Vacation Pay in Alberta | An Employer’s Guide with Examples

In Alberta, employees get vacation pay of 4% of wages until they complete five years of employment and 6% of wages after that. Alberta’s definition of “wages” for this purpose excludes overtime, general holiday pay, termination pay and vacation pay itself. Vacation pay can be paid any time, but no later than the pay day after the vacation starts, and many employers simply pay it on every cheque.

Vacation Pay in Alberta: The Quick Answer (4%, 6% and When Each Applies)

Part-time employees get the same percentages. Their dollar amount is just smaller.

Vacation Time Entitlement: When Employees Earn 2 and 3 Weeks

• After 1 year of employment: at least 2 weeks off a year
• After 5 years of employment: at least 3 weeks off a year
• Vacation must be taken within 12 months after the employee becomes entitled to it
• If you can’t agree on dates, you can set them, but you must give 2 weeks’ written notice
• Time off is taken in one block unless the employee asks in writing to split it (half-days are allowed if you both agree)

What’s Included and Excluded (Overtime, General Holiday Pay, Termination Pay)

This is where Alberta is very different from BC.

So in Alberta, you don’t pay vacation pay on overtime or on stat holiday pay.

Step-by-Step Vacation Pay Calculations with Examples

Step 1: Add up the employee’s wages for the vacation year, leaving out the excluded items.

Step 2: Multiply by 4% (less than 5 years of service) or 6% (5 years or more).

Example 1: Hourly employee, year 2

Kevin earned $48,000 total in the year: $44,500 regular wages, $2,300 overtime and $1,200 general holiday pay.

Wages for vacation pay: $44,500

$44,500 × 4% = $1,780

Example 2: Hourly employee, year 6

Same numbers, but Kevin has been with you 6 years:

$44,500 × 6% = $2,670

Example 3: Monthly salaried employee

For employees paid monthly, Alberta requires at least one week’s wages per week of vacation. Weekly wage = monthly salary ÷ 4.3333.

Salary $5,200/month → $5,200 ÷ 4.3333 = $1,200 per week of vacation

Two weeks off = $2,400. In practice, most employers just keep paying the regular salary during vacation.

Example 4: Paid on each cheque

Part-time employee earning $900 per pay period (no overtime):

$900 × 4% = $36 per cheque

When to Pay Vacation Pay: Before Vacation, on Each Cheque or Later

Alberta gives employers flexibility:

• Any time, but no later than the next regular pay day after the vacation starts
• If you haven’t paid it before the vacation, the employee can ask for it one day before their vacation starts, and you must pay it then
• On every cheque: common and allowed, as long as it’s shown clearly on the pay stub

Even if you pay it on every cheque, you still have to give the time off. The employee just won’t get paid again during it.

Vacation Pay at Termination

When employment ends, you must pay all vacation pay earned and not yet paid, including:

• Unpaid vacation pay from previous years, and
• 4% (or 6%) of wages earned since the employee last became entitled to vacation

Read more: Employee termination payroll in Canada · ROE guide

FAQ: Vacation Pay in Alberta

Does vacation pay include overtime in Alberta?

No. Overtime pay is excluded from wages for vacation pay in Alberta.

Do employees in their first year get vacation pay?

They earn it from the start. If they leave before their first anniversary, they’re owed 4% of wages earned.

Is “use it or lose it” allowed in Alberta?

No. You can’t take away earned vacation pay or time. Vacation has to be given within 12 months of being earned.

Is vacation pay taxable?

Yes. Deduct income tax, CPP and EI from it like regular pay.

Can an employee waive vacation in exchange for pay?

No. The time off must be taken, even if the pay has already been given on each cheque.

What’s different for construction workers?

They’re entitled to 6% vacation pay from the start of employment.

Payroll Services for Calgary Employers