Is Vacation Pay Calculated on Commission in Ontario
'/%3E%3Ccircle cx='48' cy='39' r='19' fill='%23f2c9a5'/%3E%3Cpath d='M27 35c3-16 39-17 42 2-8-8-27-9-42-2z' fill='%23374151'/%3E%3Cpath d='M21 86c5-24 49-28 56 0z' fill='%232563eb'/%3E%3Ccircle cx='41' cy='41' r='2' fill='%23111827'/%3E%3Ccircle cx='55' cy='41' r='2' fill='%23111827'/%3E%3Cpath d='M42 52c4 3 9 3 13 0' stroke='%2392400e' stroke-width='3' fill='none' stroke-linecap='round'/%3E%3C/svg%3E)
Reviewed by Calculator Editorial Team
In Ontario, vacation pay is a legal requirement for most employees. Understanding how vacation pay is calculated, especially when commission-based earnings are involved, is crucial for both employers and employees. This guide explains the rules, provides a calculator, and includes practical examples.
How Vacation Pay Works in Ontario
Under the Ontario Employment Standards Act, most employees are entitled to paid vacation time. The specific requirements depend on the employee's status and the type of employment:
Key Requirements:
- Employees with less than 10 years of service are entitled to 2 weeks of paid vacation per year.
- Employees with 10 or more years of service are entitled to 3 weeks of paid vacation per year.
- Vacation pay must be calculated based on the employee's regular wages, including overtime.
- Employers must provide at least 10 days' notice before deducting vacation pay from an employee's wages.
The calculation of vacation pay typically follows these steps:
- Determine the employee's annual vacation entitlement (2 or 3 weeks).
- Calculate the daily vacation pay rate based on the employee's regular wages.
- Multiply the daily rate by the number of vacation days to get the total vacation pay.
For employees who earn commission-based income, the calculation becomes more complex as commission is typically considered irregular income.
Is Vacation Pay Calculated on Commission?
In Ontario, vacation pay is generally calculated based on the employee's regular wages, which typically includes both salary and commission. However, the Ontario Labour Relations Board (OLRB) has clarified that commission income should be treated as irregular income for vacation pay purposes.
Vacation Pay Formula (with Commission):
Vacation Pay = (Regular Wages + Overtime) × Vacation Entitlement × Vacation Pay Rate
Where:
- Regular Wages = Base salary (excluding commission)
- Overtime = Any overtime pay
- Vacation Entitlement = 2 or 3 weeks
- Vacation Pay Rate = 1/52 (for 2 weeks) or 1/52 (for 3 weeks)
Commission income is not included in the regular wages calculation for vacation pay. Instead, it is treated as a separate component that may affect the employee's overall compensation but not the vacation pay calculation.
Employers must ensure that vacation pay is calculated correctly to comply with Ontario employment standards. Employees should review their pay stubs to confirm that vacation pay is being calculated based on their regular wages, not including commission.
Worked Examples
Let's look at two examples to illustrate how vacation pay is calculated in Ontario, with and without commission.
Example 1: Employee with Base Salary Only
Scenario: An employee with 5 years of service earns a base salary of $50,000 per year with no commission.
Calculation:
Vacation Entitlement = 2 weeks (since employee has less than 10 years of service)
Daily Vacation Pay Rate = $50,000 / 52 ≈ $961.54 per day
Total Vacation Pay = $961.54 × 10 ≈ $9,615.40
Example 2: Employee with Base Salary and Commission
Scenario: An employee with 10 years of service earns a base salary of $60,000 per year and $20,000 in commission.
Calculation:
Vacation Entitlement = 3 weeks (since employee has 10+ years of service)
Daily Vacation Pay Rate = $60,000 / 52 ≈ $1,153.85 per day
Total Vacation Pay = $1,153.85 × 15 ≈ $17,307.73
Note: Commission is not included in the vacation pay calculation.
These examples show that vacation pay is calculated based on the employee's regular wages, not including commission. Employees should confirm with their employer how vacation pay is being calculated to ensure compliance with Ontario employment standards.
Frequently Asked Questions
Do commission-based employees get vacation pay in Ontario?
Yes, commission-based employees in Ontario are entitled to vacation pay, which is calculated based on their regular wages (excluding commission).
How is vacation pay calculated for employees with commission?
Vacation pay is calculated using the employee's regular wages (base salary and overtime) multiplied by the vacation entitlement (2 or 3 weeks) and the vacation pay rate (1/52). Commission income is not included in this calculation.
Can employers deduct vacation pay from commission earnings?
No, vacation pay must be calculated based on regular wages and cannot be deducted from commission earnings. Employers must provide at least 10 days' notice before deducting vacation pay.
What happens if an employer doesn't pay vacation pay correctly?
Employees who are not paid the correct amount of vacation pay may be entitled to claim the difference through the Ontario Labour Relations Board or a court of law.
Are there any exceptions to the vacation pay rules in Ontario?
Yes, certain employees such as agricultural workers, domestic workers, and employees in the film industry may have different vacation pay requirements under specific collective agreements.