Canadian Vacation Entitlement, Pay Accrual, and Rollover Protocols for 2026

The administration of annual vacation entitlements in Canada represents one of the most complex intersections of employment standards legislation, contract law, and payroll compliance. As the Canadian workforce transitions into the 2026 calendar year, employers and employees alike are confronted with a fragmented legal landscape where the answer to the fundamental query "Do unused vacation days roll over?" varies dramatically based on jurisdiction, tenure, and the specific classification of the worker.

Unlike many international jurisdictions that may adopt a unified national labour code, Canada operates under a bifurcated system. Approximately 94% of the workforce is governed by provincial or territorial statutes, while the remaining 6% falls under federal jurisdiction. This report serves as an exhaustive treatise on the provincial and territorial regulations governing vacation entitlements, carry over provisions, and payout obligations effective for 2026.

Federal Jurisdiction: The Canada Labour Code

Employees working in federally regulated industries (including banking, telecommunications, interprovincial transportation, and Crown corporations) are governed exclusively by the Canada Labour Code (CLC), irrespective of the province in which they physically reside.

The Architecture of Federal Entitlement

Under the Canada Labour Code, vacation entitlements are tiered based on the employee's duration of "continuous employment" with the same employer. As the legislative framework stands for 2026, the entitlement structure is as follows:

• 1 to 4 Completed Years: The employee is entitled to 2 weeks of vacation time. The corresponding vacation pay is calculated at 4% of gross wages earned during the year of employment.
• 5 to 9 Completed Years: Upon completing five consecutive years of employment, the entitlement increases to 3 weeks of vacation time. The vacation pay accrual rate rises to 6% of gross wages.
• 10 or More Completed Years: Employees with ten or more consecutive years of service constitute the highest tier, entitled to 4 weeks of vacation time. The vacation pay accrual rate is 8% of gross wages.

Rollover Protocols and the 10 Month Rule

The federal system operates under a strict statutory usage window designed to ensure employees utilize their vacation for rest and recuperation.

The 10 Month Mandate: The legislation stipulates that an employee must take their annual vacation no later than 10 months after the completion of the "year of employment" in which it was earned. For example, if an employee completes their year of employment on December 31, 2025, they must take their earned vacation time by October 31, 2026.

Postponement and Waiver: A critical distinction in the federal code, which is often misunderstood, is the ability to waive vacation time. Under Section 14(1) of the Canada Labour Standards Regulations, an employee may, by written agreement with the employer, postpone or waive their entitlement to an annual vacation for a specified year of employment. However, the waiver of time does not extinguish the employer's obligation to pay. The employer must pay the vacation pay owed to the employee within 10 months after the end of the specified year of employment.

2026 Legislative Context

For the 2026 calendar year, federal employers must be cognizant of how new leave entitlements impact vacation accrual. Recent amendments have introduced paid leaves for pregnancy loss (3 days paid after 3 months of service) and enhanced bereavement leave.

British Columbia: The Employment Standards Act

British Columbia presents a rigorous regulatory environment regarding vacation usage. The Employment Standards Act (ESA) in BC is distinct in its refusal to allow employees to "cash out" statutory vacation time while remaining employed.

Entitlement Structure

• First 12 Months: No vacation time is mandated, but vacation pay accrues.
• After 1 Year: The employee is entitled to 2 weeks of vacation. Vacation pay is calculated as 4% of total wages earned in the previous year.
• After 5 Years: The entitlement increases to 3 weeks of vacation. Vacation pay increases to 6% of total wages earned in the previous year.

The Prohibition on "Payouts" and Rollover

British Columbia’s legislation emphasizes the health and safety aspect of vacation. Consequently, the ESA dictates that an employer must ensure an employee takes their annual vacation within 12 months of the end of the employment year in which it was earned. Experts note that if an employee refuses to schedule vacation, the employer has the right and the duty to unilaterally schedule the vacation time to ensure compliance.

Can Statutory Vacation Be Paid Out? No. Employers and employees cannot "contract out" of the ESA. They cannot agree to pay out the statutory minimum vacation time. The legislation states there is "no option for pay in lieu of vacation" for continuing employees regarding the statutory minimums. See Ascent Employment Law for further interpretation.

The Definition of "Total Wages"

In BC, vacation pay is calculated on "total wages," which is a broad definition. It includes regular salary, hourly wages, commissions, bonuses, statutory holiday pay, and previously paid vacation pay (creating a compounding effect). For 2026, employers must also ensure that the 5 days of paid sick leave mandated by the province are included in the Section 58 calculation base.

Alberta: The Employment Standards Code

Entitlement Structure

Years 1 to 4 entitle employees to 2 weeks of vacation and 4% of wages. From Year 5 and beyond, this increases to 3 weeks of vacation and 6% of wages. Refer to the Employment Standards rules for detailed breakdowns.

Scheduling and Carry Over

Employers must ensure employees take their vacation within 12 months after earning it. If the employer and employee cannot agree on when the vacation should be taken, the employer has the authority to schedule the vacation, provided they give the employee at least two weeks' written notice.

Rollover: While the Code mandates taking vacation within 12 months, it does not explicitly ban agreements to extend this timeline. However, standard practice implies that rollover beyond the 12 months is at the employer's discretion.

General Holidays: If a general holiday falls on a day that would otherwise be a working day for the employee, and the employee is on vacation, they are entitled to receive holiday pay and take one extra day of vacation.

Saskatchewan: The Saskatchewan Employment Act

Saskatchewan is notable for having the most generous initial vacation entitlement in Canada, a factor that significantly impacts payroll liabilities for employers operating in the province.

Entitlement Structure

• Years 1 to 9: 3 weeks of vacation time; vacation pay is 3/52 of total wages (approx. 5.77%, often rounded to 6%).
• Year 10 and Beyond: 4 weeks of vacation time; vacation pay is 4/52 of total wages (approx. 7.69%, often rounded to 8%).

The 2026 Legislative Landscape (Bill 5)

Effective January 1, 2026, significant amendments to the Saskatchewan Employment Act (via Bill 5) come into force. The Act introduces enhanced sick leave protections (up to 27 weeks for serious illness). Employers must ensure that "years of service" continue to accrue during these unpaid leaves. For an analysis of these changes, see MLT Aikins legal insights.

Rollover and Payout Deadlines

A unique feature of Saskatchewan law is the explicit deadline for vacation pay payout if time is not taken. If an employee does not take their vacation, the employer must pay the vacation pay not later than 11 months after the day on which the employee became entitled to the vacation. For public service specific carryover rules, consult the Taskroom manager resources.

Manitoba: The Employment Standards Code

Manitoba’s regulations are characterized by a shorter usage window. Unlike the 12 month standard in the West, Manitoba requires that employees take their vacation within 10 months of earning it. Entitlement stands at 2 weeks (4%) for years 1-4, increasing to 3 weeks (6%) for year 5 and beyond. See the Manitoba Employment Standards factsheet for more details.

The CFIB also notes that if vacation pay is paid on every cheque, employers are not required to pay the employee again when they take the actual time off.

Ontario: The Employment Standards Act, 2000

Entitlement Structure

• Less than 5 Years: 2 weeks of vacation time; 4% of gross wages.
• 5 Years or More: 3 weeks of vacation time; 6% of gross wages.

Written Agreements and 2026 Compliance

Effective June 21, 2024, the Employment Standards Act was amended to clarify that arrangements to pay vacation pay on every cheque must be agreed to in writing. Verbal agreements are no longer sufficient. For 2026, employers must ensure all "pay-as-you-go" employees have signed agreements on file. Refer to recent changes to the ESA for compliance checklists.

The ESA implies a "use-it-or-lose-it" approach to time, but the vacation pay never expires. Employers may allow employees to carry over vacation time, but this specifically requires a written agreement.

Quebec: The Act Respecting Labour Standards

Quebec operates under a distinct "Reference Year" system that aligns the majority of the province's workforce to a common calendar (typically May 1 to April 30). Entitlement is based on 2 weeks (4% indemnity) for 1 to 3 years of service. For 3 years or more, this increases to 3 weeks (6% indemnity). See CNESST for calculation tables.

Quebec law strictly prohibits replacing vacation time with money for current employees. The goal is to ensure the employee takes the rest. Exceptions exist only if the collective agreement allows it, as outlined by Éducaloi.

Atlantic Canada

Nova Scotia & New Brunswick

In Nova Scotia and New Brunswick, the entitlement is 2 weeks (4%) initially, increasing to 3 weeks (6%) after 8 years. Nova Scotia is unique in allowing employees who work less than 90% of regular hours to waive their vacation time entitlement in writing. For a wider comparison of these rules, see Thirdsail's guide.

Prince Edward Island: The 2026 Legislative Shift

Employers in PEI face a critical transition due to Bill 76. Legislation has been introduced to reduce the threshold for 3 weeks vacation from 8 years to 5 years, aligning PEI with the national norm. For the 2026 calendar year, employers must verify the proclamation date of these sections of the new Employment Standards Act. Legal firm Stewart McKelvey advises adjusting accruals for employees with 5 to 7 years of tenure accordingly. Visit the PEI Government website for the latest status.

Newfoundland and Labrador

NL has the longest tenure requirement in the country for increased vacation. Employees are entitled to 2 weeks (4%) initially, and do not receive 3 weeks (6%) until after 15 years. Refer to the government paid leave policy or the CFIB summary for calculation methods.

The Territories

Yukon: Entitlement is 2 weeks (4%). The Employment Standards Act prohibits "use-it-or-lose-it" policies regarding vacation pay. See Vacation Tracker for territory specifics.

Northwest Territories & Nunavut: Entitlement is 2 weeks (4%) for years 1-5, increasing to 3 weeks (6%) after 6 years. Employers in Nunavut can consult the Labour Standards Compliance Office, while NWT managers should review the Excluded Employees Handbook.

Summary Data Tables

Table 1: Statutory Vacation Entitlements (Effective 2026)

Table 2: Rollover and Forfeiture Rules

Systemic Issues and 2026 Outlook

The "Unlimited Vacation" Paradox

In 2026, the trend of "Unlimited PTO" continues to grow in the tech sector. Employers must recognize that "unlimited" policies do not supersede statutory minimums. An employer in Ontario with an unlimited policy must still track that the employee took at least 2 weeks. If the employee takes 0 weeks and resigns, the employer owes 4% of wages, regardless of the "unlimited" label. The failure to track this creates a hidden liability.

Payroll Mechanics and "Wages"

A recurring compliance failure involves the definition of "gross wages" for the 4%/6% calculation. In almost all jurisdictions, overtime and public holiday pay are included in the calculation. In some jurisdictions (like Ontario), vacation pay must be calculated on termination pay, meaning if you pay 4 weeks severance, you owe vacation pay on those 4 weeks.

Conclusion

For the year 2026, the answer to "Do unused vacation days roll over?" is nuanced. Vacation Pay never expires; it rolls over indefinitely as a financial debt until paid. Vacation Time generally does not roll over as a statutory right. Most provinces require it to be taken within the following year. If not taken, the time is lost, but the money must be paid out.