Canada Vacation Pay 2026: The 4% / 6% / 8% Rules Explained
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In Canada, vacation pay is a percentage of your gross wages that you earn as you work — separate from the time off itself. This guide covers the Ontario and federal rates and what happens when you leave.
Ontario
- Under 5 years: 4% of gross wages (2 weeks' vacation).
- 5 years or more: 6% of gross wages (3 weeks).
Federally regulated
- After 1 year: 4% (2 weeks).
- After 5 consecutive years: 6% (3 weeks).
- After 10 consecutive years: 8% (4 weeks).
The 8% / 10-year tier is the headline difference between the federal Code and Ontario, which stops at 6%.
Worked example
Ontario, 3 years' service, $52,000 gross earned in the year: 4% × $52,000 = $2,080 vacation pay. At 6 years it would be 6% = $3,120.
Vacation pay when you leave
Because vacation pay accrues on every dollar you earn, any accrued vacation pay you haven't been paid must appear in your final pay — no matter whether you quit or were let go. It's on top of any termination or severance pay.
What it's calculated on
Vacation pay is a percentage of gross wages (before deductions), generally excluding vacation pay already paid out.
Frequently asked questions
How is vacation pay calculated in Ontario?
It's 4% of your gross wages if you've been employed under 5 years (equivalent to 2 weeks' vacation), and 6% once you reach 5 years (3 weeks). On leaving, any vacation pay you've accrued but not taken must be paid out.
What is the federal vacation pay rate?
Under the Canada Labour Code it's 4% after 1 year (2 weeks), 6% after 5 consecutive years (3 weeks), and 8% after 10 consecutive years (4 weeks). The 8% tier is the main difference from Ontario, which caps at 6%.
Do I get vacation pay when I quit or am fired?
Yes. Vacation pay accrues on your wages regardless of how the job ends, so any accrued but unpaid vacation pay must be included in your final pay.
Is vacation pay calculated on gross or net wages?
On gross wages — your earnings before deductions — and generally excluding vacation pay already paid. Overtime and most wages count toward the base it's calculated on.
Does vacation pay come on top of severance?
Yes. Vacation pay is a separate entitlement from termination and severance pay, and all accrued vacation pay is owed in your final settlement.