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what is vacation pay on vacation pay now when an employee hears or reads a term like vacation pay on vacation pay they most likely brush it off as some legal depiction that they are not about to scrutinize beyond the fact that it adds more money to their bank account meanwhile when I tackled this aspect from a legal angle I got severe pushback from Major law firms representing some very significant employers when the fact is that I didn't create the concept of vacation pay on vacation pay the legal concept of vacation pay on vacation pay is not some mythical creation out of my imagination but the application of certain provinces employment standards legislation such as the Alber employment standards code and is actually paid out by a number of major employers and as everyone can appreciate there isn't an employer out there that is going to make a pay payment to its employees that it doesn't have to legally pay especially one as cryptic as vacation pay on vacation pay now if we take a step back one needs to understand that every province has its own employment standards legislation together with there being a further piece of legislation for certain areas of employment that are of federal significance which is legislated by the Canada labor code and there are clear distinctions in how payments must be calculated in each of these employment jurisdictions such that specific calculation might work in Ontario but could contravene the employment standards legislation in many other provinces as such there isn't a one-size fits-all calculation for employees across Canada such that it becomes necessary to create workarounds and additional pay computations to cover differences between Pro provinces and employment jurisdictions with vacation pay on vacation pay being one such example so what exactly is vacation pay on vacation pay it is an attempt to overcome a deficiency in payroll computations and payroll software that was largely formulated or modified to meet the needs of Ontario's employment standards legislation when it is applied to other provinces and even though it does serve to correct part of the problem in my professional opinion it does not go far enough so as to fully correct the problem while also creating additional employee pay issues throughout the country so what exactly is the deficiency that vacation pay on vacation pay is attempting to address for this we need to direct our attention to section 43 of the Alberta employment standards code which states quote vacation pay paid to an employee in one year of employment is deemed to be wages for the purposes of calculating the vacation pay payable to the employee in the following year of employment end quote the effect of the statutory provision is that in addition to an employee receiving their four or 6% vacation pay on their wages which excludes vacation pay General holiday pay overtime pay and other specified payments there is required payment of four or 6% vacation pay that must be paid on the prior year's vacation pay hence vacation pay on vacation pay so if an Alberta based employee is entitled to 6% vacation pay the regular vacation pay might be recorded as 6% of their regular hourly pay in the current pay period with a further 6% of the regular vacation pay in that pay period being paid as vacation pay on vacation pay by way of example let us say an Alberta based employee making $25 an hour Works 80 regular hours in a 2E period such that the employees hourly pay before deductions is $2,000 now if the employees is entitled to a 6% rate for vacation pay the employ employ regular vacation pay is computed at $2,000 time 6% equating to $120 to cover the employes vacation pay on vacation pay the employer would pay a further 6% of $120 being a further payment of $720 this effectively brings the employer more in line with Alberta employment standards code although there are often times additional elements that are not being dealt with which are outside the scope of the current analysis this is the diametric opposite of what is set out at section 35.2 of the Ontario employment standards act 35.2 an employer shall pay vacation pay to an employee who is entitled to Vacation under section 33 or 34 equal to at least a 4% of wages excluding vacation pay that the employee earned During the period for which the vacation is given if the employees period of employment is less than 5 years or B 6% of wages excluding vacation pay that the employee earned During the period for which the vacation is given if the employees period of employment is 5 years or more due to this clear statutory difference the employer needs to be excluding vacation pay from its calculation in Ontario while including vacation pay in Alberta such that employers required a workaround for bir employees namely vacation pay on vacation pay however this leads to inevitable problem of workarounds which is that they attempt to correct an obvious issue yet all too often fail to address all the problems where there isn't just a single difference as between employment standards legislation furthermore there can be issues arising from the Ontario employees vacation pay computation which is distinct from this vacation pay on vacation pay issue now don't get me sted on British Columbia as their provincial employment standards legislation has different parameters which isn't helped by certain official government posts which in my personal opinion are inaccurate or ill defined as a state position that demands both one a hyp pathetical employment scenario that arguably does not exist in the real world and two requires the employers other pay computations to be calculated in a manner that is not the norm and require some very serious mathematical acrobatics for as we've come to learn at our law firm and is the basis for many of our current lawsuits against employers far too many employers are subject to improper payroll schemes that are originating from Ontario or worse yet the United States of America with slight modifications for Ontario and simply doing a few cosmetic work rounds is not sufficient instead when one reworks employee payroll reporting and computations from first principles and specifics to the governing employment standards legislation the outcome is quite serious with the amount of underpayments being truly significant so whether or not you see vacation pay on vacation pay on your pay statements fallowing the conclusion of your employment whether fired laid off terminated quit or resigned you need to dig even deeper into what you were properly due from your former employer for employees fired laid off terminated quitting or resigning their job who are seeking to get the appropriate legal payout from their former employer contact their Law Firm for a confidential initial consultation thank you