How Is Holiday Pay Calculated?

We are fortunate in Ontario to have nine public holidays each year. If your employment is covered by the province’s Employment Standards Act (ESA), then you are entitled to be paid for these holidays.

The ESA sets out how your pay will be calculated for the holiday. For those of us who work regular hours, it is not difficult to work out how much this will be. However, calculating holiday pay for those whose employment is not as predictable, such as part-time or casual workers, is not so clear-cut, especially in light of recent changes to this calculation.

So, what does the current law say?

The previous formula

Previously, holiday pay was calculated as the total amount earned in the four weeks before the holiday, divided by 20.

As a basic example, if Sarah worked only one eight-hour shift in the four weeks before the holiday, earning $15/hour, she would be entitled to $6 for the public holiday (8 hours / 20 = 24 minutes of holiday pay). However, if Sarah worked 20 eight-hour shifts in the four weeks before the holiday at that same rate, she would be entitled to $120 for the public holiday (160 hours / 20 = 8 hours of holiday pay).

Keep in mind that you and your employer can always agree for you to work on a public holiday. In addition, if you are an employee at a hospital, a continuous operation, or a hotel, motel, tourist resort, restaurant or tavern, your employer can require you to work on a public holiday. However, if this happens, your employer must either offer you a separate day within three months of the holiday to take off at the paid public holiday rate, or pay you public holiday pay and premium pay for the public holiday worked.

A step backwards?

Last year, the Ontario provincial government passed Bill 148, the Fair Workplaces, Better Jobs Act, which made significant changes to the Employment Standards Act, 2000. You can read more about these changes here.

Among the changes was an update to how holiday pay is calculated. The new calculation is as follows: the total amount earned in the pay period before the holiday, divided by the number of days worked in that period.

This change has been heavily criticized as flawed and costly, particularly for small business owners.

Going back to the first example above, if Sarah worked just one eight-hour shift in the previous pay period, earning $15/hour, she would be entitled to one full day of holiday pay (8 hours / 1 day of work = 8 hours of holiday pay). This is equal to the full-time employee, who may have worked 80 hours in the previous pay period (80 hours / 10 days of work = 8 hours of holiday pay).

As this example illustrates, the updated calculation requires employers to pay part-time and casual employees identical holiday pay rates to full-time staff. Though an obvious win for employees, the change may result in employers making fewer part-time and casual positions available, positions often filled by students, as they are unfeasible for their business.

In with the old, out with the new

In response to this contentious change to holiday pay, earlier this month the Ontario government issued a new regulation that, as an interim measure, reinstates the previous formula.

This will come into effect on July 1, 2018 and will be valid until the end of 2019, when a new system will be implemented.

The government also announced they will be conducting a review of the public holiday system under the ESA.

Stay tuned to hear more about this review, and if you have questions about holiday pay, contact our Employment Law Group.