Creating a vacation policy can be a daunting task and much more complicated than it may seem on the surface. While all jurisdictions have minimum standards with respect to vacation entitlement and vacation pay, many details regarding vacation administration is left to the employer. A vacation policy will ensure management and employees alike understand the details of vacation entitlement and its administration.
Minimum entitlement v. enhanced vacation benefits
The provisions of the various provincial/territorial employment standards statutes are minimum standards and have two aspects—one related to the length of vacation and the other related to vacation pay. All provinces/territories provide two weeks of vacation time entitlement after one year’s employment, except Saskatchewan which provides for three weeks. Minimum vacation pay rates are also set in the statutes. Most provinces/territories do not require any vacation time entitlement until one year of service, however both Quebec and New Brunswick require vacation time accrual of 1 day per month for service of up to one year. Many employers, however, offer greater vacation time than the minimum standards. How such enhanced vacation is earned should be detailed in the policy.
Vacation time v. vacation pay
Vacation time entitlement is earned through the passage of time in employment, whether or not the individual is actively at work; vacation pay is a percentage of an individual’s earnings during the period for which the vacation time entitlement is granted. As a result, vacation pay usually includes not only a percentage of base pay but also such pay items as overtime, commissions, merit bonuses and statutory holiday pay. Conversely, if an employee is absent without pay, that employee will not normally earn vacation pay for that period of absence even though the employee may still earn vacation time. Employers who simply continue to pay employees the normal salary during vacation may be over—or under-paying vacation pay and a vacation policy should require that an employee is compensated for minimum vacation pay entitlement under the law regardless of how it is being paid.
Employee v. employee and the challenges of scheduling
Vacations can be disruptive to normal operations and employers should consider planning them as much in advance as possible to minimize these disruptions. Employers may also find that it is a challenge to co-ordinate and prioritize competing vacation requests for popular vacation times, such as summer, Christmas and March Break. Employers may determine when vacation may be taken, however, employees may resent being forced to take their vacation time in February. A vacation policy should include the process by which vacation time is requested, including commencement and deadline dates for requests, and granted, whether by seniority, first-come, first-served or drawing from a hat.
Use it v. lose it
Most provinces/territories state the time frame within which the vacation time earned must be taken by the employee. Employment standards provisions usually state the minimum length of vacation periods, as well, with some requiring minimum vacation periods of at least one week, with others allowing vacation to be taken in smaller intervals, such as one day. Some provinces/territories, including Ontario, Saskatchewan, New Brunswick, and Nova Scotia (in limited circumstances and sometimes with approval from the Ministry of Labour) permit an employee to forego taking vacation, with the required written approvals. In such cases, the employer would still be required to pay vacation pay. Other provinces/territories do not allow employees to not use vacation entitlements. Even where vacation accrual is allowed, employers should recognize the potential “unfunded liability” that may result from such vacation banking.
Vacation v. stat holidays
Employees who are on vacation during a statutory holiday may be entitled to a paid day off in lieu of the holiday, if other wise entitled under the employment standards legislation of the jurisdiction. Likewise, holiday pay is included in “wages” for the purposes of calculating vacation pay. Employer should confirm the employment standards requirement in their particular jurisdiction.
Lump sums v. periodic payments
Some employers may find that tracking and accounting for vacation pay earned and paid is easiest if vacation pay is added to each pay cheque. Other employers may find it easier to pay in one lump sum each year. Each province/territory has different requirements with respect to when vacation pay must be paid, often with some flexibility with the employee’s consent. Employers should confirm the rules in their jurisdiction and clearly state the vacation pay process in the vacation policy.
Now I need a vacation.
For specific details on the above requirements and how to incorporate them in a vacation policy, consult the Human Resources PolicyPro, Alberta, British Columbia, Manitoba & Saskatchewan, Ontario, Atlantic and Quebec Editions.
To help you keep a neat record of vacation time, try HRtrack, the employee data tracking software that
- Calculates and displays vacation entitlement details
- Allows you to keep track of vacation periods, days off, sick leaves, etc.
- Displays the information per employee
- Offers scalable reports to fit your needs
- Checks everything against your company policy
- Provides compliance requirements in your province or territory
Editor of Human Resources PolicyPro
published by First Reference Inc