Interpretation Guidelines Manual
British Columbia Employment Standards Act and Regulations

Employment Standards Act Part 7 - Annual Vacation

ESA Section 58 - Vacation pay

Contents:

Summary
Text of Legislation
Policy Interpretation
Related Information


Summary

This section explains the calculation and amount of vacation pay an employee is entitled to, when they are entitled to it, and how it is to be paid.
Text of Legislation

58. (1) An employer must pay an employee the following amount of vacation pay:
(a) after 5 calendar days of employment, at least 4% of the employee's total wages during the year of employment entitling the employee to the vacation pay;

(b) after 5 consecutive years of employment, at least 6% of the employee's total wages during the year of employment entitling the employee to the vacation pay.
(2) Vacation pay must be paid to an employee
(a) at least 7 days before the beginning of the employee's annual vacation, or

(b) on the employee's scheduled paydays, if
(i) agreed in writing by the employer and the employee, or

(ii) provided by the collective agreement.

(3) Any vacation pay an employee is entitled to when the employment terminates must be paid to the employee at the time set by section 18 for paying wages.


Policy Interpretation

Subsection (1)

Employees are entitled to vacation pay after completing 5 calendar days of employment, regardless of the number of hours worked during that period.
Example

Anisha is hired to work on Mondays and Tuesdays only. She works four hours on Monday and four hours on Tuesday and is terminated on Saturday. Anisha is entitled to vacation pay because she was employed for more than five calendar days.

Employees must receive at least 4% of their total wages for vacation pay until they have been employed for five consecutive years, at which time they must receive at least 6% vacation pay.

Vacation Pay

An employee is entitled to two weeks' vacation after completion of their first year of employment. The vacation time is to be taken during the second year of employment, with the vacation pay calculated as 4% of total wages earned in the first year. Paid vacation pay becomes part of total wages for the year it is paid. Vacation pay in subsequent years is based on 4% of the total wages in the previous year. After completion of five years of employment, the employee becomes entitled to three weeks' vacation, with 6% vacation pay based on total wages from the fifth year of employment. In following years, an employee’s vacation entitlement remains at three weeks' vacation with 6% vacation pay, based on the previous year’s total wages.

Total Wages

The wages used for calculating vacation pay includes all money paid by an employer to an employee which meets the definition of “wages” under s.1 of the Act. This also includes overtime, statutory holiday pay, bonuses which meet the definition of “wages” and previously paid vacation pay. Total wages also includes compensation for length of service under s.63 and termination pay under s.64.

Calculation of vacation pay

An employee becomes entitled to 6% vacation pay at the completion of their fifth year of employment. If an employee has not completed their fifth year of consecutive employment, and their employment ends, the vacation pay is based on 4% of gross earnings in the fifth year of employment. Vacation pay for an employee who completes five years of employment is calculated as 6% of the gross wages earned by the employee during the fifth year of employment.

Vacation Pay in Excess of Minimum Standards

The Director will enforce a vacation pay entitlement established under an employment contract if it is greater than the minimum standard set out in the Act. This is because the wording of s. 58(1) refers to “at least” 4% or 6%.

Example

When Richard started work at the hardware store in June, he was told that four weeks' vacation and 8% vacation pay would be given during the first year. He requests four weeks' vacation in November, which is granted, and receives 8% of the first years' wages as vacation pay at that time. Richard quits the following May. He is not entitled to any vacation pay upon termination because the year’s vacation entitlement has been taken.

If Richard quits after his first anniversary date, then any vacation pay owing would be based on total gross earnings, less the vacation pay received in November.

If Richard does not take a vacation, and quits before completing his first year of employment, he is entitled to receive 8% of total wages on termination, as per the terms of his employment contract.

Commission Earnings

A salesperson paid entirely or partly by commission is entitled to vacation pay.

Commissioned employees may have commission payments become payable while they are on vacation. Such amounts are wages for work previously performed.  The payment of earned wages for work previously performed cannot be treated as vacation pay simply because the employee was on vacation at the time the wages were paid, such as in the case of a commission contract where commissions become payable when a customer takes delivery of goods. An employee who receives commission payments after employment terminates is also entitled to receive vacation pay on those subsequent payments.

Salaries

If employers continue paying salaried employees during their vacation period when no work is being performed by the employee, this is considered to be vacation pay. The salary received during the vacation must equal at least 4% or 6% of gross earnings, whichever is applicable, as set out above in subsection (1).

Vacation pay after leave

Any employee leave of absence, including leave under Part 6, or any other employer authorized leave of absence is included when determining continuous employment for vacation entitlement. Examples of other leaves include medical leave and education leave.

Example

During her first year of employment, Marcella goes on maternity leave after working three months. She returns to work in her second year of employment. Marcella is entitled to at least two weeks of vacation time accrued during her first year of employment. Annual vacation pay pursuant to s.58 in this case is calculated as 4% of the total wages she earned in her first year of employment, which in her case is three months wages. As such, the vacation pay will be less than if she had worked the entire year. The leave of absence does not affect accrued vacation time, it just reduces the amount of vacation pay Marcella will receive.

If the conditions of employment require an employer to pay an employee vacation pay based on vacation time accrued, the vacation pay would not be reduced. The Director would enforce the vacation payment provided in the employment contract.

Subsection (2)

Timing of payment

Under s.58(2)(a), vacation pay must be paid to an employee "at least 7 days before the beginning of the employee’s vacation". This provision is to ensure that an employee has use of earned vacation pay on their holidays.

In accordance with s.27 of the Act vacation pay should be identified on the wage statement. Section 28(l) of the Act also requires an employer to maintain a record of “the dates of the annual vacation taken by the employee, the amounts paid by the employer and the days and amounts owing”.

Subsection (2)(b)

When an employee is paid on each scheduled payday

An employee and employer may agree, in writing, that the employee will receive their vacation pay on every scheduled payday. However, when vacation pay is paid on each pay period, the employee will be entitled to an adjustment upon reaching their fifth anniversary.

Example

Rashid is paid 4% vacation pay on every cheque. Upon completion of his fifth year of employment, Rashid receives 6% vacation pay on each cheque. He also receives a one-time 2% vacation pay adjustment based on total gross earnings during the fifth year of employment. The 2% vacation pay adjustment, which he becomes entitled to upon completion of his fifth year of employment (employment anniversary) should be paid on the first pay day following the completion of the fifth year of employment. Payment of the 2% adjustment ensures that Rashid has received 6% vacation pay when he takes his next annual vacation.

Subsection (3)

Termination

Money paid for compensation in lieu of written notice under s.63 and group termination pay under s.64 is included in the calculation of vacation pay. Section 18 of the Act requires that all wages, including vacation pay is payable as follows:

  • within 48 hours after the employer terminates the employment;
  • within six days after the employee terminates the employment.

An employee who becomes entitled to additional “earned wages” after termination, such as a commission in accordance with their employment contract, is entitled to receive vacation pay on those payments. These wages must be paid to an employee when they become due.

Limitations on Collection of Vacation Pay

Terminated employees can claim for past vacation pay entitlements subject to certain time limits. The amount of vacation pay that can be claimed under the Act is determined by the employee's anniversary date, the dates vacations were taken and the date of termination.

Section 80 of the Act limits recovery of wages to those wages which become payable within 6 months of the date of the complaint or termination of employment, whichever is earlier.

The maximum vacation pay entitlement could be up to 30 months less a day.

See s.80 for information on limits to vacation pay recovery under the Act.

Employees covered by a collective agreement

Under s.3 of the Act, where a collective agreement contains any provision respecting annual vacation, the provisions of this section of the Act do not apply. If a collective agreement does not contain any provision respecting annual vacation, Part 7 is deemed by s.3 to be incorporated in the collective agreement as part of its terms.

Under s.3(7) where there is a collective agreement, the enforcement of matters relating to Part 7 is through the grievance procedure, not through the enforcement provisions of the Act.

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Related Information

Related sections of the Act or Regulation

Employment Standards Tribunal Decisions

The Director of Employment Standards, BC EST #348/01

Factsheet

Annual Vacation

Collective Agreements and the Employment Standards Act


Farm workers

Other

Atlas Travel Service Ltd. v. British Columbia (Director of Employment Standards) (1994), 99 B.C.L.R. (2d) 37 (BCSC)

VCR Print Company Ltd. v. Employment Standards Tribunal et al. 2003 BCSC 442