Annette Parsons asked:

Do we pay vacation at a percentage of previous years earnings when large amounts of bonuses are paid out or do we pay on regular salary by weeks? How does this work for salesmen who receive a regular pay plus commissions ? In addition, payroll is not notified when vacation days or weeks are taken.

Belinda Sutton answered:

Do we pay vacation at a percentage of previous years earnings when large amounts of bonuses are paid out or do we pay on regular salary by weeks?

The vacation with pay provisions in the Employment Standards Act, 2000 (the ESA, 2000) do not apply to all employees and employers in Ontario. There are exemptions set out in the ESA, 2000 and in the regulations.

If the provisions apply, employees must receive a minimum of four per cent of the gross "wages" (excluding vacation pay) they earned in the 12 months for which the vacation is being given. If an employee's contract or collective agreement provides a better vacation benefit than the minimum required, the employee may be entitled to a higher percentage of his or her gross earnings for vacation pay.

The term "wages" is defined in the ESA, 2000. The "wages" earned on which the vacation pay is calculated includes:

• regular earnings, including commissions;
• overtime pay;
• public holiday pay;
• termination pay; and
• allowances for room and board.

It does not include:

• vacation pay already paid;
• tips and gratuities;
• discretionary bonuses and gifts that are not related to hours of work, production or efficiency;
• expenses and travelling allowances;
• living allowances;
• contributions made by an employer to a benefit plan and payments from a benefit plan that an employee is entitled to; or
• severance pay.

How does this work for salesmen who receive a regular pay plus commissions?

Generally, the vacation with pay provisions in the ESA, 2000 do not apply to commissioned salespersons that sell away from their employer's office or plant and that do not sell on a route.

Otherwise, under the ESA, 2000, a commissioned salesperson is entitled to a minimum of four per cent of the gross "wages" (excluding vacation pay) they earned in the 12 months for which the vacation is being given. As indicated earlier, the amount of "wages" will include commissions.

In addition, payroll is not notified when vacation days or weeks are taken.

If you are referring to commissioned salespersons that work on a particular route, the employer is believed capable of verifying the whereabouts and activities of the employee, and the vacation with pay provisions of the ESA, 2000 will apply.

You may view the ESA, 2000 in its entirety at: www.e-laws.gov.on.ca/DBLaws/Statutes/English/00e41_e.htm.

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