I have a question about an employee's vacation pay for a person who is on salary. My understanding is that under the ESA in Ontario, all employees are eligible to earn 4% accrual vacation pay which is taken from their wages. For a salaried employee though, if they decide to go take their two week vacation, would I have to pay out the vacation pay equivalent to a business week on top of their normal salary or can I deduct from their normal salary for those business weeks and replace it with vacation pay? Please let me know.

If the period of employment is less than 5 years, then vacation pay must equal at least 4% of wages/salary. If an employee has 5 years of employment or more, then at least 6% vacation pay is owed. As such, the salary maintained during a period of vacation must equal at least 4% (or 6%) of wages/salary earned. For clarity, vacation pay is not “taken” from wages” nor would you “deduct” from salary in order to satisfy the obligation to provide vacation pay.

Vacation entitlements are among the most complex issues arising under the ESA and, frankly, it is an issue which employers frequently get wrong. The format of this website allows for a basic answer, which we provided, but we recommend that you seek legal advice in respect of your vacation calculation methodology in order to avoid any unpleasant surprises in the event an employee files a complaint/claim. Consultations with our Firm are available.