Canadian Vacation Pay: Questions Answered

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How vacation pay really works across Canada in 2026 — the difference between the money and the time off, and what you're owed when you leave.

Frequently asked questions

What's the difference between vacation time and vacation pay?

Vacation time is the weeks off; vacation pay is the money (a percentage of wages) you're paid for it. Both are set by statute and can differ if you leave before taking the time.

Why is the federal rate different from Ontario?

The Canada Labour Code adds an 8% / 10-year tier that Ontario doesn't have. Ontario tops out at 6% (5+ years).

Do other provinces use 4%/6%?

Most use 4% then 6%, but thresholds and extra tiers vary by province. Check your provincial standards if you're outside Ontario or the federal sector.

Is vacation pay taxable?

Yes, vacation pay is taxable employment income like your regular wages.

Does vacation pay accrue on overtime?

Generally vacation pay is calculated on wages including most earnings; the exact inclusions depend on the jurisdiction's definition of wages.

Can my employer refuse to pay out unused vacation?

No — accrued vacation pay is owed on termination as part of your final pay.