Including overtime pay when calculating vacation pay | When vacation entitlement begins | Retaining vacation pay records
Including overtime pay when calculating vacation pay
QUESTION: Is overtime pay automatically included when calculating the amount of vacation pay owing to an individual employee?
ANSWER: Under employment standards law, overtime pay is included when calculating vacation pay in all Canadian jurisdictions, except for the western provinces of Alberta and Manitoba.
Other common earnings to include when calculating vacation pay are regular wages, work-related bonuses, commissions, and statutory holiday pay (in some jurisdictions).
For more information on earnings included and excluded when calculating vacation pay, contact the applicable employment standards board.
Employment standards rules in most provinces and territories require that employers pay employees vacation pay of at least four per cent or six per cent of their vacationable earnings, depending on their length of employment.
For jurisdiction-specific requirements, payroll professionals are advised to refer to the applicable jurisdiction’s employment standards legislation or labour ministry website.
When vacation entitlement begins
QUESTION: Do employees begin to accumulate their entitlement to vacation pay on their first day of work or can we delay it until they pass a probationary period (for example, three or six months)?
ANSWER: In general, employment standards laws across Canada require that employees begin to accumulate vacation pay entitlement from the time they begin working for an employer, meaning that they do not have to serve a probationary period before accumulating vacation entitlement.
It is important to point out that in British Columbia, employees begin to accumulate vacation from the first day of employment if they are employed for more than five days.
Employees who are employed for five or fewer days are not entitled to vacation pay.
A similar requirement applies in Newfoundland and Labrador.
Retaining vacation pay records
QUESTION: How long do we have to keep records related to an employee’s vacation pay?
ANSWER: Since vacation pay is subject to source deductions for the Canada/Quebec Pension Plan, employment insurance, Quebec Parental Insurance Plan, and income tax, the Canada Revenue Agency and Revenu Québec (for employers with Quebec payrolls) require employers to keep records on vacation pay for at least six years from the end of the last tax year to which they apply.
Employers may apply for permission to destroy records before that time. Employers must also comply with employment standards rules for keeping records related to vacation pay.
The following table sets out the minimum retention period for vacation pay records under employment standards laws across the country:
|
Jurisdiction |
Retention period for vacation records |
|
Canada Labour Code |
Three years after work is performed |
|
Alberta |
Three years from the date the record is made |
|
British Columbia |
Two years after termination of employment |
|
Manitoba |
Three years after the record is made |
|
New Brunswick |
36 months after work is performed |
|
Newfoundland and Labrador |
Four years from the date the last entry is made for the employee |
|
Northwest Territories |
Two years after the record is made |
|
Nova Scotia |
36 months after work is performed |
|
Nunavut |
Two years after the record is made |
|
Ontario |
Five years after the record is made |
|
Prince Edward Island |
36 months after work is performed |
|
Quebec |
Three years after work is performed |
|
Saskatchewan |
Employers must keep records covering the most recent five years of employment for each employee. If an employee’s employment terminates, employers must keep these records for an additional two years after the date employment ends |
|
Yukon |
For 12 months after work is performed |
