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Vacation pay for salaried employees in Canada is total wages earned in the year multiplied by the vacation rate: 4% after one year of employment and 6% after five years in most provinces, including BC, Ontario, and Alberta. On a $75,000 salary that is $3,000 at 4% or $4,500 at 6%. The pay is typically built into regular salary payments, with the entitlement being the paid time off itself.
At a Glance
Every employee in Canada is entitled to paid vacation time, and calculating vacation pay for a salaried employee means knowing two things: the minimum entitlement set by your province's employment standards legislation, and how the percentage formula applies to an annual salary.
This 2026 guide covers the minimums for every province and territory, with worked examples for British Columbia, Ontario, Alberta and Quebec, the BC rule that pays vacation pay on vacation pay, Saskatchewan's higher minimums, and exactly what to pay out when an employee leaves.
The Basic Vacation Pay Formula
Vacation Pay = Total Wages Earned in the Year × Vacation Pay Rate
For most provinces: 4% after 1 year of employment, 6% after 5 years. Saskatchewan starts higher at 5.77%.
For a salaried employee earning $60,000/year:
- At 4%: $60,000 × 0.04 = $2,400 vacation pay
- At 6%: $60,000 × 0.06 = $3,600 vacation pay
Vacation Entitlements by Province and Territory
| Jurisdiction | Starting Minimum | Increase | Notes |
|---|---|---|---|
| British Columbia | 2 weeks (4%) | 3 weeks (6%) after 5 years | Vacation pay already paid counts as vacationable wages |
| Alberta | 2 weeks (4%) | 3 weeks (6%) after 5 years | Wage base excludes overtime and general holiday pay |
| Saskatchewan | 3 weeks (5.77%) | 4 weeks (7.69%) after 10 years | Highest starting minimum in Canada (3/52 and 4/52 of wages) |
| Manitoba | 2 weeks (4%) | 3 weeks (6%) after 5 years | |
| Ontario | 2 weeks (4%) | 3 weeks (6%) after 5 years | |
| Quebec | 2 weeks (4%) | 3 weeks (6%) after 3 years | 1 day per completed month in the first year |
| New Brunswick | 2 weeks (4%) | 3 weeks (6%) after 8 years | |
| Nova Scotia | 2 weeks (4%) | 3 weeks after 8 years | The 6% pay rate starts earlier, with wages from the 8th year of service |
| Prince Edward Island | 2 weeks (4%) | 3 weeks (6%) past 5 years | Lowered from the old 8-year threshold; many summaries are outdated |
| Newfoundland and Labrador | 2 weeks (4%) | 3 weeks (6%) after 15 years | Longest threshold in Canada |
| Yukon | 2 weeks (4%) | No automatic increase | |
| Northwest Territories and Nunavut | 2 weeks (4%) | 3 weeks after 6 years | 6% applies to wages from year 6, once 5 years are completed |
| Federal (Canada Labour Code) | 2 weeks (4%) | 3 weeks (6%) after 5 years | 4 weeks (8%) after 10 years |
These are minimum entitlements. Employment contracts and collective agreements can provide more generous vacation, and many employers do, particularly for senior employees. They can never provide less.
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How Vacation Pay Works for Salaried Employees in BC
Under BC's Employment Standards Act, salaried employees earn vacation pay at a rate of 4% of total wages after completing one year of employment, increasing to 6% after five consecutive years with the same employer.
For salaried employees, "total wages" includes the base salary plus any overtime, statutory holiday pay, bonuses that are considered wages, and commissions. It does not include expense reimbursements or non-wage benefits.
Worked Example, BC Salaried Employee
Employee details: Annual salary of $75,000, employed for 3 years in BC.
- Vacation pay rate: 4% (less than 5 years of service)
- Vacation pay entitlement: $75,000 × 0.04 = $3,000
- Vacation time: 2 weeks (10 business days)
If this employee is paid bi-weekly at $2,884.62 per pay period ($75,000 ÷ 26), their regular pay during vacation weeks will equal their normal pay. The $3,000 vacation pay is built into their regular salary payments.
After 5 years of service:
- Vacation pay: $75,000 × 0.06 = $4,500
- Vacation time: 3 weeks (15 business days)
Vacation pay on vacation pay in BC
BC has a quirk that surprises many employers: because "total wages" under the Act includes vacation pay that has already been paid, the vacation pay an employee received last year forms part of the wages you calculate this year's vacation pay on. In effect, BC pays vacation pay on vacation pay.
Worked Example, Vacation Pay on Vacation Pay
A BC employee earned $75,000 in salary and received $3,000 of vacation pay during the same vacation year. Their vacationable wages are $78,000, not $75,000:
- $78,000 × 0.04 = $3,120 vacation pay owing, $120 more than a calculation that ignores the rule
Payroll that calculates vacation pay on salary alone slowly underpays BC employees, and the shortfall surfaces in an Employment Standards complaint or an audit. Definitions of vacationable earnings differ by province, so confirm the rule for each jurisdiction you pay employees in.
How Vacation Pay Works for Salaried Employees in Ontario
Ontario's Employment Standards Act, 2000 provides the same minimum entitlements as BC: 4% / 2 weeks after one year, and 6% / 3 weeks after five years. The calculation method is identical.
Worked Example, Ontario Salaried Employee
Employee details: Annual salary of $85,000, employed for 7 years in Ontario.
- Vacation pay rate: 6% (more than 5 years of service)
- Vacation pay entitlement: $85,000 × 0.06 = $5,100
- Vacation time: 3 weeks (15 business days)
How Vacation Pay Differs in Alberta
Alberta follows the same structure: 4% after one year, 6% after five years. However, Alberta's Employment Standards Code calculates vacation pay on a narrower wage base than BC or Ontario: overtime pay and general holiday pay are excluded, so an Alberta employee's vacation pay is a percentage of regular wages only.
Quebec's Different Rules
Quebec stands apart from other provinces in two ways. First, the increased vacation entitlement kicks in after three years of continuous service (not five). Second, employees in their first year of employment earn one day of vacation per completed month of service, up to a maximum of two weeks.
| Years of Service | Vacation Time | Vacation Pay Rate |
|---|---|---|
| Less than 1 year | 1 day per month worked | 4% |
| 1 to less than 3 years | 2 weeks | 4% |
| 3 years or more | 3 weeks | 6% |
Saskatchewan's Higher Minimums
Saskatchewan is the national outlier. Employees start at three weeks of vacation with vacation pay of 5.77% of wages (3/52), and after 10 years with the same employer the entitlement rises to four weeks and 7.69% (4/52). A payroll set up with the standard 4% default underpays every Saskatchewan employee from day one, so double-check the accrual rate if you hire in the province.
Vacation Payout on Termination
When a salaried employee is terminated (with or without cause) or resigns, the employer must pay out any accrued but unused vacation pay. This is calculated on all wages earned since the employee's last vacation entitlement year.
Worked Example, Vacation Payout on Termination
Employee details: Annual salary of $60,000, employed for 2 years in Ontario, terminated on September 30 with no vacation taken in the current year.
- Wages earned in the current vacation year (Jan 1 - Sep 30): $60,000 × (9/12) = $45,000
- Vacation pay rate: 4%
- Vacation pay owing: $45,000 × 0.04 = $1,800
This amount must be paid as part of the employee's final pay.
How Payroll Software Handles Vacation Accruals
Everything above is manageable for one employee in one province. It stops being manageable when you have employees in BC and Ontario, an anniversary that flips someone from 4% to 6% mid-year, and a Saskatchewan hire accruing at 5.77%. This is the single most common payroll error we see in small business books: the rate never gets bumped at the five-year mark, or vacationable earnings are calculated on base salary alone.
To get the exact figure for any employee first, our vacation pay calculator covers every province and territory. Payroll software applies each employee's provincial rate and tenure automatically. Wagepoint, the Canadian payroll platform we recommend most often, tracks vacation accrual as a percentage or a time bank per employee, applies it on every pay run, and includes accrued vacation in the final pay when someone leaves. New customers who sign up through our referral link receive a $150 gift card after running their first payroll; the details are on our Wagepoint deal page and the full assessment is in our Wagepoint review. To compare it against Payworks, Rise and QuickBooks Payroll, see our guide to the best payroll software in Canada, and if you are onboarding the employee who triggered this question, our TD1 form guide covers the other half of the paperwork. Employers in Ontario and BC should also check whether Employer Health Tax applies to their payroll.
Common Questions About Vacation Pay for Salaried Employees
- Is vacation pay calculated on gross or net salary?
- Vacation pay is always calculated on gross wages (before deductions). The resulting vacation pay amount is then subject to normal income tax, CPP, and EI deductions when paid out.
- How does vacation pay work for salaried employees versus hourly employees?
- The calculation method is the same, both use the percentage-of-wages formula. The key difference is that salaried employees receive the same pay during their vacation weeks as during working weeks, while hourly employees receive a separate vacation pay amount (since they do not earn hourly wages while on vacation).
- When does vacation pay increase from 4% to 6%?
- In most provinces, the increase occurs after five consecutive years of service with the same employer. In Quebec, the threshold is three years; in PEI, service past five years; in New Brunswick, more than eight; in Nova Scotia, the 6% rate starts with wages from the 8th year of service; in Newfoundland and Labrador it is fifteen. For federally regulated employees under the Canada Labour Code, vacation pay increases to 6% after five years and 8% after ten years.
Frequently Asked Questions
What is the standard vacation pay rate in BC?
In British Columbia, the standard vacation pay rate is 4% of gross wages for employees with less than 5 consecutive years of employment. After 5 years, it increases to 6%.
Is vacation pay paid on vacation pay?
In BC, yes. "Total wages" under BC's Employment Standards Act includes vacation pay already paid, so vacation pay received during the year is part of the wages the next vacation pay calculation is based on. Other provinces define vacationable earnings differently, so the compounding does not automatically apply outside BC.
What is the vacation pay rate in Saskatchewan?
Saskatchewan employees earn vacation pay at 5.77% of wages (equivalent to 3 weeks out of 52) from the start of employment, rising to 7.69% (4 weeks out of 52) after 10 years with the same employer. It is the highest starting minimum in Canada.
Does vacation pay accrue on overtime pay?
In most provinces yes, including BC and Ontario, where vacation pay is calculated on gross wages that include overtime pay, statutory holiday pay, and commissions. Alberta is the notable exception: its vacation pay base excludes overtime and general holiday pay. Discretionary bonuses and expense reimbursements are generally excluded everywhere.
Can unused vacation pay be forfeited?
Generally, no. Vacation time might be subject to "use it or lose it" policies depending on the province (though many require it to be taken), but earned vacation pay is wages that belong to the employee. It must be paid out if not taken as time off.
How is vacation pay taxed?
Vacation pay is taxed as employment income. It is subject to the same deductions as regular salary, including Federal and Provincial income tax, CPP (Canada Pension Plan), and EI (Employment Insurance).
Do part-time salaried employees get vacation pay?
Yes. Part-time employees are entitled to the same vacation pay rates (4% or 6%) as full-time employees. The dollar amount will be lower simply because their gross wages are lower.
What if my employment contract says "no vacation pay"?
Employment standards legislation sets the minimums. An employment contract cannot provide less than the legal minimum. A clause stating "no vacation pay" would likely be void, and the statutory minimum (e.g., 4%) would apply.
Sebastien ProstCPA, Ex-CRA
Licensed CPA with 10+ years of experience, including work with the Canada Revenue Agency. Founder of LedgerLogic, a cloud accounting firm serving Canadian SMEs. Xero Certified Advisor.
