Overtime, Holiday Pay, Vacation Pay Highlight Canadian Labor Laws

Holidays and the pay and leave entitlements surrounding them are among the most complex parts of Canadian jurisdictions’ labor laws, an executive from Canada’s National Payroll Institute said May 14.

At a general level, Canadian labor laws are based on the jurisdiction where the employee works, said Steven Van Alstine, PLP, the NPI’s vice president of professional standards and education. If an employee is paid from a different jurisdiction, this creates a situation where they would be considered an employee for tax purposes in the jurisdiction from which they are paid but would be covered by their work jurisdiction’s labor laws, he said.

The Canada Labour Code applies to employees in federally regulated jurisdictions, including banks, all forms of air travel and shipping, all forms of international and interprovincial transportation, telecommunications except for cable companies, and atomic energy, Van Alstine said. It applies to many businesses in Canada’s territories because of the nature of businesses that operate there, he said.

Van Alstine spoke at the 2025 Payroll Congress in Kissimmee, Florida.

Overtime, Hours of Work

Van Alstine described overtime and hours of work as one of the most important parts of wage and hour laws, but “unfortunately, this is one of the areas where there is a lot of variability,” he said. Some but not all jurisdictions have a maximum number of hours workable per week including overtime, such as Ontario’s 48-hour limit, he said.

Some jurisdictions allow hours to be averaged over a certain period so that overtime does not have to be paid if the average is up to 40 hours a week or the applicable overtime threshold, Van Alstine said. He said it was more common for healthcare businesses and industries based on shift work to use compressed workweeks, such as three 12-hour days.

Conversely, there are also minimum hour requirements representing the number of hours for which an employee must be paid call-in pay regardless of hours actually work, most commonly three hours, Van Alstine said. Some jurisdictions allow call-in pay to be paid at the minimum wage in effect instead of the employee’s normal rate, he said.

Overtime is generally paid at time-and-a-half, Van Alstine said, except that British Columbia requires double pay for work over 12 hours in a day. Unions may also have negotiated something more generous than time-and-a-half, he said.

Overtime can be based on a daily or weekly threshold for hours worked, Van Alstine said. For example, Alberta has thresholds of 8 hours a day or 40 hours a week, whichever is more beneficial to the employee, while Ontario has a threshold of 44 hours a week, he said.

Some jurisdictions allow employees to bank overtime, but employers can limit how much can be banked, Van Alstine said. As an example, NPI allows employees to bank 37.5 hours of overtime before it is automatically paid out, he said.

Holidays

Holidays are “a beast,” Van Alstine said. “This is probably the biggest chunk of the labor legislation, just because there’s so many layers to it,” he said. Whether an employee is even eligible for holiday pay depends on whether a holiday falls on a working or nonworking day and if it is actually worked, he said, adding that an employee might have to work for an employer for 30 days to be eligible at all.

Generally, when a holiday is not worked an employee receives an average day’s pay based on the wages earned in the previous four weeks, Van Alstine said. Employees working on a holiday generally must receive either their regular pay or time-and-a-half, varying across jurisdictions, plus another paid day off, he said. How hours worked on a holiday count toward overtime calculations also varies by jurisdiction, he said.

While jurisdictions set their own holidays and the Canada Labour Code has its own list, with some in common across the country, Van Alstine said that businesses can also unofficially observe the holidays of other jurisdictions. For example, Ontario businesses tend to treat the first Monday in August as a holiday — even though it is not an official holiday in Ontario — because it is a holiday in five other jurisdictions, he said. “That’s the discretion you have with all of this legislation in terms of making decisions around policy,” Van Alstine said.

Annual Leave, Vacation Pay, Terminations

Annual leave and vacation pay are separate topics in the labor laws, Van Alstine said. All jurisdictions require annual leave based on length of service, and most require two or three weeks, he said, noting that the Canada Labour Code and Saskatchewan both require up to four weeks.

Vacation pay represents the amount an employee is supposed to be paid for their annual leave and is determined as a percentage of vacationable earnings, except in Saskatchewan where it is a fraction of vacationable earnings, Van Alstine said. Percentages vary from 4% to 8% of vacationable earnings depending on an employee’s annual leave entitlement and do not correspond with the wages the employee would have earned during the period, Van Alstine said, cautioning that 4% of vacationable earnings for two weeks of leave is never equivalent to two weeks of wages. Vacation pay is paid either before or after leave, depending on the jurisdiction, he said.

The vacation year in which leave is accrued can be an employee’s start anniversary, a calendar year, or any other 12-month period, but employers prefer to use the same period for all employees, Van Alstine said.

Of all the frequently asked question NPI fields, termination pay tops the list, Van Alstine said. All outstanding vacation pay is due to an employee on termination, Van Alstine said, noting that only the Canada Labour Code and Ontario require severance payments. Businesses in other jurisdictions most commonly use Ontario’s formula when paying severance pay, he said.