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ON: Gross wages

Expert: Julie King

Maureen asked:

Can an employer in Ontario base vacation pay on 'gross' earnings that exclude taxable benefits such as RRSPs, which are reportable on a worker's T4 slip? Thank you.

Julie King answered:

To answer your question I contacted the Ontario Employment Standards office.

First, the government representative stressed that you must ensure that your business is covered by their legislation as opposed to federal legislation.

She then explained that gross wages for the purpose of calculating vacation pay includes:

  • regular earned wages and commissions
  • bonuses and gifts that are "non-discretionary" or are related to hours of work, production or efficiency
  • room and board
  • overtime and public holiday pay
  • termination pay

However, it does not include:

  • vacation pay
  • living expenses and travelling allowances
  • tips and gratuities
  • "discretionary" bonuses and gifts that do not relate to hours of work, production or efficiency (such as a Christmas bonus)
  • contributions made by an employer to a benefit plan and payments from a benefit plan that an employee is entitled to
  • federal insurance benefits
  • severance pay

As you can see from this response, you do not need to include contributions made by the employer to a benefit plan in your gross wage calculations.

The Vacation Pay Fact Sheet on the Ontario government website contains much of this information plus additional information on vacation pay.

I hope that helps answer your question.

About the author

Julie King is the co-founder and managing editor of CanadaOne, Canada's first small business portal.

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