Vacation Pay in Ontario Explained: 4%, 6%, Examples, Final Pay, and Employer Mistakes

Last reviewed: May 2026 Jurisdiction: Ontario Applies to: Most provincially regulated Ontario employers, subject to exemptions and special rules. This 2026 employer guide reflects Ontario ESA vacation pay rules as reviewed in May 2026, including the 4% and 6% vacation pay rules, the five-year threshold, final-pay timing, and the June 21, 2024 vacation pay agreement clarification. Vacation pay sounds simple. Then real workplace situations make it complicated. An employee works part-time. A salaried employee earns commission. A nonprofit pays vacation pay on every paycheque. A manager forgets that an employee reached five years of service. A worker resigns after only a few weeks. A long-service employee is terminated and final pay has to be calculated quickly. These are the moments where Ontario vacation pay mistakes happen. Under Ontario’s Employment Standards Act, 2000 , vacation pay is a minimum employment standard. Employers can usually provide more generous vacation benefits, but they generally cannot provide less than the ESA minimum. This guide explains Ontario vacation pay in plain English for employers, payroll teams, HR managers, small businesses, nonprofits, charities, and anyone responsible for employee policy manuals. It is not written as a legal textbook. It is a practical employer guide. By the end, you should understand: how Ontario vacation pay works the difference between vacation time and vacation pay when 4% applies when 6% applies what happens when an employee reaches five years of service what wages may need to be included what amounts are excluded how vacation pay works when employment ends common employer mistakes what should be updated in your Ontario employee policy manual This article provides general information only and is not legal advice. Employers dealing with a specific payroll dispute, termination, vacation pay complaint, unionized workplace, employment contract issue, or complex compensation arrangement should get legal advice. Ontario vacation pay is generally calculated as a percentage of an employee’s gross wages, excluding vacation pay. For employees with less than five years of employment , vacation pay is generally at least 4% of gross wages earned in the vacation entitlement year or stub period. For employees with five or more years of employment , vacation pay is generally at least 6% of gross wages earned in the vacation entitlement year or stub period. Employee’s period of employment Minimum vacation time Minimum vacation pay Less than 5 years 2 weeks 4% of gross wages, excluding vacation pay 5 years or more 3 weeks 6% of gross wages, excluding vacation pay Important note: Vacation time is generally earned after completing a vacation entitlement year. An employee becomes entitled to three weeks of vacation time for the vacation entitlement year in which they reach five years of employment, and for each completed vacation entitlement year after that. Vacation pay, however, is earned as wages are earned. A simple way to remember it: Vacation time is the time away from work. Vacation pay is the money earned for vacation. They are connected, but they are not the same thing. Many employer mistakes begin with confusing vacation time and vacation pay. Vacation time means the employee’s time away from work. Vacation pay means the money the employee earns for vacation. An employee may earn vacation pay even if they do not complete a full vacation entitlement year. Ontario’s ESA vacation guide explains that even if an employee works only one hour, the employee is still entitled to vacation pay of at least 4% or 6%, depending on length of employment. Example An employee works for only two weeks and then resigns. The employer may think: “They did not stay long enough to get vacation.” That may confuse vacation time with vacation pay. The employee may not have completed a full vacation entitlement year, but they still earned wages. Because vacation pay is earned as wages are earned, the employer should review whether vacation pay is owed on those wages. Employer takeaway Do not assume vacation pay is owed only after one full year. Vacation time and vacation pay should be tracked carefully from the start of employment. Ontario’s ESA minimum vacation pay percentages are: 4% for employees with less than five years of employment 6% for employees with five or more years of employment The percentage is applied to gross wages, excluding vacation pay, earned during the vacation entitlement year or stub period. Example: 4% vacation pay An employee has worked for the employer for two years. They earned $42,000 in gross wages during the vacation entitlement year. Minimum vacation pay: $42,000 × 4% = $1,680 Example: 6% vacation pay An employee has worked for the employer for seven years. They earned $52,000 in gross wages during the vacation entitlement year. Minimum vacation pay: $52,000 × 6% = $3,120 Employer takeaway If your payroll system does not automatically flag employees approachi