Vacation Pay on Canadian Pay Stubs
Prepared by Paystub Pilot
Payroll and tax research
Checked against provincial employment standards legislation current as of September 2026, including PEI's new Employment Standards Act (in force June 30, 2026).
Every province sets a minimum vacation pay rate, most start at 4% and step up to 6% after a set number of years, and most expect the amount to be visible on the pay statement. Find the rate for each jurisdiction, what counts as vacationable wages, and how to show it on a stub whether you pay it out every cheque or bank it.
The rates by jurisdiction
Vacation pay is a percentage of vacationable wages, and the percentage is set by employment standards law in the province where the employee works. It is one of the lines a Canadian pay stub should make easy to audit. The percentages line up with the weeks of vacation the same law grants: two weeks is 2/52 of a year's pay, which rounds to 4%; three weeks is 6%; four weeks is 8%. Saskatchewan grants three weeks from the start, so its rate is 3/52, and it does not round.
| Jurisdiction | Starting rate | Higher rate | After |
|---|---|---|---|
| Ontario | 4% | 6% | 5 years |
| British Columbia | 4% | 6% | 5 years |
| Alberta | 4% | 6% | 5 years |
| Manitoba | 4% | 6% | 5 years |
| Saskatchewan | 3/52 (5.77%) | 4/52 (7.69%) | 10 years |
| Quebec | 4% | 6% | 3 years |
| New Brunswick | 4% | 6% | 8 years |
| Nova Scotia | 4% | 6% | 8 years |
| Prince Edward Island | 4% | 6% | 5 years (8 before June 30, 2026) |
| Newfoundland and Labrador | 4% | 6% | 15 years |
| Yukon | 4% | — | no increase |
| Northwest Territories | 4% | 6% | 6 years |
| Nunavut | 4% | 6% | 6 years |
| Federal (Canada Labour Code) | 4% | 6%, then 8% | 5 years, then 10 |
Small employers often miss two details. The years are counted from the employee's start date with the same employer, not from the start of the calendar year, so the rate can change mid-year and the stub for that period should reflect the new rate. And these are floors: an employment contract or collective agreement can set a higher rate, and once it does, that higher rate is what the province enforces.
What the percentage applies to
Vacationable wages are broadly everything the employee earned for working, which is wider than base pay. In most provinces regular wages, overtime, commissions, and non-discretionary bonuses tied to hours or production are in. Vacation pay itself is out (it is not paid on vacation pay), and so are discretionary gifts, expense reimbursements, tips in most provinces, and severance. Ontario's definition of wages in section 1 of the ESA is the reference most provinces resemble; Quebec's uses gross wages including commissions and overtime.
Alberta and Manitoba are the exceptions. Alberta's vacation pay is based on wages paid for work, and the province's rules leave out overtime pay, general holiday pay, termination pay, unearned bonuses, tips, and expenses and allowances. Manitoba's is based on gross wages, which include general holiday pay and bonuses tied to productivity but not overtime wages or wages in lieu of notice. In both provinces, overtime earns no vacation pay.
For a stub generator this means the vacation pay line is computed on regular pay plus overtime plus commissions (without the overtime in Alberta and Manitoba), and a discretionary bonus entered on the same stub is left out of the base. If a bonus is contractual, add it to the vacationable amount by hand.
Paid out or banked
There are two lawful ways to handle vacation pay, and the stub looks different under each.
Paid out on every cheque. The employer adds the percentage to each pay period as its own earnings line, so the employee's vacation is unpaid time off later. Ontario allows this with the employee's written agreement and, when it is done, requires the vacation pay to be shown separately on the wage statement. Alberta requires earnings to be itemized, including vacation pay. British Columbia's employment standards guidance says vacation pay should be identified on the wage statement. This is the usual arrangement for part-time, casual, and hourly staff. On the stub it is an earnings row, "Vacation Pay (4%)", included in gross pay and subject to the normal CPP, EI, QPP, and QPIP limits and income tax deductions.
Banked and paid when vacation is taken. The employer accrues the percentage each period and pays it out when the employee takes vacation or when employment ends. Nothing is added to the current cheque, so gross pay is unchanged. Most provinces do not require the running balance on the statement, but the accrual is the only number the employee can check against their eventual vacation cheque, and it is exactly what an employment standards officer asks for in a dispute. Showing it as a memo line, outside the earnings total, keeps the stub honest without inflating gross. Paystub Pilot's Canadian stubs offer both treatments: pick the rate and whether it is paid or accrued, and the line renders accordingly.
Whichever method is used, the accrued or paid amounts have to reconcile to the employee's vacation entitlement at year end. An employee who has been paid 4% on every cheque has no vacation pay owing when they take their two weeks, and an employee whose pay was banked is owed the full accrual, on the regular pay day, before the vacation starts in most provinces.
Termination and the final stub
Every province requires unused vacation pay to be paid out on termination, and it appears on the final statement as its own line. The amount is the accrued balance for the current vacation year plus any untaken vacation pay carried from a prior year. It is also insurable earnings for the Record of Employment, reported in Block 17A, so the final stub and the ROE should show the same figure. Employers who paid vacation pay out on every cheque have no balance to pay and nothing to report in Block 17A.
Common mistakes
Applying the rate to net pay instead of gross understates vacation pay. Forgetting to step the rate up on the anniversary underpays every cheque after it. Leaving commissions out of the base underpays every cheque that has them, and so does leaving out overtime anywhere but Alberta and Manitoba. And treating the paid-out line as non-taxable is wrong in every jurisdiction: it is wages, and the deductions follow.
A stub that carries the vacation rate, the treatment, and the resulting amount each period makes each of these visible before it becomes a claim.