In Ontario, all employees are entitled to vacation pay and vacation time, unless exempt under the ESA. Per section 35.2 of the ESA, vacation pay must be at least:
- 4% per cent of the gross wages (excluding any vacation pay) earned in the 12-month vacation entitlement year or stub period (where that applies) for employees with less than five years of employment; or
- b) 6% of the gross wages (excluding any vacation pay) earned in the 12-month vacation entitlement year or stub period (where that applies) for employees with five or more years of employment.
A greater benefit or entitlement may be provided under an employee’s employment contract or collective agreement, but not less.
Vacation pay is calculated as a proportion of the “wages” an employee receives. The ESA Part I, s. 1(1):, defines “wages” to mean monetary remuneration payable by an employer to an employee under the terms of an employment contract, oral or written, express or implied, but do not include any sums paid as gifts or bonuses that are dependent on the discretion of the employer and that are not related to hours, production or efficiency. [emphasis added].
Where a bonus is predictable and an expected element of regular pay such as commission payments, safety compliance or performance bonus pay or profit-sharing bonus allocations, and not truly dependant on an employer’s discretion, it ought to be included in the vacation pay calculation of wages.