Ontario employment standards
Ontario Vacation Pay: 4% and 6% Rules Explained
Ontario’s general minimum vacation pay is 4% of gross wages for employees with less than five years of employment and 6% when the five-year threshold applies.
Quick answer
Apply the percentage determined by the employee’s period of employment at the relevant entitlement-year or stub-period threshold.
Vacation pay = gross wages excluding vacation pay × 4% or 6%For $50,000 in eligible wages, the general minimum estimate is $2,000 at 4% or $3,000 at 6%.
Vacation time and vacation pay are different entitlements
Employees with less than five years of employment generally earn two weeks of vacation time after completing each 12-month vacation entitlement year. Employees with five or more years generally earn three weeks.
Vacation pay accrues as wages are earned. Ontario notes that an employee who works even one hour may earn vacation pay even though vacation time is generally earned after completing an entitlement year or applicable stub period.
The general 4% and 6% rules
| Period of employment | Minimum vacation time | Minimum vacation pay |
|---|---|---|
| Less than five years | Two weeks after each completed entitlement year | 4% of gross wages excluding vacation pay |
| Five years or more | Three weeks after each completed entitlement year | 6% of gross wages excluding vacation pay |
A contract or collective agreement may provide a greater right or benefit.
How the five-year threshold works
Ontario states that an employee who reaches five years of employment partway through a vacation entitlement year or stub period receives 6% of all wages, excluding vacation pay, earned during that entire entitlement year or stub period.
Use the period-end service status
Do not automatically split one completed entitlement year into 4% before the anniversary and 6% after it when the employee reaches five years during that period.
Use the ESA wage base, not take-home pay
The general calculation uses gross wages earned in the vacation entitlement year or stub period, excluding vacation pay itself. Gross wages are measured before payroll deductions.
The legal wage base is not necessarily identical to taxable income or every amount appearing on a pay statement. Special arrangements, exclusions and industry rules require separate review.
Worked examples
Less than five years
$40,000 × 4%
$1,600 vacation payFive years or more
$40,000 × 6%
$2,400 vacation payWhen vacation pay is paid
In most cases, vacation pay for a completed entitlement year or stub period is paid in a lump sum before the employee takes the vacation time. Ontario lists exceptions, including an electronic or written agreement to pay vacation pay on each pay cheque as it accrues. When paid each cheque, it must be shown separately from other amounts.
What the WageWise calculator supports
The calculator estimates the general 4% or 6% minimum for one employer and a completed vacation entitlement year or stub period. Enter wages excluding vacation pay itself. The calculator does not support unfinished-year projections, construction-industry rules, multi-employer plans, exempt occupations, termination calculations or contractual benefits above the ESA minimum.
Estimate a supported Ontario vacation-pay amount
Select the service threshold and enter eligible gross wages for the completed period.
Open Ontario Vacation Pay CalculatorFrequently asked questions
Is vacation time the same as vacation pay?
No. Vacation time is time away from work, while vacation pay is a percentage of wages. The two entitlements are connected but calculated and earned differently.
What happens if five years is reached during the entitlement year?
Ontario states that 6% applies to all wages earned in that entitlement year or stub period when the employee reaches five years during it.
Is vacation pay included in the wage base?
No. Ontario’s formula uses gross wages excluding vacation pay itself.
Can an employer pay vacation pay on each cheque?
Yes, when the employee agrees electronically or in writing and the amount is reported separately as required.
Official sources
- Ontario: Vacation
- Ontario ESA Policy and Interpretation Manual: Vacation with pay
- Ontario: Industries and jobs with exemptions or special rules
This guide is informational and does not replace the ESA, its regulations or advice about a specific situation. See the calculation methodology and sources policy.