As we step into 2024, Ontario's businesses face new challenges and opportunities in managing holiday pay. With evolving payroll legislation and complex calculations, it's crucial for employers to stay informed and compliant.
This guide provides a detailed walkthrough of holiday pay in Ontario, helping ensure your business not only adheres to legal requirements, but also fosters a fair and rewarding workplace.
In Ontario, holiday pay is a legal entitlement for employees, governed by the Employment Standards Act (ESA). It's crucial for employers to understand these regulations to avoid penalties and maintain a positive work environment.
There is no minimum period of employment required for an employee to be eligible for holiday pay. Even a new employee is entitled to holiday pay if they work on a public holiday.
To be eligible for holiday pay, an employee must have worked their last regularly scheduled workday before the holiday and their first regularly scheduled workday after the holiday, unless they had reasonable cause not to work those days (like illness, for example).
For employees on leave or those who work irregular hours, the eligibility criteria may vary, and specific rules could apply for calculating their entitlement. Employees from temp agencies are entitled to public holiday pay calculated based on the regular wages earned in the pay period before the public holiday, divided by the number of days worked.
Employers must familiarize themselves with the details of the ESA and, if necessary, seek legal advice or consult the Ontario Ministry of Labour, Immigration, Training and Skills Development for guidance on specific situations to ensure compliance with the law and fair treatment of employees.
The amount of holiday pay an employee is entitled to is calculated based on the regular wages they earned in the four weeks prior to the public holiday plus the vacation pay payable to the employee. To calculate the amount owed to the employee, add their regular wages during that four-week period plus any vacation pay payable to them and divide the total by 20.
Let's consider an employee, Emily, who works in a retail store in Ontario. Here's how her holiday pay would be calculated for an upcoming public holiday based on her previous pay periods:
To calculate Emily's holiday pay, add her regular wages and vacation pay:
Total for 4 weeks: $416 (Week 1) + $0 (Week 2) + $468 (Week 3) + $520 (Week 4) = $1,404
$1,404 (Total Regular Wages and Vacation Pay) ÷ 20 = $70.20
Therefore, Emily's holiday pay for the public holiday would be $70.20. This example demonstrates how the inclusion of vacation pay in the calculation can affect the final holiday pay amount, ensuring that employees receive fair compensation for their overall earnings, including their accrued vacation pay.
Visit the ESA website for more examples.
Ontario has nine public holidays. They are:
Even if your business is closed, you are required to pay your staff holiday pay for these public holidays.
When an employee in Ontario works on a public holiday, also known as a statutory holiday, specific rules apply to their compensation and time off, as outlined in the ESA. If an employee works on a stat holiday, they are generally entitled to their regular rate of pay for the hours worked on that day, plus a substitute holiday with holiday pay, or public holiday pay plus premium pay (usually 1.5 times their regular rate) for the hours worked on the holiday.
The employer has the discretion to choose which option to provide. It's important to note that the eligibility and entitlements can vary based on the nature of the work and the employment contract. Employers must ensure they are compliant with the ESA by providing the appropriate compensation and additional time off where applicable. This also shows a commitment to respecting and valuing the employee’s contributions, even during statutory holidays.
Understanding the distinction between public holiday pay and vacation pay is crucial for employers in Ontario. Public holiday pay refers to compensation that employees are entitled to receive for public holidays, as mandated by the ESA. This pay is calculated based on an average of the employee's recent earnings and is provided for specific public holidays recognized by the province, regardless of whether the employee works on these days.
On the other hand, vacation pay is a separate entitlement, representing a percentage of an employee's gross wages earned over a 12-month vacation entitlement year or stub period. In Ontario, vacation pay is typically calculated as 4% (or more, depending on tenure) of the total wages (excluding any public holiday pay) earned during the entitlement year.
Unlike public holiday pay, which is linked to specific public holidays, vacation pay accrues over time and is paid out during the employee's vacation time or under other specific circumstances as outlined in the ESA. Both forms of pay play a vital role in compensating employees fairly, but they serve different purposes and are calculated based on distinct criteria, reflecting the diverse aspects of employee benefits.
Effective record-keeping and reporting are crucial components of managing holiday pay in Ontario. Employers are required to maintain detailed and accurate records of the hours worked by each employee, along with their wages and holiday pay received.
As Ontario's holiday pay regulations continue to evolve, staying informed and prepared is key to your business's success. By understanding the rules and leveraging the right tools, like QuickBooks, you can navigate these complexities with ease. Discover how QuickBooks Payroll can transform your approach to holiday pay and help your business flourish in 2024.
This content is for information purposes only and should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by region, province, state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit does not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Readers should verify statements before relying on them.
We provide third-party links as a convenience and for informational purposes only. Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. Intuit accepts no responsibility for the accuracy, legality, or content on these sites.
Call Sales: 1-888-829-8589
