Vacation pay and public holidays

When you pay vacation pay, how you calculate deductions will depend on whether your employee takes holidays or not. Also, deduct as you normally would when part of the pay period includes a public holiday (such as Christmas day).

Note
Vacation pay rates and paid statutory holidays vary from province to province.

The employee takes holidays

The following applies when you pay vacation pay and your employee takes holidays.

Note
If your employee takes holidays but does not receive their vacation pay at that time, see The employee does not take holidays.

CPP contributions
Deduct CPP contributions from vacation pay in the same way as you would from regular pay. Do not change the pay period table you would normally use. Do not deduct more than the maximum employee contribution for the year.

EI premiums
Deduct EI premiums from vacation pay in the same way as you would from regular pay. Do not deduct more than the maximum employee premium for the year.

Income tax
When you calculate the amount of income tax to deduct, use the tax table that applies to the period of vacation. For example, for one week of paid vacation, use the weekly tax deduction table. If your payroll is bi-weekly and the employee is paid one week of vacation pay and one week of regular pay, the bi-weekly tables should be used. If the employee is paid one week of vacation pay and the second week is unpaid, the bi-weekly tables should be used.

The employee does not take holidays

The following applies when you pay vacation pay and your employee does not take holidays.

CPP contributions
To deduct CPP contributions, use the bonus method. Do not deduct more than the maximum employee contribution for the year.

EI premiums
Deduct EI premiums from vacation pay in the same way as you would from regular pay. Do not deduct more than the maximum employee premium for the year.

Income tax
Use the bonus method.

Vacation pay trust
Include in the employee's income any contributions you make to a trust for vacation credits that an employee earns in the year. Deduct CPP/QPP contributions, EI/QPIP premiums, and income tax from this amount as if you had paid the amount directly to the employee.

Related topics

• Paid Statutory Holidays (HRSDC Web page)
• Vacation pay (HRSDC Web page)

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