Vacation pay in Quebec: The complete employer’s guide

Running a business in Quebec isn’t just about speaking French; it’s about speaking the language of unique labour standards. If you’ve ever felt like Quebec’s employment laws are operating on a different frequency than the rest of Canada, you aren’t imagining it. The rules here don’t just zag where others zig—they built an entirely different road.

This is especially true when it comes to vacation pay.

While the rest of the country generally follows a standard anniversary-based system, Quebec’s CNESST regulations throw a curveball that catches even seasoned payroll pros off guard. We’re talking about mandatory reference years, distinct concepts of “time off” vs. “indemnity,” and specific reporting requirements that can turn your year-end into a headache if you aren’t prepared.

But don’t sweat it. We’re here to cut through the noise. This guide is your sidekick in navigating the complexities of vacation pay in Quebec so you can get back to what matters: growing your business and supporting your team.

What is vacation pay?

Let’s start by stripping it back to basics. In Quebec, vacation pay isn’t just your regular salary continuing while you sip a margarita on a beach. It’s a specific accrued amount called vacation indemnity.

Think of indemnity as a savings account that builds up with every hour your employee works. It is a percentage of their gross wages earned during a specific period. When they take time off, they aren’t technically being paid their “salary”; they are withdrawing from this accrued pot of money.

This distinction is crucial because the amount of money in that pot might not match their current weekly salary exactly. It depends entirely on what they earned in the previous year. If they worked overtime, earned commissions, or had a raise mid-year, that indemnity pot changes.

Vacation time vs. vacation pay

Here is where many employers get tripped up. In Quebec law, the right to take time off and the right to be paid for that time are two legally separate concepts that accumulate at different rates.

Vacation Time is the physical days an employee is allowed to be away from work. This is based on their years of continuous service.
Vacation Pay (Indemnity) is the money they receive during that time off. This is based on their earnings during the reference year.

You can have an employee who is entitled to two weeks off but has only accrued enough indemnity to pay for three days. Conversely, you might have a part-timer who has accrued a nice chunk of change in indemnity but, due to their schedule, only takes a few days of actual time off. Keeping these two concepts distinct in your mind is step one to mastering Quebec payroll.

The Quebec reference year (May 1 to April 30)

This is the big differentiator. Most provinces let you calculate vacation based on the employee’s hire date anniversary. Quebec says, “Non, merci.”

The CNESST sets a standard reference year that runs from May 1 of one year to April 30 of the next.

This period determines two things:

1. How much vacation time an employee has earned for the upcoming year.
2. The total gross wages used to calculate their 4% or 6% indemnity.

This means that on May 1st of every year, the books close on the previous twelve months and a new entitlement bucket opens up for everyone at the same time.

The standard reference period

Why does this matter? Because it creates a unified reset button for your entire workforce. Whether you hired Julie in June or Marc in November, on May 1st, you calculate their vacation pot based on what they earned up until April 30th.

This standardization can actually be a blessing for administration once you get the hang of it. Instead of tracking 50 different anniversary dates, you have one date where the math happens. However, it does create some confusion for new hires who haven’t worked a full reference year yet.

Exceptions for contractual years

Now, we know one size rarely fits all in business. You can set a different reference period if you want to. For example, many companies prefer the calendar year (January 1 to December 31) to align with their fiscal planning.

But here is the catch: You cannot just decide this quietly in your head.

To use a reference year other than May 1–April 30, it must be explicitly defined in the employment contract or a collective agreement. If it’s not written down and signed, the law defaults back to May 1. So, if you are operating on a calendar year basis without a paper trail, you are technically non-compliant. Check those contracts today.

The “stub year” for new hires

The May 1st deadline creates what we call a “stub year” for new employees. Let’s look at a scenario to make this real.

Scenario: You hire Sophie on January 1st.
Reference Year End: April 30th.

When May 1st rolls around, Sophie has only worked for 4 months. She hasn’t earned a full two weeks of vacation yet. Instead, she gets a pro-rated amount based on those 4 months of service.

She is entitled to 1 day of vacation for every month worked during the reference year. So, Sophie gets 4 days of vacation to use in the upcoming year. Her indemnity (pay) for those 4 days will be 4% of whatever she earned between January 1 and April 30.

It’s vital to explain this to new hires during onboarding so they aren’t surprised when summer comes and they don’t have two full weeks available.

Stop crunching numbers manually. See how Humi makes Quebec payroll effortless.

Vacation entitlement in Quebec

Understanding the tiers of entitlement is key to keeping your team happy and the labour board off your back. The length of an employee’s continuous service determines how much time they get and what percentage of their earnings they receive.

It’s worth noting that “Continuous Service” isn’t just days worked. It continues to accumulate even during protected leaves like maternity leave or absences due to a work-related injury (CNESST). You don’t hit pause on their seniority just because life happened.

Less than 1 year of service

As we touched on with the “stub year,” employees with less than one year of service at the end of the reference year (April 30) are building their foundation.

• Time off: 1 day per month worked, up to a maximum of 2 weeks.
• Indemnity: 4% of gross wages earned during the reference year.

This period is strictly about accumulation. It ensures that even short-term employees earn something for their time, but protects the employer from handing out full benefits on day one.

1 to 3 years of service

Once an employee has a full reference year under their belt, they move into the standard tier.

• Time off: 2 continuous weeks.
• Indemnity: 4% of gross wages earned during the reference year.

This is the baseline for most of the Quebec workforce. It’s simple, standard and easy to manage. But keep your eye on the calendar, because the jump happens faster than you might think.

3 years or more (the 6% Jump)

Here is where Quebec differs significantly from some other jurisdictions and where old-school policies often get it wrong.

In the past, the jump to 3 weeks of vacation happened at 5 years. That is no longer the case.

Currently, as soon as an employee completes 3 years of continuous service, their entitlement increases.

• Time off: 3 weeks.
• Indemnity: 6% of gross wages earned during the reference year.

That 2% bump represents a significant cost increase for employers, so you need to budget for it. If you are still waiting for the 5-year mark to bump people up, you are underpaying your staff and opening yourself up to claims.

If you are looking for more details on managing these transitions, check out our resource on navigating Quebec labour standards.

How to calculate vacation pay in Quebec

Let’s get into the math. The calculation seems straightforward—4% or 6% of gross wages—but the definition of “gross wages” is where the devil hides in the details.

Gross wages for vacation indemnity INCLUDE:

• Regular salary
• Overtime pay (this is a big one.)
• Commissions
• Statutory holiday pay
• Work premiums (e.g., night shift premiums)

Gross wages EXCLUDE:

• Discretionary bonuses (bonuses not tied to performance metrics or contracts)
• The vacation indemnity paid out in the previous year (you don’t pay vacation pay on vacation pay)

Calculation Example:

Let’s say Marc has worked for you for 2 years (4% rate).
Reference Year: May 1, 2024 to April 30, 2025.

• Regular Wages: $50,000
• Overtime worked: $2,000
• Commissions: $5,000
• Christmas Bonus (Discretionary): $1,000

Total Gross Wages for Calculation:
$50,000 + $2,000 + $5,000 = $57,000
(Note: We excluded the $1,000 discretionary bonus).

Vacation Indemnity:
$57,000 x 4% = $2,280

Marc has $2,280 available to cover his 2 weeks of vacation time.

Need help managing the complexities of payroll beyond just vacation? Our guide to running payroll in Quebec breaks down everything from DAS to tax remittances.

When to pay vacation indemnity

You have calculated the money. Now, when do you hand it over?

The CNESST is very specific here. The standard legal requirement is to pay the indemnity in a lump sum before the vacation is taken.

Ideally, if an employee takes two weeks off in July, they receive their indemnity on the paycheque immediately preceding their holiday. This ensures they have the cash flow to actually enjoy their time off.

Can you pay it on every paycheque?

We see this question a lot. Many employers prefer to pay the 4% on every pay to avoid accruing a liability. In Quebec, this is permitted only if there is a specific written agreement (like an employment contract) or a collective agreement stating so. You cannot simply default to this method because it’s easier for your accountant. If you do this without a written agreement, you are technically in violation of the standards.

Vacation pay on termination & RL-1 reporting

Breaking up is hard to do, but paying out vacation shouldn’t be. When an employment relationship ends—whether they quit, you fire them, or it’s a mutual parting of ways—you must settle the score.

Payout on Resignation or Dismissal

There is no “use it or lose it” when it comes to the money. The indemnity is wages earned. It belongs to the employee.

Upon termination, you must calculate:

1. Any vacation pay accrued in the previous reference year that hasn’t been paid out yet.
2. The vacation pay accrued in the current reference year up to the last day of work.

All of this must be paid on the final paycheque. You cannot withhold vacation pay due to lack of notice or bad blood. It’s their money.

RL-1 and T4 Reporting

Quebec loves its paperwork. When you pay out vacation indemnity, it needs to be reported correctly so the government knows how to tax it.

This income must be reported in Box A and Box G of the Quebec RL-1 slip.

• Box A: Employment income (includes the indemnity).
• Box G: Pensionable salary under the QPP (also includes the indemnity).

This is distinct from federal T4 reporting, and getting it wrong can cause issues for your employees when they file their taxes. For a deeper dive into unique payroll nuances, read our article on understanding Quebec’s unique payroll requirements.

Critical Compliance: Bill 96 and Language Laws

We can’t talk about Quebec employment without addressing the elephant in the room: Bill 96.

Under these strengthened language laws, employees have a fundamental right to be communicated with in French. This extends to your vacation policies, employee handbooks and even the software portal where they request time off.

If your vacation policy is only available in English, it may not be legally enforceable. To protect your business, ensure all documentation regarding leave and indemnity is available in French. This isn’t just a “nice to have”—it’s a compliance necessity.

Automate Quebec Vacation Pay with Humi by Employment Hero

If your head is spinning with reference years, 4% vs 6% calculations and RL-1 boxes, you are not alone. Managing this manually on a spreadsheet is a recipe for error. And in Quebec, errors can be costly.

Humi by Employment Hero was built to handle the heavy lifting of Canadian payroll, with specific features designed for the Quebec market.

We automatically track the standard Reference Year (or your custom one), calculate the correct indemnity rates based on years of service and ensure that overtime and commissions are factored in correctly. When it’s time for year-end or a termination, the numbers are there, accurate to the penny.

Why waste hours on compliance when you could be focusing on your team? Let us handle the math so you can handle the business.

Navigating Quebec’s vacation pay laws requires attention to detail, but it doesn’t have to be a burden. By understanding the reference year and leveraging the right tools, you can turn compliance into confidence.