Vacationable Earnings Explained for Canadian Employees
Not all earnings are treated equally when your vacation pay is calculated.
Written and reviewed by Rocco Clayfield, Founder & DirectorLast reviewed
Short answer
Vacationable earnings are the earnings on which your employer calculates vacation pay. In most Canadian provinces, regular wages are always included. Whether overtime pay, commissions, bonuses, or other amounts count as vacationable depends on your province's employment standards legislation and the terms of your employment contract. The rules vary, and the exact list matters because vacation pay is a percentage of vacationable earnings.
Vacation pay sounds simple: your employer owes you a percentage of your pay as vacation. What trips people up is the word "pay." Not every dollar you earn is automatically included in the base that vacation pay is calculated on.
The earnings that qualify as vacationable earnings are defined by provincial employment standards legislation. Some provinces have a broad definition that pulls in overtime, commissions, and bonuses. Others are narrower. Your employment contract or collective agreement may also provide a more generous definition than the minimum required by law.
What this page helps you check
- Whether your vacation pay percentage matches at least the provincial minimum for your province
- Whether overtime earnings, commissions, and bonuses are being included or excluded from your vacationable earnings base
- Whether a recent bonus or large commission payment resulted in a corresponding increase in vacation pay
- Whether your pay stub shows vacation pay accruing each period or being paid as a lump sum
- Whether your year-to-date vacation pay total is consistent with your vacationable earnings and the stated percentage
- Whether any pay types you receive regularly are being treated consistently each period
- Whether your employment contract promises a higher vacation pay entitlement than the provincial minimum
What vacationable earnings are
Vacationable earnings are the pool of earnings from which vacation pay is calculated. Your employer takes a percentage of this pool to arrive at the vacation pay amount you are owed.
The starting point for that pool is set by your province's employment standards legislation. Most statutes define vacationable earnings to include at least regular wages or salary. Beyond that, the definition differs across provinces.
Which pay types are commonly included
In many provinces, overtime pay, commissions, and certain types of bonuses are included in vacationable earnings. The reasoning is that these amounts represent regular or semi-regular compensation for work performed.
However, some pay types are commonly excluded, such as discretionary bonuses, tips (in some jurisdictions), expense reimbursements, and certain allowances. The treatment of each pay type is set out in provincial legislation and, sometimes, by case law or employment standards interpretation bulletins. Your province's employment standards website is the best source for a definitive list.
Provincial variation
Vacation pay rules are one of the most variable areas of Canadian employment law. The minimum vacation entitlement (for example, two or three weeks per year after certain lengths of service) and the percentage of vacationable earnings (for example, four or six percent) differ by province. The definition of vacationable earnings also differs.
If you work in a province where commissions make up a large portion of your pay, the question of whether commissions are vacationable can significantly affect your vacation pay dollar amounts. It is worth checking your province's employment standards rules directly.
How vacation pay appears on your stub
Vacation pay can appear on your stub in two main ways. Some employers accrue vacation pay each period, showing it as a running balance. Others pay it out periodically or when you take vacation. A small number of employers pay it as a percentage added to each pay cheque, particularly for employees on short-term or seasonal contracts.
If you are unsure how vacation pay is being handled on your stubs, ask payroll to explain the method being used. Both accrual and pay-per-period approaches are permissible in most provinces, but the method affects when and how you see the money.
When a contract or agreement changes the picture
Your employment contract or a collective agreement can expand the definition of vacationable earnings beyond the provincial minimum. If your contract specifies that bonuses or other amounts are vacationable, that contractual term applies even if the provincial legislation does not require it.
The reverse is also worth knowing: a contract cannot legally reduce your vacation pay below the provincial minimum. If you are unsure whether your contract provides more than the statutory minimum, comparing the two is worthwhile.
Province & territory note
Quebec works differently
Common red flags worth checking
These do not automatically mean there is an error. They are simply lines worth a closer look, or worth asking payroll to explain.
Commissions are excluded from vacation pay on a commission-heavy role
In many provinces, commissions are vacationable earnings. If you earn substantial commissions and vacation pay is calculated only on a base salary, this may be worth checking against your provincial employment standards rules.
A large annual bonus was paid but vacation pay did not change
Whether bonuses are vacationable depends on the province and on whether the bonus is discretionary or contractual. If you received a significant bonus, ask payroll whether it was treated as vacationable and under which rule if not.
Vacation pay percentage is below the provincial minimum
The minimum vacation pay percentage in Canada ranges from four percent upward depending on province and length of service. If the percentage on your stub looks lower than the minimum, that is worth confirming with your provincial employment standards office.
Vacation pay has not changed despite an income increase
If your regular pay increased and your vacation pay percentage stayed the same but the dollar amount did not increase proportionally, the vacationable earnings base may not have been updated correctly.
No vacation pay line on your stub
If you are a non-exempt employee and vacation pay is not shown anywhere on your stub or being accrued, ask payroll how vacation pay is being handled. Every eligible employee is entitled to vacation pay under their provincial employment standards legislation.
Accrued vacation balance does not increase after a bonus pay period
If your employer accrues vacation pay and a bonus period does not result in any change to the accrued balance, the bonus may have been excluded from vacationable earnings. Confirm with payroll whether this was intentional and under which rule.
Want this checked on your real pay stub?
Upload your pay stub or payroll document and get a plain-English breakdown with possible questions to ask payroll.
What to ask payroll or HR
Calm, specific questions get clearer answers. You can copy any of these, or build a full message with the Payroll Message Generator.
- “Can you confirm what pay types are included in my vacationable earnings base and which provincial rule or policy defines that list?”
- “Are commissions and overtime treated as vacationable earnings for my role?”
- “My recent bonus did not appear to increase my accrued vacation pay. Was it excluded from vacationable earnings, and if so, why?”
- “Can you confirm the vacation pay percentage being applied and whether it meets the current provincial minimum for my years of service?”
- “Is vacation pay being accrued each pay period or paid out on a different schedule? Where can I see the running balance?”
- “Does my employment contract provide a different or more generous vacationable earnings definition than the provincial minimum?”
Frequently asked questions
Is vacation pay calculated on overtime in Canada?
In many provinces, yes. Overtime pay is often included in the vacationable earnings base under provincial employment standards legislation. However, the specific rule varies by province. Check your provincial employment standards rules to confirm how overtime is treated where you work.
What is the minimum vacation pay percentage in Canada?
The minimum varies by province and typically increases with years of service. At the federal level and in many provinces, the baseline is four percent of vacationable earnings, equivalent to two weeks of vacation. Some provinces require a higher percentage or more weeks after a certain length of service. The CRA and provincial employment standards websites publish current minimums.
Can my employer pay vacation pay as a percentage added to each cheque?
In most provinces this is permitted for some categories of employees, such as those on temporary or seasonal contracts, where it would be impractical to schedule vacation. For permanent, ongoing employment, some provinces require vacation time to actually be taken. Ask your provincial employment standards office if you are unsure.
Do tips count as vacationable earnings?
The treatment of tips and gratuities as vacationable earnings varies by province. Some provinces have amended their legislation to address this. Check your province's current employment standards rules or ask your provincial employment standards office.
My contract says I get three weeks of vacation. Does that mean more pay?
Three weeks of vacation typically corresponds to a higher vacation pay percentage than two weeks. Your contract may specify the percentage directly, or it may be calculated based on your provincial rate for three weeks. Confirm the dollar calculation with payroll to ensure the correct percentage is being applied.
What if I leave my job before taking all my vacation?
On termination, employers are generally required to pay out any accrued but unused vacation pay. The rules on how this is calculated and when it must be paid vary by province. Your final pay statement or a separate vacation payout cheque should reflect this amount.
Can my employer reduce vacation pay below the provincial minimum in my contract?
No. Employment standards minimums are the floor, not the ceiling. A contract term that provides less than the provincial minimum is generally unenforceable to the extent it falls below the statutory minimum. Your employer must provide at least the minimum required by law.
How do I calculate what my vacation pay should be?
Multiply your vacationable earnings for the relevant period by the applicable percentage. For example, if the percentage is four percent and your vacationable earnings for the year were a certain amount, your vacation pay entitlement is four percent of that amount. Confirm with payroll what percentage applies to you and which earnings they are including in the base.
Official sources for this page
Every figure here is derived from these. Where a number matters to you, read it at the source — PayStub IQ Canada explains the rules, it does not set them.
- Vacation pay under the Canada Labour Code — Employment and Social Development Canada
- Your guide to the Employment Standards Act — Government of Ontario
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Helpful guidance, not advice
PayStub IQ Canada provides educational payroll explanations based on the information visible in your document. It does not provide legal, tax, accounting, payroll, CRA, Revenu Québec, or employment standards advice. For official decisions or corrections, contact your employer, payroll department, CRA, Revenu Québec, your provincial or territorial employment standards office, or a qualified professional.