Vacation (Ontario)

Topic 140-ON     Importance: High


Communicates vacation entitlements, how they're calculated and how vacation is taken and recorded. 


  • Clarifies the rules and procedures for a topic that's important to all employees and promotes consistency for entitlements.  
  • Ensures that employees are clear on your procedures for recording absences.
  • Links to ESA site to ensure that you adhere to the law as it relates to vacation and prevents having to maintain any changes to legislation. 


  • Inconsistent communication of vacation entitlements and procedures, often by managers. 
  • Recording absences is often not well executed in most small businesses and results in inflated vacation liabilities/accruals when vacation balances are not reduced to reflect time taken. 

HR Expertise

This topic requires you to understand your company processes, but specialized HR subject matter expertise is not required to customize it.



This topic is well defined by legislation. If your vacation entitlements have not been defined, the actual customization of this topic won't take long – maybe an hour – especially if you adopt the process it describes with few modifications.  Additional time will have to be budgeted to do research on vacation entitlement norms in your industry and offered by your competitors. 

Recommended:  Customize this topic with caution. Failing to draft it properly can expose your company to unnecessary liability. If you make changes to this topic, legal review is recommended.


This topic can be independent. It was written to relate to other topics, but with slight modification, could be used independently.  Other topics it references:

  • Approving, Communicating, and Recording Absences policy, which is a separate topic that outlines how all exceptions to a normal work week are recorded. 

Key Decisions

  • What vacation benefits will you offer and after how much seniority?
  • How will you deal with carry-over of unused vacation time to the next vacation period?
  • How will vacation time off be recorded?

Key Approvals

If your vacation program has not yet been defined, this topic should be approved by: 

  • Highest level executive in your company
  • Highest level Finance position in your company
  • Highest level HR position in your company, or the executive that HR reports to

Additional Resources

We recommend that you include the following link(s) in the Resources section at the end of this topic in the Handbook to make it available to employees.  The topic outlined in this policy is governed by legislation and if you're going to communicate it and be compliant, it's much easier for you to make a general statement about the policy and then provide a link to the source website.  That way, you don't have to maintain the information when legislated changes (particularly minor changes) and your information will always be up-to-date. 

Ontario Employment Standards Sheet – Vacation:

Additional Tips

  • This pre-written policy and vacation example in the Handbook template may surprise you, but it's the accurate way to calculate vacation. Vacation is earned, then taken and paid based on "vacationable earnings".  Many companies simply pay vacation as a continuation of payroll, but if an employee's vacationable earnings are over and above their regular wages, you'll be underpaying them. For example in Ontario, certain types of bonuses are considered vacationable earnings. So if you're paying Salina her regular wages when she's on vacation, you'll be underpaying her.
  • The Employment Standards Act does not differentiate between part time and full time employees when allowing time off for accrued vacation.  Therefore, adding 4% to basic salary in lieu of time off should only be allowed for casual employees.

Getting Started

Before you start customizing this topic, we recommend you:

  1. Research the vacation standards for your industry to make sure you are competitive with your vacation benefits. Ontario Employment Standards Act regulates minimum requirements for vacation entitlement and its minimum requirements may not be sufficient to attract good employees. 
  2. Liaise with Finance to understand how vacation time off will be recorded, which is an important part of the procedures for this policy.