--- title: "BC Vacation Pay Rules: 4%, Then 6% After Five Years" url: https://www.everstonecpa.com/blog/vacation-pay-rules-canada-employers description: "BC vacation pay for employers: 4% of wages, 6% after five years, paid before the vacation or on each cheque, and what is owed at the end. See it." type: guide updated: 2026-10-08 summary: "Vacation pay is a provincial entitlement with federal payroll consequences. In British Columbia an employee earns at least four percent of gross wages, rising to six percent after five years of employment. It can accrue and be paid before the vacation starts, or be paid on each cheque by written agreement." faq_count: 6 publisher: EverStone CPA Inc., a Chartered Professional Accountant firm registered with CPA British Columbia and CPA Alberta service_area: British Columbia, Alberta, Ontario and Manitoba language: en-CA contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online --- [Home](https://www.everstonecpa.com/) [Blog](https://www.everstonecpa.com/blog) Vacation Pay Rules for Employers Vacation pay # Vacation pay rules for employers: *accrual, pay-as-you-go and the year-end treatment* By EverStone CPA · Reviewed August 2026 · 10 min read Vacation pay looks trivial until an employee leaves with a larger payout than expected. Two rules apply: a provincial one sets *how much* is owed and *when*; a federal one sets withholding and reporting. Small employers usually get the first roughly right and the second wrong. Related: [Accounting for hair salons, barbers and spas](https://www.everstonecpa.com/accountant-for-hair-salons-spas-bc). Related: [The record of employment — when, how and by when](https://www.everstonecpa.com/blog/roe-record-of-employment-canada). **Free: The monthly bookkeeping checklist** The month-end routine that keeps accruals like vacation pay current. No email wall — it’s just useful. [Download the PDF](https://www.everstonecpa.com/downloads/everstone-monthly-bookkeeping-checklist.pdf) **Quick answer:** Vacation pay is a provincial entitlement with federal payroll consequences. In British Columbia an employee earns at least four percent of gross wages, rising to six percent after five years of employment. It can accrue and be paid before the vacation starts, or be paid on each cheque by written agreement. **Vacation pay calculated on every cheque?** We run payroll with vacation pay, remittances and T4s done correctly, included in bookkeeping from $325 a month. [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=payroll#enquiry-form) Whether you accrue or pay as you go changes the year-end liability on the balance sheet. [How payroll is run here](https://www.everstonecpa.com/payroll-services-canada), or [ask about one employee](https://www.everstonecpa.com/quick-question). Accruing vacation pay assumes the books run on the accrual method; see [which accounting method a business can use](https://www.everstonecpa.com/blog/cash-vs-accrual-accounting-canada). ## The B.C. minimums, side by side B.C. vacation time and vacation pay minimums | Length of employment | Vacation time | Vacation pay | | Employed 5 calendar days or less | No entitlement | No entitlement | | Under 12 months | Earned during the first year | At least 4% of wages paid | | 12 months to under 5 years | Two weeks | At least 4% of wages paid in the previous year | | 5 years and over | Three weeks | At least 6% of wages paid in the previous year | | When employment ends | — | All remaining vacation pay on the final cheque | Vacation time and vacation pay are separate entitlements, which is the distinction this table exists to make: an employee cannot skip the time off and take the money instead. An agreement that gives more than the minimum is enforceable at the higher figure. BC allows either method — but pay-as-you-go must be in writing. **Employment standards are provincial.** Vacation entitlement, statutory holidays and termination notice are set by each province or territory (or by the *Canada Labour Code* for federally regulated employers such as banks, airlines, telecoms and interprovincial trucking). This guide is written for **British Columbia**. If you employ people in Alberta, Ontario or anywhere else, the minimums are different — check your own province’s employment standards branch before you run the numbers. The payroll and tax treatment described further down is federal and applies across Canada. Working out an average day’s pay for a B.C. statutory holiday? The [BC stat pay calculator](https://www.everstonecpa.com/bc-stat-holiday-pay-calculator) does it, and settles the qualifying test first. ## What B.C. requires Two entitlements run in parallel and they are not the same thing. **Vacation time.** Employees earn vacation from their first year: two weeks after 12 months, three weeks after five years. It must be taken within 12 months of being earned, not exchanged for money. **Vacation pay.** At least **4% of all wages paid in the previous year**, rising to at least **6%** once the employee completes five years of employment. Total wages for this purpose include regular wages, salary, commissions, statutory holiday pay, paid sick days required by employment standards, and previously paid vacation pay, which is why the base grows slightly each year. Employees employed five calendar days or less get no vacation pay. Agreements giving *more* are enforceable: an offer letter promising three weeks from day one sets your standard. **Paying vacation pay to a team?** EverStone accrues and pays it correctly, including on termination, as part of payroll on a fixed monthly fee from $325 a month. See [our payroll service](https://www.everstonecpa.com/payroll-services-canada), or [get a payroll quote](https://www.everstonecpa.com/book-online). [Get My Fixed Quote](https://www.everstonecpa.com/book-online) ## Accrual versus pay-as-you-go There are two legitimate ways to run this in B.C. Under the **accrual** method, vacation pay builds up as a liability and is paid at least seven days before the employee starts their annual vacation. This is the default. It matches the cash outflow to the time off, and it means the balance sheet carries an accurate picture of what you owe. Under **pay-as-you-go**, the 4% or 6% goes on every cheque. B.C. allows this only *if the employee and employer agree in writing*. It keeps the liability off the books, but the employee must still take the time off after the money is spent, and any shortfall is still settled when employment ends. Whichever route you choose, apply it consistently and document it. A verbal “it’s included in your rate” is not the written agreement the Act contemplates. ## The payroll treatment This part is federal and applies in every province. Vacation pay is employment income reported in **box 14 of the T4 in the year it is received**, with EI insurable earnings in box 24 and CPP pensionable earnings in box 26. What changes is how the deductions are calculated: - **Paid while the employee is on vacation leave.** CPP contributions and EI premiums are calculated exactly as they would be on regular salary. For income tax, use the table for the vacation period if you pay it separately, or the regular pay period if it goes out with other earnings. - **Paid out without leave, or paid continuously on every cheque.** Income tax is calculated using the *bonus or irregular payment* method, and — the part most often missed — **CPP is also calculated using the bonus method**. EI premiums are still calculated as for regular salary. A company car is the most common taxable benefit on a T4; see [how the standby charge works](https://www.everstonecpa.com/blog/company-car-taxable-benefit-canada). A wrong method rarely changes the employee’s final tax, but it changes what you remit in the period, and remittance mismatches prompt letters. If unsure, apply the discipline of [taxable and non-taxable benefits](https://www.everstonecpa.com/blog/taxable-vs-non-taxable-benefits-canada): characterize the payment first, then withhold. ## What to carry at year-end If you accrue, carry the liability on the balance sheet at fiscal year-end, measured on actual wages paid in the entitlement year. Vacation pay owing differs from vacation *time* owing; an employee can be current on one and behind on the other. The accrual is real cash, so plan it alongside your [source deduction remittances](https://www.everstonecpa.com/blog/payroll-remittances-canada-rp-account). Under pay-as-you-go there is normally nothing to accrue, but you should still be able to show, employee by employee, that the percentage actually went out on every cheque. That reconciliation is a five-minute job during your [payroll year-end checklist](https://www.everstonecpa.com/blog/payroll-year-end-checklist-canada) and a very unpleasant one two years later. ## When employment ends All remaining vacation pay is owed on the final cheque, with 4% still due to someone who has been there less than a year. That payout lands inside the same 48-hour window as the rest of the final wages. See [final pay on termination](https://www.everstonecpa.com/blog/terminating-an-employee-canada-final-pay) for the full sequence. ## Vacation pay on a Chilliwack trades payroll Chilliwack trades employers often pay vacation pay on each cheque as crews come and go. BC allows that if agreed and shown separately on the pay statement; the common failure is folding it into the hourly rate with no record. [Chilliwack accounting firm](https://www.everstonecpa.com/accountant-chilliwack) for the payroll side. ## The bottom line Choose deliberately between accrual and pay-as-you-go, put pay-as-you-go in writing, use the right deduction method, and carry an honest liability if you accrue. Then vacation pay will not surprise you. Hiring for the first time? Our [first-employee checklist](https://www.everstonecpa.com/blog/hiring-first-employee-canada-checklist) sets up the rest of the payroll file. Running payroll through your own corporation puts you on the other side of these rules. For the version that applies to your company, [send the question](https://www.everstonecpa.com/quick-question) and a CPA answers it, usually the same business day. Vacation accrual is the kind of calculation that quietly compounds when it is wrong, which is one reason owners end up [having payroll run for you](https://www.everstonecpa.com/payroll-services-canada) rather than tracking it in a spreadsheet. Getting the accrual and the withholding right every pay is ordinary [payroll and bookkeeping](https://www.everstonecpa.com/accounting-services) work — the errors compound quietly when it is reconstructed at year-end instead. Sources - [B.C. Employment Standards — Annual vacation and vacation pay](https://www2.gov.bc.ca/gov/content/employment-business/employment-standards-advice/employment-standards/time-off/vacation) - [Canada Revenue Agency — Vacation pay and public holidays (payroll deductions and reporting)](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/special-payments/vacation-pay-public-holidays.html) - [B.C. Employment Standards — Getting paid for work](https://www2.gov.bc.ca/gov/content/employment-business/employment-standards-advice/employment-standards/wages) This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and your situation is unique, so please [speak with a CPA](https://www.everstonecpa.com/book-online) before acting on anything here. About this article **EverStone CPA** Prepared and reviewed by a CPA at EverStone CPA, serving businesses in BC, Alberta, Ontario and Manitoba. [About the firm →](https://www.everstonecpa.com/about) · [Send an enquiry →](https://www.everstonecpa.com/book-online) Working through this locally? We advise owners on it as an [Abbotsford small business accountant](https://www.everstonecpa.com/accountant-abbotsford). ### Keep reading [Statutory holiday pay for employers →](https://www.everstonecpa.com/blog/statutory-holiday-pay-canada-employers) [Final pay on termination →](https://www.everstonecpa.com/blog/terminating-an-employee-canada-final-pay) [Payroll year-end checklist →](https://www.everstonecpa.com/blog/payroll-year-end-checklist-canada)[CPP & EI for 2027: What’s Known, What Isn’t Yet →](https://www.everstonecpa.com/blog/cpp-ei-rates-2027) Common questions Never miss it again Subscribe to our Canadian tax deadline calendar — the fixed CRA dates land in your calendar every year with a reminder a week ahead. [Add the deadline calendar](https://www.everstonecpa.com/cra-tax-deadlines#ics) ## Frequently asked questions about vacation Pay Rules for Employers **How much vacation pay is required in British Columbia?** At least 4% of all wages paid in the previous year, rising to at least 6% once the employee completes five years of employment. Total wages for this calculation include regular wages, salary, commissions, statutory holiday pay, employment-standards paid sick days and previously paid vacation pay. Employees employed for five calendar days or less are not entitled to vacation pay. **Can I just add 4% to every pay cheque instead of accruing?** In B.C. you can, but only if the employee and employer agree in writing. Otherwise vacation pay must be paid at least seven days before the employee starts their annual vacation. Pay-as-you-go does not remove the requirement that the employee actually take their vacation time within 12 months of earning it. **Is vacation pay taxed?** It is reported the same way — employment income in box 14 of the T4 in the year received — but the deduction method can differ. Paid while the employee is on vacation leave, CPP and EI are calculated as for regular salary. Paid out without leave, or continuously on each cheque, income tax and CPP use the bonus or irregular payment method while EI stays on the regular basis. **Do vacation time and vacation pay have to match?** Not exactly. They are separate entitlements. In B.C. an employee gets two weeks of vacation time after 12 months and three weeks after five years, while vacation pay is a percentage of the previous year’s wages. An employee can be paid correctly and still be behind on time off, which is itself a compliance problem because vacation must be taken within 12 months of being earned. **Should vacation pay sit on the balance sheet?** If you accrue, yes. The unpaid vacation pay liability belongs on the balance sheet at your fiscal year-end, calculated on actual wages paid in the entitlement year rather than estimated. It is a real cash commitment that crystallises when someone takes their vacation or leaves. Under a written pay-as-you-go arrangement there is normally nothing left to accrue. **What happens to vacation pay when an employee leaves?** All remaining vacation pay must be paid on the final cheque, and an employee with less than a year of service is still owed at least 4% of their wages. In B.C. that payout falls inside the same window as the rest of the final wages: 48 hours if the employer ended the employment, six days if the employee quit. ## Want vacation pay handled inside your payroll? Send us your head count and pay frequency. A CPA replies by email within one business day with a fixed monthly fee. [Get My Fixed Quote](https://www.everstonecpa.com/book-online)[Book a Paid Advice Call](https://www.everstonecpa.com/advice-call) ## Have a question about this? Ask free through [the quick-question form](https://www.everstonecpa.com/quick-question); a CPA replies within one business day. Need more? A 45-minute **Advice Call** is $225 plus GST, credited to your first invoice if you become a client within 60 days. Want us to take it on? [Send an enquiry](https://www.everstonecpa.com/book-online). [Ask a Free Question](https://www.everstonecpa.com/quick-question) [Book a Paid Advice Call](https://www.everstonecpa.com/advice-call) Email info@everstonecpa.com ★★★★★ “Personal. Professional. Responsive. Plus he saved me a bundle!” Corrin Skalbeck · Google Local Guide **Run your own numbers with the free calculators:** [GST/HST calculator](https://www.everstonecpa.com/gst-hst-calculator) · [test whether incorporating pays](https://www.everstonecpa.com/incorporation-calculator) · [verify your payroll deductions](https://www.everstonecpa.com/payroll-deduction-calculator) [← Underused Housing Tax: why corporations get caught](https://www.everstonecpa.com/blog/underused-housing-tax-canada-corporations) [Vehicle & mileage deductions for business (2026) →](https://www.everstonecpa.com/blog/vehicle-mileage-deductions-canada-business) More on this subject: [the corporate tax library](https://www.everstonecpa.com/corporate-tax-hub). More on this subject: [the year-end hub](https://www.everstonecpa.com/year-end-hub). --- Source: https://www.everstonecpa.com/blog/vacation-pay-rules-canada-employers Prices: https://www.everstonecpa.com/pricing · Contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online