How to pay your PEI employees for vacation

The Prince Edward Island Employment Standards Act regulates that employees are required to take time off for annual vacation and to be paid vacation time. After being employed for 12 months, an employee becomes entitled to receive an annual vacation.

What are the employer’s responsibilities revolving around the annual vacation entitlement?

  • An employer must give an employee an annual vacation of:
    • At least 2 weeks after 12 consecutive months of employment, or
    • At least 3 weeks after 8 years with the same employer.
  • Ensure an employee takes an annual vacation within the following four months (this four-month period can be varied if mutually agreed upon by the employer and the employee)
  • Help employees determine when their vacation will be taken. Generally employers let their employees choose when to take vacation time; however, the employer has the final say and must notify employees when their vacation will begin at least one week in advance
  • If the employer and employee agree, the vacation time can be broken up into two or more periods.
  • Employees who work full time must take vacation time. Those who work less than 90 per cent of regular working hours during the 12 months when they earned vacation, can give up vacation time and just collect their vacation pay.

How is vacation pay calculated?

An eligible employee is entitled to:

  • 4% of gross wages if the employee has been employed for less than 8 years.
  • 6% of gross wages if the employee has been employed by the same employer for 8 years or longer.

Vacation pay must be paid:

  • At least one day before the employee goes on vacation, or
  • Include the vacation pay in with the employee’s hourly rate, which would be paid on every pay cheque. If this method is chosen the employer must have proof the employee knows vacation pay is on every cheque and include reference to this on the employee’s pay stub.
  • When employment ends, the employee is entitled to receive all accumulated vacation pay he/she has earned. The employer must include these monies with the employee's final pay.

Workers Not Covered

Not all workers are covered by the Employment Standards Act rules on vacations and vacation pay. Those who are not include:

  • salespersons whose income is derived primarily from commission on sales
  • farm labourers

For more information please see the Labour Standards Vacation Time and Vacation Pay section of the Prince Edward Island Labour Standards Website.

You can also contact your CFIB Business Counsellor at 1-888-234-2232 or