There are 2 methods to calculate vacation pay: you can include vacation pay in each paycheque, or your can pay it out in a lump sum when employees take their holiday (or when their contract ends). For our examples, let’s assume an employee receiving the Employment Standards Act minimum of 2 paid weeks per year worked, or 4% of earnings. (Update as of January 2018: Under the ESA employees who have seniority of 5 years or more are entitled to 3 paid weeks per year worked or 6% of earnings).
Method 1 – Pay with each cheque:
Vacation pay can be rolled into regular pay, so the employee receives it as they earn it. This means that the employee has to do their own saving-up for time off. This method is often used for part-timers, temporary and hourly-paid staff.
Example: An employee earns $1,000.00 per pay cheque. The employee has vacation paid on each cheque, therefore they receive $1,000.00 in pay + 4% ($40.00) for a total of $1,040.00 of gross pay each pay period. If they have seniority of 5 years or more, they would receive $1,000,00 in pay + 6% ($60.00) for a total of $1,060.00 of gross pay each pay period).
Method 2A – Pay with holiday – Salary:
Salaried employees get “paid vacation”, which means they receive their normal salary without interruption even when on vacation. There is no change in the rate or frequency of their pay; they just get paid time off. In the payroll records, 4% vacation pay is accrued each week. (For employees with 5 years or more of seniority, it would be 6%). That is, the employer sets aside the vacation pay amount as money owing to the employee for their holiday. Since the process is seamless for both the employer and the employee, the accrual process may be omitted: if the employee gets their regular pay, the requirements have been fulfilled!
Method 2B – Pay with holiday – Non-Salary:
Part-time, casual and hourly-paid staff often have an irregular stream of earnings. From the employer’s viewpoint, the accounting is the same: you accrue 4% of each week’s earnings, setting it aside as an amount owed to the employee. (Again, this would be 6% for employees with 5 years or more in seniority). However, when the employee takes time off, their vacation payout will not correspond to a normal paycheque — so from their point of view vacation pay is a lump sum.
Example: The employee is about to take her/his annual vacation, and no vacation pay has yet been paid. Therefore, the employer bases vacation pay on the employee’s total gross pay since the last time they took vacation. In this case, the employee has earned $13,978.65 in gross earnings since his or her last vacation. 4% of those gross earnings warrants vacation pay of $559.15.
Visit the Ontario Ministry of Labour website (or a comparable website for your area) for more information on vacation pay.
Young Associates founder and principal associate has been named one of the four faces of innovation in Canada by Metro News. The article profiles four innovative Canadians, praising Heather for her pioneering work in developing sound financial management best practices in the Canadian arts sector.
At first, Heather Young didn’t know much more about arts administration than the students she taught at Humber College in Toronto 20 years ago.
But what she quickly learned in trying to teach sound fundamentals of arts management was that hard information on the topic was difficult to muster — let alone make available to budding artists and art groups. As good innovators often do, she saw a need and filled it.
Young crafted her own materials, including Finance for the Arts in Canada, a textbook and reference guide to aid in running an arts organization. Her company, Young Associates — with a staff of 12 — now serves as a financial management resource for 90 Toronto companies. She’s soaked in years of knowledge working with arts groups in the city — something she believes is essential for innovation.
“Get to know your subject area as intimately as you possibly can,” she said. “You need to know the upsides and downsides of what you’re working on … and in particular the gaps in the available supports.”
Building on feedback from the sector, including organizations such as CAPACOA seeking a broader definition of who could qualify, this finalized version attempts to clarify what CRA finds as acceptable examples of appropriate purposes to merit charitable status.
First, there are three broad categories of arts-related activities that could qualify as charitable purposes under one or more of the four heads of charity, including:
Advancement of education;
Exhibitions, performances and presentations of artistic works;
Activities that enhance an art form or style within the arts for the benefit of the public.
In particular, CRA has clarified and expanded details in its arts forms and styles appendix, thus opening the door for more presenter members of CAPACOA to garner or maintain standing as a charity.
If you are interested in exploring these ideas in more detail, these links will be of value:
Back in November, I attended a symposium called L3C and the Arts at Columbia University in New York City. The event was designed to be discussion around how a new form of incorporation (the L3C) in the US can be used for arts organizations. I Live tweeted the event and the Storify of the tweets from the day can be found below.
Low-Profit Limited Liability Company (L3C) is a form of incorporation that is a hybrid between a for-profit business and a not-for-profit business. It was formed by augmenting the existing Limited Liability Company (LLC. We don’t have the equivalent in Canada; essentially it’s a hybrid of a sole proprietorship and a corporation). The L3C differs from the LLC in that the articles of organization (similar to articles of incorporation in a Canadian Not-For-Profit) must state one of the IRS’s charitable purposes. Because of this, an L3C can receive the money that charitable foundations must give each year (called Program Related Investments, or PRIs).
Basically, an L3C allows a company to accept investment and payout investors while still being able to receive funding from foundations. Champions of L3Cs say that it’s a great way to diversify revenue sources and raise capital to start an organization while critics of L3Cs say the form of organization isn’t so attractive because there isn’t the ability to issue tax receipts for donations.
The L3C and the Arts symposium brought together the co-founder of an L3C organization, a lawyer involved in the drafting of the L3C legislation for several states, the executive director of a theatre arts services organization , the executive director of a theatre organization with an L3C subsidiary organization, and the head of Columbia’s theatre program. After being briefed on the technical aspects of the L3C, the discussion then turned to how the L3C can work in the arts world.
Here’s some main points that brought up for how the L3C can work in the arts:
The L3C is an interesting new tool to consider when forming new organizations, but will not work for all circumstances.
An existing NFP should not change it’s form of organization to an L3C. It should be considered for organizing a new company or a new subsidiary business.
The main drawback for arts companies is the inability to issue tax receipts for donations.
It may be a good form for independent artist and smaller collectives, such as those who use crowd funding sites like indigogo to raise money.
Art forms that have a higher capital potential (like film) may be more suited for the L3C than art forms with a lower capital potential (like visual arts organizations). Performing arts falls between film and visual arts.
I tried to keep a Canadian perspective in mind when listening to the discussion. The L3C form would not work exactly in Canada mainly because Canadian not-for-profits do not rely as heavily on foundation revenue as in the US. But, the discussion on how hybrid forms of organization can work in the arts was quite interesting and applicable for Canadian not-for-profits, especially with the introduction of the hybrid Community Contribution Companies in British Columbia.
Artists and arts organizations need to set prices for tangible goods (e.g. works of art, CDs, publications) and for services (e.g. admissions, registration fees). The considerations for goods vs. services are rather different – as are the circumstances of individuals and organizations.
These tips are offered from a very generic point of view. I have tried to make them applicable in a wide variety of situations. This may make them a challenge to apply specifically! I hope the examples will help to clarify how you might use these ideas to support your personal decision-making.
There’s no recipe. Take heart if you feel uncertain about how you are going about setting your prices. My research turned up no ‘correct’ method, in the art world, the not-for-profit world as a whole, or in commercial business. There are, however, some useful guidelines.
Take your time. Think of this as an iterative or recurring process. You’re going to draft a price list, sleep on it, run it past colleagues and friends, and revise it again before making a final decision.
Three approaches. Here are three approaches that you might find useful. You can choose the one that works best for you, or you can consider all three, and decide after playing with the options
A. Cost-based: Figure out your costs, and charge more than that. Price = your cost + mark-up – e.g. If I’m selling admissions to a concert, I could add up all of the costs, subtract grants and donations, and divide the net cost by my estimate of how many people will attend. Thus, if I expect to spend $12,500 and I have $7,500 in grants and donations, I need to raise $5,000 from ticket sales. If I anticipate that 200 people will attend, I need to charge each person $25. That gives me my break-even price. If I wanted to make a profit, I could then tack on a mark-up of so many dollars.
Price = a multiple of your cost – e.g. Book publishers need to pay for editorial expenses, writer royalties, book production and promotion, as well as their own administration. They often base their book prices on the printing cost, by charging 5 or 6 times cost. So, if a certain book cost $8 to print, the publisher would look at a price between $40 and $48. Experience has shown that a multiple of 5 or 6 generally covers all of their expenses.
B. Market-based: Charge what everyone else charges ‘Everyone else’ should include comparable artists/arts organizations as well as the other options your buyers might consider; for instance:
– A performing arts organization might compare its prices to what its peers are charging – as well as to the cost of a movie ticket, the cover charge for a band, and other ‘night out’ options
– A visual artist might look at what their buyers are considering. For instance, if the art in question is usually purchased for its decorative value, buyers may be deciding between buying a picture and another decorative object (e.g. fine craft, furniture, area carpet)
C. Value-based: What’s it worth to you? This is how hotels and airlines do it – not to mention gas stations and ticket scalpers. Today’s rate on a hotel room or an airfare depends on how far in advance you’re booking, plus demand, plus any other factors that affect its desirability. The price a scalper can get before the game is vastly different from what he’ll accept half an hour after the puck drops!
Know your limits! - Floor = your cost (If you sell below cost, you’re losing money!) – Ceiling = what the market will bear (You can’t charge more than what people are willing to pay.)
Consider your environment and how that might affect the prices you can charge. - Geography: are you in a large city, a town, a rural community, a remote area? – Accessibility/distribution: how easy is it for people to come to you – or for you to get your work to major centres of population? – Economy: how’s the local economy doing, how much disposable income do people have? – Political framework: what taxes do you have to take into consideration, what public policies affect you (e.g. copyright, availability of government funding)? – Local arts community: are there many colleagues/competitors close by, or are you the only game in town?
Consider how the characteristics/qualities of your art – whether it’s a canvas or an exhibition or production – should affect its price. - Artistic merit is definitely a factor in pricing – and one of the hardest to confront. It’s also a factor that’s likely to change over the course of your career. You need to consider the significance of your work in relation to other artists, and the market overall.
– Popular appeal is also important. It’s easy to see that more people want to buy tickets to mega-musicals and Broadway-style shows than to a lot of other performing arts genres. You must consider the size of your market, and hence the volume of demand for your work. This could push the price up or down! A lower price might make you more attractive. On the other hand, aficionados may be less price-sensitive, and thus willing to pay more for something harder to come by.
– Use price to send a message about quality and value, and where your work fits in the marketplace. Take coffee shops as an example: relative to your competitors, you need to determine if you’re more of a Starbucks or a Tim Horton’s!
Uniqueness is not a factor in setting prices in the arts. You’re unique, just like everyone else. Every artwork is one-of-a-kind: the visual art collector, or the performing arts engager, is choosing amongst a number of unique offerings, each of which has its appeal.
Don’t let the price be an emotional decision! Price your work dispassionately, without reference to your attachment to it. – Don’t assume that your personal favourites will fetch a higher price. Your investment of time, effort and angst in the creative process won’t necessarily speak to the buyer or audience. If an artwork is so significant for you that you can’t part with it at your normal price, perhaps it’s not the right time to offer it for sale.
– By the same token, you may not love a certain piece, and therefore be tempted to underprice it – but don’t assume that others will share your feelings for it.
Establish your base price according to your most typical art. It may be useful to think about how new cars are priced. Often, there’s a ‘base price’ plus the option to purchase ‘extras’ – or to get the car ‘fully loaded’ In the same way, a visual artist, a performer or an arts organization may be able to identify their price baseline, and what their extras might be, and establish a range of prices for different types of work. For instance:
– An actor taking a lead role may be able to negotiate a better weekly rate than when he or she accepts a supporting part. A musician may be able to charge more for a soloist engagement than for a sideman gig. The difference is related to the perceived value of the service.
– A visual artist may charge more for larger or more elaborate works. This might be either a cost-based or a value-based approach.
– A theatre company may charge more per ticket for the musical it’s offering this year than for its one-hander. This would almost certainly be a cost-based approach related to the number of artists involved and the scope of the production values.
Stick to your guns! It’s a good policy to keep your prices consistent no matter who the buyer is. This can be especially important for visual artists selling multiples or working with more than one dealer – and for performers hoping to build a client base of repeat customers.
– If you’re an experienced artist with a track record, document your sales. When you can see how works have sold over time, it’s easier to be consistent about pricing your new pieces.
– If you’re still building that record, you can achieve consistency by pricing your art like a realtor would price a home for sale: look at comparables in terms of medium and style, as well as in terms of fellow artists at a similar level of accomplishment
Think carefully before you discount, to make sure the price cut will work for you strategically.
A. Discounts may be standard in some circumstances, for instance: – A commercial gallery may offer a standard 10% discount to arts consultants purchasing on behalf of clients, or to regular customers who purchase a lot of art. – Performing arts organizations commonly offer discounts for group purchases, as well as to students and seniors, and for less popular nights. – NOTE! Where a range of prices is in effect, you need to be clear on which is The Price. Your regular price is the Saturday night, full price amount . Everything else is a discount.
B. Discounts may be used to introduce negotiation , so you can close a sale, for instance: – You might want to offer an incentive to a good client to buy more – You might decide to make it possible for someone to buy the work who loves it but can’t afford the regular price.
C. You might wish to use discounts to adjust to market conditions, for instance: – If tickets are selling poorly, performing arts organizations may consider putting out two-for-one coupons, or offering discounted tickets within the arts community. – A gallery in a tourist town might wish to consider special offers in the off-season.
D. You might be tempted to price lower than your colleagues/competitors to gain an edge. Think seriously about whether this will really work in your favour. For instance: – Performing arts patrons definitely react to price points – but not necessarily to relatively small differences. Someone might decide that the current Broadway touring show is too pricey – but if they’ve decided to spend the money to see a local company, they’re more likely to make their choice based on the title, the artists, the reviews, etc., than on a couple of dollars’ difference in price.
– If all practitioners of a certain discipline charge within the same range, they can create a “going rate” which sets buyer/audience expectations, and helps everyone plan their budgets.
Don’t forget to raise your prices when it’s appropriate! - A useful rule of thumb for visual artists is to contemplate an increase when you’re selling at least 50% of last six months’ output.
– Another benchmark would be to look at an increase when you’ve experienced six to twelve months of consistent success in your work. Once you’ve established steady demand, it’s time to re-examine your pricing.
This tip sheet was created by Heather Young of Young Associates for the workshop ‘How Much Am I Worth? How Much Do I Charge? – The Secrets of Pricing and Negotiating’ which was presented in March 2006 by the Cultural Careers Council of Ontario. Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, focused on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.
