Vacation pay - IPG-012
Effective date: September 10, 1993
Revised date: June 22, 2023
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Subject
Definition of wages for calculating vacation pay pursuant to Division IV, Part III of the Canada Labour Code (Code).
Issue
This Interpretation, Policy and Guideline (IPG) provides guidance on the definition of wages when calculating vacation pay as per section 183 of the Code.
Background
Vacation pay is defined as a percentage of the wages of an employee during the year of employment in respect of which the employee is entitled to the vacation.
Note: “employees” also includes “interns”. Student interns are not entitled to vacation pay.
Wages are defined in section 166 of the Code as every form of remuneration for work performed but does not include tips and other gratuities. Monetary and non-monetary pay accruing to an employee which derives from work performed are considered wages. An example of a non-monetary form of remuneration is board and lodging outlined in sections 21 and 22 of the Canada Labour Standards Regulations.
There are certain payments to which employees may be entitled under the Code, which, though clearly not for work performed, are wages for the purposes of Division IV. The following are wages because they have been defined to be by the Code:
- general holiday pay (section 200)
- bereavement leave pay [subsection 210(2)]
- vacation pay itself (section 186)
- pay to an employee on a leave of absence awaiting the employer’s decision regarding maternity-related reassignment and leave [subsection 205(2)], and
- pay to an employee who is required to remain available at the workplace during the 30-minute unpaid break [subsection 169.1(1)]
A 2004 Supreme Court of Canada decision declared that remuneration received during an administrative suspension is also to be considered wages (Cabiakman v. Industrial Alliance Life Insurance Co. 2004 SCC 55).
Many sections of the Code distinguish between “wages” and “other amounts” (see section 247, as one example). The category of “other amounts” includes those that do not fit the definition of wages as identified above. For example, termination pay and severance pay are not remuneration for work performed and so are not deemed to be wages by the Code. In this regard, termination pay and severance pay fall under the category “other amounts” and are not classified as wages. The same reasoning applies to other exclusions from the definition of wages.
Conclusion
For the purpose of calculating vacation pay, the following are considered wages:
- regular earnings for work performed
- premium pay for overtime hours worked
- premium pay for time worked on general holidays
- pay for general holidays
- pay in lieu of general holidays
- pay for personal leave
- pay for leave for victims of family violence
- pay for medical leave with pay
- bereavement leave pay
- vacation pay
- pay pending an employer's decision on maternity-related reassignment/leave
- pay received during an administrative suspension
- any other remuneration (monetary or non-monetary) an employee is entitled to under his contract of employment which meets the test of being for work performed, for example:
- commission on sales
- flight pay
- production bonuses
- northern allowances (isolation allowances)
- safety bonuses
For the purpose of calculating vacation pay, the following are not considered wages:
- tips, gratuities
- reimbursement of work-related expenses
- monies owed to an employee upon termination
- pay in lieu of notice of termination
- severance pay
- compensation under Division XIV (unjust dismissal)
- compensation for lay-over
- compensation for:
- a period of injury, disease or illness for members of the Reserve Force that occurs while on an operation in Canada or abroad
- an activity set out in the regulations
- Canadian Armed Forces military skills training
- training or duties for which they have been called out on service to perform under subsection 33(2) of the National Defense Act
- service in aid of a civil power for which they are called out
- treatment, recovery or rehabilitation in respect of a physical or mental health problem that results from service in an operation or activity referred to paragraph 247.5(1)(a) to (g) of the Code
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