Vacation Entitlement

Submitted by OnPayroll.ca on Fri, 2016-07-15 16:04

Summer is in full swing in most of the country which might mean vacation for some, hence the timing of this post.  Employees who are entitled to vacation time under employment labour standards may or may not be entitled to waive their rights, depending upon the jurisdiction. It is important to understand that both vacation time and vacation pay are legislated. The waiving of entitlements refers to time only. The employer will still owe vacation pay. Vacation pay is defined as a percentage of vacationable earnings. Specifics for each jursidiction is listed below:

Canada Labour Code - can be waived providing the employer and the employee sign an agreement for a specific year. A new agreement must be signed each year.

British Columbia - Rights cannot be waived.

Alberta - requires employers to provide vacation time and employees to take the vacation.

Saskatchewan - a written agreement can be signed if there is a labour shortage, and the agreement must be filed with the director of labour standards.

Manitoba - Rights cannot be waived.

Ontario - can be waived with a written agreement and approved by the Employment Standards Director

Quebec - cannot be waived unless there is a special provision in a collective agreement or a decree allows for it. Where an employee is entitled to a third week, an employee may request to receive pay in lieu of time (called a compensatory indemnity) but only if the business closes for 2 weeks.

New Brunswick - Rights cannot be waived

Nova Scotia - full time employees cannot waive their rights. Employees who work less than 90% of regular working hours on a continuous basis for a 12 month period may waive their entitlement.

Prince Edward Island - Rights cannot be waived.

Newfoundland and Labrador - topic not covered in Labour Standards.

Yukon - can be waived if agreed to in writing.

Northwest Territories - an application can be made to the Director of Labour Standards to waive vacation entitlement in a specific year due to exceptional circumstances.

Nunavut - an application can be made to the Director of Labour Standards to waive vacation entitlement in a specific year due to unusual circumstances.

Submitted by OnPayroll.ca on Wed, 2014-02-05 16:19

Vacation legislationVacation Time and Pay a Legal Right in Canada  

"Use it or lose it" vacation policies are illegal in Canada. It wasn't until roughly 1944, that vacation legislation was first enacted in Canada, making vacations with pay a legal right for employees.

 

Employment Standards sets out the minimum legislation relating to employment and each jurisdiction has it's own legislation surrounding the treatment of vacation.  Legislation surrounding vacation, will often address:

  • earning vacation and entitlement
  • minimum vacation time
  • minimum vacation pay
  • defines what earnings are "vacationable"
  • employer's rights to schedule vacation time
  • employee's rights to forfeit vacation time
  • timing of paying vacation pay
  • obligations of vacation pay when employment is terminated
  • requirements to track/record vacation
  • types of employment that are exempt

Some jurisdictions have legislation specifically addressing vacation time and vacation pay.  This covers the minimum amount vacation time that an employee earns and is entitled to. For instance most provinces legislate a minimum 2 week vacation entitlement for new employees.  Saskatchewan, being the only exception, legislates a minimum 3 weeks. Some provinces will increase the minimum vacation entitlement after so many years of service.

It is not uncommon for jurisdictions to state that the employee earns the vacation in the first year of employment and is entitled to take the time off in the year following.  Vacation entitlement may be on a calendar year basis or employment year basis, as defined by company policy.  In the event the employee doesn't take the vacation time, they are still entitled to vacation pay.   In most cases, vacation pay out in lieu of time, is not permitted or highly discouraged.  The percentage of vacation pay depends on the company's vacation policy.  2 weeks vacation is equivalent to 4%, 3 weeks vacation is equivalent to 6%, 4 weeks vacation is equivalent to 8% and so on. 

Upon termination of employment, any outstanding vacation is owed to the employee.  One exception, being in British Columbia, an employee terminated within 5 days of hire is not entitled to any vacation pay.  Each province defines which earnings are "vacationable", that is, which earnings are to be used in the calculation of vacation pay entitlement.  There are several earnings other than regular pay that are subject to vacation dollar calculations.  A common one is commissions.  In all jurisdictions and in almost all circumstances, commissions paid are "vacationable".  A less common one is employer controlled tips, which is considered vacationable earnings, only in the province of Québec. Calculation of the vacation pay on termination can handled efficiently by ensuring your records of vacation time taken are up to date, all vacationable earnings are included and/or you have a good accrual system in place. 

Be aware that where a company's policy meets or exceeds employment standards, the employee is entitled to the greater benefit.  For salaried employees, we always recommend recording vacation time when taken and having it paid as such through payroll.  Our software solution can handle an hourly accrual, to manage vacation time, as well as a dollar accrual, so you can always stay on top of the vacation liability as it accrues.  As vacation time is taken or paid, the accrual is reduced.  With every payroll, you then know exactly what your liability is.