In British Columbia and other Canadian provinces and territories, employees earn a bonus in addition to their hourly wage called vacation pay. The employer or payroll administrator calculates vacation pay as a percentage of the regular wage, and it is paid just before a booked vacation period or in each paycheck. Vacation pay calculations are based on gross income, before mandatory deductions such as employment insurance and income tax.
Calculate calendar days worked. In British Columbia, employees must work at least five calendar days to qualify for annual vacation pay. Employees employed more than five days earn vacation pay retroactive to the first day of work.
Determine if your job falls under the Employment Standards Act. Farm workers who earn piece-rate instead of an hourly wage still qualify, but should contact the B.C. Ministry of Labour if they suspect their vacation pay is not included in the piece-rate wage.
Calculate on top of wage and commission in sales positions. Commission sales jobs are eligible for vacation pay. Vacation pay is calculated on any base rate plus commissions. Commission paid during a vacation period does not substitute for vacation pay.
Set Up Vacation Pay
Understand the employer's responsibility. B.C. employers are required to pay at least 4 percent in vacation pay under the Employment Standards Act.
Choose a payment schedule. Employees may receive vacation pay on each paycheck or in a lump sum payable at least seven days before a scheduled vacation period.
Document the schedule. If the employer and employee both agree to distribute the vacation pay on each paycheck, this agreement must be documented in writing and signed by the employee.
Give an increase after five years. Employers are required to increase the rate of vacation pay to 6 percent after five years of employment.
Redeem Vacation Pay
Request vacation pay at least one pay period ahead of time to receive it at least seven days before a booked vacation.
Check each paycheck to ensure the employer calculated the proper amount of vacation pay. Many companies use software for payroll; however, it is a good idea to double check vacation pay and deductions to ensure their accuracy.
Ensure accumulated vacation pay is paid upon termination. An employer cannot withhold vacation pay on termination of employment. According to the Employment Standards Act, all vacation pay is due with the final paycheck.
Contact an accountant to understand how vacation pay affects total annual income and taxes.