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Within the Employment Standards Act, it is stated that employees are entitled to take time off for annual vacation and to be paid vacation pay. Therefore, employees who are paid by commission must take annual vacation and receive vacation pay the same as other employees. For commission employees, vacation pay cannot be incorporated into the commission rate, rather vacation pay must be paid on all commissions earned.

Here are 3 common examples of how vacation pay is calculated into commission based employees’ wages:
 
Example 1:
Sarah starts a new job on March 1, 2008. She completes her first year of work on February 28, 2009 and becomes entitled to take an annual vacation. Her employer must grant Sarah a vacation no later than February 28, 2010.

When Sarah takes a two week vacation in July 2009, her employer pays her 4% of her gross earnings from the period March 1, 2008 – February 28, 2009 for vacation pay. Since Sarah is not working during those two weeks, she does not receive any regular wages. This vacation pay amount becomes part of her gross wages for the year from March 1, 2009 – February 28, 2010.

Example 2:
John quits his job after working for three months. His final paycheque includes 4% vacation pay on all wages earned from his first day of employment.

Example 3:
Tracy starts work on July 2, 2008. On January 31, 2009 she makes a written request to take a vacation “in advance”. The employer agrees. Tracy takes one week off in March of 2009. Her first year of employment ends on July 1, 2009, and she becomes eligible to take the vacation she earned in that year. Tracy has one week of vacation left to take.

For more information on employment standards, please visit the Ontario Ministry of Labour.

*This guide is provided for your information only. It is not a legal document. For complete information, including what is stated above; refer to the Employment Standards Act, 2000 and its regulations.

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