Vacation Pay In British Columbia

(B.C., Canada)

Calculating Vacation Pay

Is the 6% vacation pay figure on gross wages and commissions in British Columbia to be paid only after year five?

For example, 4% would up to and including the 5th year = 2 weeks. After year five, it would be 6 % = 3 weeks.

Hi,

I am not a payroll expert. However, it is my understanding that the Employment Standards say the minimum vacation pay for years 1 through 5 is 4%.

Employers can pay their employees more than that. Some employers may pay higher than the required 4% when they hire someone with experience.

After 5 years, the minimum vacation pay is 6% ... but again, it is only a minimum.

The Employment Standards Branch has an annual vacation factsheet where you can find more information.

While we are on the topic of vacation pay, it should be noted that there are two ways to pay out vacation pay.

The first is to pay it on each pay cheque.

The second is to pay it when the employee goes on vacation ... you may need to make a request in advance of your vacation to have it paid prior to your holiday.

If the vacation pay is paid out with each pay cheque, there must be an agreement signed by the employee permitting this.

I think the reason is that when the vacation pay is paid out with every cheque, the employee will receive no cheque when they go on vacation. This may create financial difficulties for many employees.

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Jul 22, 2011
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Vacation on Vacation Paid in BC
by: Anonymous

In BC when we pay out vacation on every paycheque, we have to calculate vacation on vacation paid and pay that out too. Simply Accounting has this feature setup in payroll, does Quickbooks payroll have this feature too? If not, how is it done in Quickbooks payroll?

Thank you.

Jul 23, 2011
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Do you have a reference?
by: Lake

Hello Anonymous, ;0)

I don't do a lot of payroll anymore so I can't answer that question without doing some research. :0(

When I have some free time, I will go in and play in QuickBooks to see how it handles it ... or you could do this yourself by using one of their sample files.

Using QuickBooks sample data files is a great way to figure out how to use a feature ... or figure out how QuickBooks handles a transaction ... without mucking up your books.

However, for the sake of other visitors to the site, I'm wondering if you have a reference that you can quote. It would be great if you did.

I don't want visitors to just accept information found on this site. I like them to verify the information with another source such as their accountant, with CRA or by going directly to the resource ... so they have a reference to place in their file in the event of an audit. It helps show due diligence.

It would be great if a site visitor raiding this post who does payroll in BC ... and knows the answer ... could respond to this post! :0)

While this doesn't address your question, for my other site visitors, HRInfoDesk.com has a great article on Entitlement to Vacation Pay. It discusses all jurisdictions in Canada.

You can find the article at http://www.hrinfodesk.com/preview.asp?article=29874.

Jul 23, 2011
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Vacation on Vacation Paid in BC
by: Steve (Anonymous)

Hi Lake,

Thank you for your quick response.

Here is the source:

Interpretation Guidelines Manual
British Columbia Employment Standards Act and Regulations

Employment Standards Act Part 7 - Annual Vacation
ESA Section 58 - Vacation pay

and the link:
http://www.labour.gov.bc.ca/esb/igm/esa-part-7/igm-esa-s-58.htm

In particular please refer to the following paragraph where it says that paid vacation pay becomes part of total wages for the year it is paid and vacation pay in subsequent years is based on 4% of the total wages in the previous year. So you can see that if you pay out vacation pay every pay period you have to calculate vacation on vacation paid too.

"Vacation Pay

An employee is entitled to two weeks' vacation after completion of their first year of employment. The vacation time is to be taken during the second year of employment, with the vacation pay calculated as 4% of total wages earned in the first year. Paid vacation pay becomes part of total wages for the year it is paid. Vacation pay in subsequent years is based on 4% of the total wages in the previous year. After completion of five years of employment, the employee becomes entitled to three weeks' vacation, with 6% vacation pay based on total wages from the fifth year of employment. In following years, an employee?s vacation entitlement remains at three weeks' vacation with 6% vacation pay, based on the previous year?s total wages."

Aug 20, 2011
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Dazed and confused
by: Anonymous

Hello. I have done payroll for years and have just recently been told that I need to pay vacation pay on the vacation pay I pay to my part-time employees.

However, the only way that I can figure to do this is by accrueing their vacation pay every two weeks and then paying it out on the same payslip.

The problem is then there is accrued vacation pay left over(vac pay on the vac pay). If I try to capture the small amount it keeps calculating vacation pay on the vacation pay. I am sure this is not the correct way.

I have looked for hours on the web and this site is the only one I have found that referenced this problem.

FYI, my husband works part-time and he was only paid 4 % not 4% plus 4% on the 4%. His payroll is done by a large payroll firm. I am really confused.

image of fancy scroll lines

I wasn't aware of this either until the post by Steve.

I will post this on a bookkeeping forum I use and see if I get a response.

Aug 23, 2011
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QuickBooks and Vacation Pay
by: Lake

Here is what I came back from my posting on the bookkeeping forum. Hope it helps:

"QuickBook's payroll module can handle pretty much any vacation pay option.

When you first setup an employee and select the 'Payroll and compensation' tab there is a Vacation Pay button. Click on it and the dialogue box that opens up and allows you to enter the Percentage of VP to be calculated, On what Payroll items to calculate the VP, whether or not it is to be retained and paid out once a year (ie as in B.C.) or paid out on each paycheque.

It also allows you to enter accrued VP if there is any. The VP percentage is unique to the employee so you can have various rates based on Legislation or Company Policy.

My clients in Ontario utilize several of these options. Most new hires on an hourly basis have their VP paid out on each paycheque, although they do have the right to have it accumulate and paid out once a year."

Oct 14, 2011
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Vacation Pay shows in the payroll slip?
by: Anonymous

Hi!

I have a question, How can I know I'm getting paid Vacation pay?

In my last job it would say in my payroll slip, but in my current job it doesn't say anything, still the General Manager says I am getting paid. I am confused ...

Thank you!

Oct 16, 2011
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Reporting of Vacation Pay
by: Lake

Hi,

Vacation Pay should be broken out on your pay slip. If it isn't, you can always calculate your pay to see if it is in fact included.

You didn't say if you were paid hourly or by salary. If hourly, take the number of hours you work and multiply it by your rate per hour.

Does it match the amount of your Gross Pay? If yes, then I would say you are not being paid vacation pay on each cheque.

If you are salaried, your vacation is probably being accrued. That means you don't receive it on every pay cheque.

When you go on holidays, you will still receive a pay cheque as your employer draws down on your accrued vacation pay.

You need to check with your employer to see whether you have to make a request to receive your vacation pay while on holiday or whether you receive it automatically.

Sep 01, 2012
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How to pay less tax on vacation pay
by: Myles

Thanks for the web page, it is very easy to read and navigate :)

I work in BC, at my job I get paid 9.6% vacation pay in lieu of Paid Statutory Holidays.

I am curious to know if having your vacation pay paid on every cheque is better ( tax wise ) than having my vacation pay accrued for the year?

Looking forward to any and all replies, as there is no reason to pay more income tax than I have to...hahaha

Thanks again for the site.
Cheers

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Myles,

In my experience, vacation pay is usually paid out in accordance to company policy.

Typically policy is to have full-time employees accrued their vacation pay so when they go on vacation, they still receive a pay cheque when the vacation pay is paid out.

As a general rule, part-time employees and/or seasonal workers are paid out their vaction pay with each pay cheque.

May 04, 2013
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Statutory Deductions on Vacation Pay
by: PeaceRose

In BC, vacation pay is considered part of Insurable Earnings - whether or not the vacation is paid out each pay period or is accrued - so statutory deductions (CPP, EI, & Income Tax) would be withheld.

I believe that if Vacation Pay is accrued until the employee takes it, and if that vacation pay cheque is stand alone and not part of the regular paycheque, then there would be no deductions.

I would welcome any comments or updates on this. Thank you.

Sep 23, 2016
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Vacation pay before one year of employment?
by: Joti

Actually my question is whether it is ok in BC if we receive the vacation pay before one year of employment with the employer's consent? or it must be paid after one year?

Sep 25, 2016
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Joti
by: Lake

I'm not sure why you would want to pre-pay vacation pay to an employee. Makes no sense to me.

However rather than accrue vacation pay to pay out when they take their first vacation, you can opt to pay the vacation pay earned on every pay cheque. This means that when they take their vacation, it would be without pay as you were paying out vacation pay on every cheque.

Jan 13, 2018
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PeaceRose: All income paid is taxable!
by: Laurie McDonald

Accrued vacation does not incur the deductions until it is paid out so ... vacation pay must include all stat deductions: cpp, ei and taxes.

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