Think you’ve got a handle on vacation pay in Canada?
Vacation pay is one of the most confusing areas of employment law, yet they’re often overlooked until an issue arises. When that happens, it’s rarely straightforward, and the consequences can be steep. Even small mistakes can pile up over time, creating massive liabilities for employers.
To help you steer clear of trouble, let’s break down five of the most common misconceptions about vacation pay in Canada and why it's so important to get right.
Myth #1: Vacation Pay Only Applies to Base Salary
This one trips up employers all the time.
It’s easy to assume that vacation pay is just a percentage of an employee’s base salary. But in most provinces, vacation pay applies to all regular earnings—including commissions and non-discretionary bonuses.
Here’s why that matters: If your team gets bonuses or commissions and you’re not including those amounts in your vacation pay calculations, you could be setting yourself up for a hefty liability.
For instance, a recent class-action lawsuit against RBC Dominion Securities is seeking $800 million in damages, claiming that the company didn’t pay vacation and holiday pay on commissions for its employees.
Bottom line? This isn’t just a small oversight—it can lead to massive financial consequences.
Myth #2: Unused Vacation Days Expire
The whole “use it or lose it” idea is a classic myth.
Sure, it’s common for companies to remind employees to take their vacation before the end of the year. But here’s the thing: vacation time is mandatory, and it’s the employer’s responsibility to make sure employees take their minimum required time off.
In most provinces, employers are legally required to schedule vacation time for their employees if it isn’t used. That means if someone hasn’t taken their vacation, you can’t just let those days disappear.
Myth #3: Employees Are Responsible for Tracking Their Own Vacation
Nope. That responsibility falls squarely on the employer.
Employment standards laws across Canada require employers to track each employee’s vacation time and pay. This includes keeping accurate records and providing employees with clear statements of their vacation entitlements.
Failing to do so can come back to bite you.
For example, in one Ontario case, an employer was ordered to pay an employee eight years’ worth of vacation pay because they didn’t keep proper records. The court ruled that the employee couldn’t have known how much was owed without those records.
Myth #4: Employees Can Decide When to Take Vacation
While employees often get input, the ultimate decision lies with the employer.
Under Canadian law, employers have the right to schedule vacation time as it suits the needs of the business—as long as they’re reasonable about it.
The only real rule? Vacation must be scheduled in blocks of at least one week to meet minimum standards. So, sprinkling random days off here and there doesn’t cut it.
Myth #5: Two Weeks of Vacation Is the Standard
This one used to be true, but things have changed.
In most provinces, the minimum vacation entitlement starts at two weeks but increases after a few years of service. For example, employees in many provinces get three weeks after five years, and federally regulated employees earn four weeks after ten years.
Yet many employers still rely on outdated contract templates limiting employees to two weeks. That’s not just misleading—it could make those contracts unenforceable.
Takeaway
Vacation laws might seem simple, but they’re full of nuances that can trip up even the most experienced employers. By understanding these common misconceptions, you can avoid costly mistakes and make sure your business stays compliant.
Remember: when in doubt, consult an expert!
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