tracking: This method reduces the amount of ongoing tracking and accounting needed. Vacation pay is paid out automatically with each paycheque.

However, it's crucial to note that this doesn't alleviate the requirement to provide actual vacation time. 

Employees are still entitled to take time off. 

If they haven't taken their vacation time and decide to do so, you will need to ensure their hours are covered during their absence. However, you won't need to provide additional vacation pay since it has already been paid out.

Remember to consult your provincial or territorial employment standards to ensure you're applying the correct procedures. See the links below for employee standards by province.

Vacation Policies for Salaried Employees

For salaried employees, vacation policies often take a slightly different shape. 

Instead of paying out vacation pay each pay period, many businesses find it more effective to accrue vacation time for salaried employees.  This way employees can then take their vacation as paid time off.

Accrual works by setting aside a portion of the employee's entitled vacation time each pay period. 

For example, if your employee is entitled to two weeks of vacation per year, this would equate to approximately 0.38 days of vacation accrued per week.

This method can provide several benefits for salaried employees:

• Flexibility for the Employee: Accrued vacation allows salaried employees to plan their time off according to their personal needs and preferences. This gives them more control over their work-life balance.
• Work Continuity: It provides an opportunity for employers to plan for employee absences. This can help to ensure minimal disruption to the workflow.
• Improved Morale: Knowing they have a bank of time they can use for vacations can increase employee satisfaction and morale.

Just as with hourly employees, salaried employees are entitled to vacation pay. This is often included as part of their regular salary payments and should be clearly outlined in the employee's contract.

This method of accruing vacation pay can be a little more complex than the pay-as-you-go approach used for hourly employees. You will need to ensure accurate tracking of the accrued time off and regularly provide this information to your employees.

Next, we’ll get into the specifics of how vacation policies differ across Canadian provinces and territories.

Vacation Policies Across Canadian Provinces and Territories

Each Canadian province and territory has its own unique rules and regulations when it comes to employee vacation policies. 

Understanding your local regulations is key to ensuring that your business is in compliance with the law. You’ll also be sure that your employees are receiving the appropriate level of benefits.

As of the date that this article was published, the general minimum vacation pay requirements were as follows.  

This article may not be updated exactly when policies are changed. Please check the link for your province or territory’s employment standards website when confirming your requirements.

British Columbia -

In British Columbia, employees are entitled to two weeks of vacation after one year of employment, and this increases to three weeks after five years. Vacation pay should be at least 4% of an employee's gross wages for the first five years, and then it increases to 6%.

There is no vacation entitlement for employees until after their first year of employment, but employers can still choose to offer it.  These are just the minimums.

Alberta -

Alberta's policy is similar to British Columbia's. After the first year of employment, employees are entitled to two weeks of vacation time or 4% vacation pay.  After the fifth year of employment they should receive three weeks of vacation time or 6% vacation pay.

There is no vacation entitlement for employees until after their first year of employment, but employers can still choose to offer it.  These are just the minimums.

Saskatchewan -

In Saskatchewan, employees earn a minimum of three weeks of vacation after one year of service, which increases to four weeks after ten years. Vacation pay should be at least 6% of the employee's gross wages, increasing to 8% after ten years.

Manitoba -

In Manitoba, employees must receive at least 2 weeks of vacation per year for the first four years of employment, and a minimum of 3 weeks of vacation after the fifth consecutive year.

Vacation pay should be at least 4% of an employee's gross wages for the first five years, and then it increases to 6%.

Ontario -

Ontario employees with less than five years of employment are entitled to two weeks of vacation time after each 12-month vacation entitlement year. Employees with five or more years of employment are entitled to three weeks of vacation time.

Vacation pay should be at least 4% of an employee's gross wages during the first five years of employment, after which it increases to 6%.

Quebec -

Quebec’s policies are worded slightly differently.

The length of annual vacation is based on the number of years of uninterrupted service at the end of the reference year.

Employees in their first year of employment are entitled to one day of vacation per full month of uninterrupted service, not exceeding two weeks.  After one year, they should receive two weeks of vacation.  After three years they are entitled to three weeks.

Vacation pay should be at least 4% of gross wages for employees in their first three years of employment.  After this, it goes up to 6%.

Nova Scotia -

In Nova Scotia, the first eight years of employment earn two weeks of vacation time, which increases to three weeks after eight years. 

Vacation pay should be at least 4% of an employee's gross wages for the first eight years, and then it increases to 6%.

Prince Edward Island -

On Prince Edward Island, employees earn a minimum of two weeks of vacation after one year of service, and this increases to three weeks after eight years. 

Vacation pay should be at least 4% of the employee's gross wages, increasing to 6% after eight years.

New Brunswick -

In New Brunswick, employees in their first year of employment earn one day of vacation for each month worked.  After one year of work, they’re entitled to two weeks vacation and after eight years they’re entitled to three weeks.

Vacation pay should be at least 4% of an employee's gross wages for the first eight years, and then it increases to 6%.

Newfoundland and Labrador -

In Newfoundland and Labrador, employees earn a minimum of two weeks of vacation after one year of service, which increases to three weeks after 15 years.

Vacation pay should be at least 4% of the employee's gross wages, increasing to 6% after 15 years.

Nunavut -

In Nunavut, employees earn a minimum of two weeks of vacation after one year of service, which increases to three weeks after five years. 

Vacation pay should be at least 4% of the employee's gross wages, increasing to 6% after five years.

Northwest Territories -

In the Northwest Territories, employees earn a minimum of two weeks of vacation after one year of service, which increases to three weeks after five years. 

Vacation pay should be at least 4% of the employee's gross wages, increasing to 6% after five years.

Yukon -

In the Yukon, employees earn a minimum of two weeks of vacation after one year of service. This requirement does not change with additional years of service.

Vacation pay should be at least 4% of the employee's gross wages.

Understanding Statutory Holiday Pay

Next up let’s discuss Statutory holidays.

Statutory holidays, also known as public or stat holidays, are another important component of Canadian employment standards. 

On these designated days, most workers are entitled to have the day off with pay. This pay is often referred to as "holiday pay" or "statutory holiday pay."

The calculation for statutory holiday pay can vary by province or territory.  It is generally based on a percentage of the employee's earnings in a reference period before the holiday.

Here's a rundown of how stat pay generally works:

• Eligibility: Most employees are eligible for statutory holiday pay. However, some exceptions might apply depending on the province and the type of job. Always refer to your local employment standards to verify eligibility criteria.
• Pay Calculation: Statutory holiday pay is usually calculated as an average day's pay. This is often determined by dividing the employee's total wages (not including overtime) by the total number of days worked within a given reference period. 
• Work on a Statutory Holiday: If an employee works on a stat holiday, they may be entitled to premium pay (often 1.5 times the regular rate) in addition to their statutory holiday pay. 

Stat pay calculations and eligibility requirements can get quite complicated and are subject to change. For these reasons we’ve provided links below that will take you to the applicable provincial or territorial regulations.

Stat Holiday Pay Eligibility and Calculations by Province and Territory

• (see page 18)
• (see the fact sheet)

Conclusion

Navigating the rules and regulations as an employer can feel daunting.  We hope that this guide will help you to better manage your responsibilities as an employer.

If you’re looking for some help and want to outsource your finance department and your payroll, drop us a line and let’s discuss how we may be able to assist!