Canada Vacation Laws: A Guide for US Companies Hiring Abroad

US employers looking to hire abroad can look up north to find a strong candidate pool in Canada. Read our guide to learn more about Canadian vacation laws for US companies building teams globally.

Lake and mountains in Banff

Caitlin MacDougall

Published on November 12, 2021

Just this year, US News and World Report rated Canada as the "Number 1 Country in the World". This title may seem like an exaggeration, but when you look at the details, the prize is well-earned.Canada is considered a progressive country: 80% of its citizens identify with social justice causes, and many welcome the country's racial and ethnic diversity. The country is also rated one of the best for its strong job market and its "perceived agility," a term referring to the perception that the country can adapt to an ever-changing global market--no small feat, especially during a global pandemic.One hallmark of living in Canada is its quality of life. The Organization for Economic Co-operation and Development (OECD) ranks Canada as being above average in housing, job availability, social connections, and overall health. You can imagine that this achievement wouldn't be complete without a healthy work-life balance, which, to no surprise, is a hallmark of Canadian culture as well. Only 4% of employees in Canada work long hours, ranking them 11th in work-life balance out of 40 countries.If you are looking to grow your US company globally, you may want to start in Canada. It's just across the border, making scheduling calls, meetings, and interviews simple. What's more, the majority of the country speaks English, or a combination of English and French, so there is little to no language barrier. Canada is also known for some of its most popular industries, like aerospace, tech, and design. If your company specializes in this field, Canada would be a natural place to look for talent.Before you look for talent in Canada, you may consider some of the established practices and regulations for Canadian workers. That work-life balance we mentioned above didn't just happen: plenty of systems are in place to guarantee that employees in Canada are happy and healthy with access to annual vacation and paid leave. You should familiarize yourself with Canadian vacation laws and paid time off before hiring in the Great White North.

Employees and independent contractors in Canada

Before you hire, let's clarify the different types of workers in Canada. Some workers are classified as employees, and some are classified as independent contractors, or self employed. Employers abroad may decide to hire contractors instead of employees. Why is that? Let's do a brief overview of worker classification, and which type of worker may best suit your company's needs.


In an employer-employee relationship in Canada, the employer has more control over how and when their employees work than they would with an independent contractor.In an employment contract, the employer will:In addition to minimum vacation time, an employer in Canada is required to provide pension, parental leave, employment insurance, and eye exams for their employees. They may also choose to offer healthcare, healthcare spending accounts, and even gyms, but are not obligated to do so.Hiring employees can be helpful if your company needs to work collaboratively on an ongoing project, or if you know you can offer a position within your company with indeterminate amount of work.

Independent Contractors

An independent contractor is self-employed, and, like an employee, receives wages or a salary for their professional services. The employment standards when working with an independent contractor differs significantly from the standards of working with an employee.When working with independent contractors, the employer may not:
  • manage the independent contractor's schedule
  • instruct the independent contractor on how they are to complete their duties
  • provide the tools needed for the job
  • provide benefits for the contractor such as annual vacations
The independent contractor is not entitled to benefits, aside from the Canadian government's benefits like Employment Insurance (EI), or Medicare. They are also not entitled to severance pay if an employer ends their employment relationship with them. Contractors do not receive minimum wage, or overtime compensation for extra work, and they must submit their own income taxes to the Canada Revenue Agency (CRA).One disadvantage independent contractors face is that Canadian laws require self-employed contractors to pay a self-employment tax to the CRA. This self-employment tax can add up to 10% of their income, but is capped at $5,796.Many employers choose to hire independent contractors when growing their business abroad in order to save on the cost of providing benefits and managing the worker's tax obligations.If you are planning to hire employees in Canada instead of independent contractors, you will need to become familiar with the benefits they are entitled to, including annual vacation. Here is a general outline of an employee's entitlement to vacation time as per Canadian employment law.

Determining a Canadian employee's annual vacation according to the "year of employment" 🗓

Employers must define an employee's annual leave entitlement in terms of the employee's length of service to an employer, known as the "year of employment." The employee is entitled to paid leave after they have been working for the same employer for twelve consecutive months or an entire calendar year after the employee was originally hired. It's critical to know your employee's years of employment because their gross wages for the vacation period are determined by how many years they have worked for the same employer.

Calculating a Canadian employee's vacation pay 🧮

Vacation pay is a percentage of the gross wages earned during a year of employment. Some vacation entitlement depends on province, or jurisdiction, but Canadian labor law stipulates that every employee is entitled to two weeks' vacation at 4% of their regular wages earned in an entitlement year.  Paid vacation also changes for every year an employee has been employed by the same employer. If an employee has spent five years continuously employed by the same employer, the employee's vacation entitlement increases to three weeks of vacation at 6% pay. After 10 completed years, employees are entitled to four weeks of vacation at 8% pay.It should be noted that the term "wages" applies to regular wages or every payment made to the employee that year, with the exception of tips and other gratuities. If an employee has been working for less than a year, they are not entitled to paid vacation.

Paying before or after an employee's vacation period

Normally, the employer pays their employee their vacation pay within fourteen days, or roughly one pay period, before the employee's vacation period starts. This can vary slightly depending on province and a company's established practice for a vacation pay period. In British Columbia, for instance, employers must pay their employees their vacation pay "at least 7 days before the beginning of the employee’s vacation." This will allow the employee to be able to use their holiday pay during the actual vacation time.According to the Canada Labor Standards Regulation, however, the employer can issue vacation pay following the vacation period or during the vacation period, if that is the established standard at the company.

Splitting, interrupting, postponing, and renouncing vacation time 🚦

An employee must take their vacation no more than 10 months after they complete a year of employment. In some cases, however, an employee may choose to split up their paid vacation, halt it for a period of time, postpone it, or renounce it altogether.


The employee can request to have their vacation split, but they must make this request in writing for the employer's approval. If the employee's request is accepted, the employer pays a prorated amount of vacation pay each time the employee takes their vacation days.InterruptingAn employee may choose to interrupt their vacation days, also known as postponing their vacation. This is often the case if an employee takes parental leave in the middle of their paid vacation days, or if they take leave for a critical illness or bereavement (i.e. a death in the family). They can also split their leave in the case that they have military duty (i.e. reservist leave), or if they have a sickness or a work-related illness or injury.


An employee's annual vacation can be renounced, or waived, in the entitlement year if the employee chooses to do so. They will need a written agreement with their employer that shows the employer approves of the waiver.

General holidays and scheduling vacation time

If the employee asks for a vacation, the employer will schedule vacation time based on a mutually agreed upon time period. When it comes to public holidays, the Canada Labour Code (the Code) requires employers to provide holiday pay for their employees 10 times per year. Here are the general holidays in Canada according to the Code:
  • New Year's Day
  • Good Friday
  • Victoria Day
  • Canada Day
  • Labour Day
  • National Day for Truth and Reconciliation
  • Thanksgiving Day
  • Remembrance Day
  • Christmas Day, and
  • Boxing Day
Many of these holidays are the same as in the US, particularly religious holidays like Good Friday and Christmas Day (though Good Friday is not a US federal holiday), but some holidays in Canada have a different calendar date than those in the US. Thanksgiving in Canada, for instance, falls on the second Monday in October, whereas Thanksgiving in the US occurs on the fourth Thursday in November.Just this year, Canada established September 30 as a National Day for Truth and Reconciliation. On this national holiday, Canadians wear orange to commemorate indigenous survivors of residential schools and those who did not survive. These schools for indigenous children in Canada ran from 1831 to 1998, and in June of this year, a number of children's remains were discovered in unmarked graves on these school sites. The holiday is part of a larger effort by the Canadian government to provide reconciliation and reparations for indigenous people in Canada.


Exemptions for holiday pay may apply in the case of a collective agreement that entitles employees to at least nine holidays with pay, excluding annual vacation. In the case of a collective agreement, the employer can substitute a general holiday for any other day if there is a written agreement outlining this.If a public general holiday falls on an employee's day off, the employee must be granted a holiday with pay to be scheduled at some other time. The employer can add the day to the employee's annual leave or at some other mutually agreed upon time.

Time off in the case of family responsibility or critical illness 🤕

The Labour Code entitles workers to at least five days' sick leave for each calendar year. After three months of continuous employment, an employee is entitled to 3 paid days of sick leave. Employees are entitled to use that sick leave in the case that they have to take care of family members, or in the case of a family emergency. If they need more time than that which they have earned, they should refer to their vacation entitlement and use their vacation days to cover their leave.

COVID-19 🦠

With the present risk of COVID-19, taking time off for illness or family responsibility has never been more relevant. Through collective agreements, unions in 2020 requested immediate financial support for workers affected by COVID-19. As of November 9, 2020, the government of Canada mandates that those who are able to work and those who are in quarantine but otherwise in good health should continue to work remotely.

Maternity and parental leave 🤱

The Employment Insurance (EI) program in Canada offers financial support for unemployed workers, but it also offers support for biological mothers and parents of newborn, fostered, or adopted children.The EI program distinguishes maternity leave from parental leave. Maternity leave only applies to the parent that is pregnant or gives birth to a child. A mother of a newborn child may also be entitled to parental benefits, however. Here's a guideline for how these benefits work.

Maternity leave

Biological mothers, which includes surrogate mothers, who need to take time off to give birth and care for a new child, are entitled to a maximum of 15 weeks of paid time off. For any parent of a newborn child or newly adopted child or children, they have two options for parental leave: standard parental benefits and extended parental benefits.

Standard parental benefits

Standard parental benefits include a maximum of 35 weeks of paid time off at 55% of the claimant’s average weekly wages earned, and parents can take this leave any time within a 52-week period after the child's birth or adoption placement. If there are two parents taking care of the child, they can share the 35 weeks of paid time off.

Extended parental benefits

Extended parental benefits are more generous than standard parental benefits. Extended benefits allow a maximum of 61 weeks of paid time off at a rate of 33% of the employee's average weekly earnings. This leave must be taken within a 78-week period after the week the child was born or adopted. And once again, two parents split the time off, which is about 18 months.

Legal Disclaimer:

The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.

How Pilot can help your business navigate vacation requirements

The laws and regulations for annual vacation and paid leave are obviously complex. So much can depend on the employee's years with the same employer, a province's vacation entitlement laws, or a union's collective agreement. You may be asking yourself how your company would be able to keep track of these details, especially when there's still hiring, payroll management, or tax compliance to consider.Pilot can help your business with nearly every facet of hiring abroad. We specialize in international compliance, remote payroll, and benefits--such as vacation pay--for US-based companies who want to grow globally. Our international and fully distributed team has expert knowledge on everything from classifying workers, vacation pay, acquiring work permits, payroll, labor laws, to tax compliance. Whether you are a small business or a large corporation, we are here to help navigate these often complex aspects of hiring and maintaining workers so that you can focus on the other necessary aspects of running a business.When it comes to payroll, Pilot never marks up exchange rates, and contractors love our services because unlike other HR and payroll platforms, we don't require that contractors use a debit card or e-wallet. Instead, funds go straight to your independent contractors’ bank accounts. We support payments in over 240 countries around the world.There's more to business than just payroll and compliance. Pilot wants you to be able to focus on the vision and growth of your business while we take care of the rest.

Going global isn't daunting when you partner with Pilot. 🤝

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