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Published July 2007

The Ins and Outs of Vacation Time & Vacation Pay

By Mario Cywinski

Vacation pay regulations in Canada are not as straight forward as many Canadians might think. Each province has different rules and regulations with regard to the amount of vacation pay and time each person can take.

We dug through the government jargon and have prepared a guide to help provide Canadians with what they really want to know about vacation pay.

This guide is based on employers who are governed by provincial employment laws and not federal, this accounts for roughly 95 per cent of all employers in Canada.

How much vacation pay and time am I entitled to?

Starting off with the basics, every province in Canada entitles an employee to vacation time after working for 12 consecutive months of employment. The amount of time off an employer must grant their employees is two weeks in every province apart from Saskatchewan (which offers 3 weeks) and Quebec (which offers one day per month).

"The amount of vacation an employee is entitled to is governed by the firm's own policy, with a minimum amount prescribed under the employment standards legislation in each province," said Howard Levitt, Counsel to the national law firm Lang Michener. "In Ontario, it is 2 weeks per year, no matter how long the person is employed, unless the company, in its generosity, decides to have a policy to provide more."

In terms of vacation pay, many provinces calculate vacation pay from the first day an employee is working to the day they leave the company. Employers calculate four per cent (except in Saskatchewan where it is six percent) of each pay cheque towards vacation pay, unless they wish to give the employees more.

Some provinces increase the minimum amount of vacation pay an employer is required to give after a certain period. The table below shows the differences between provinces.

PROVINCES and TERRITORIES Vacation Pay starts being accumulated: Extension of Vacation Time Extension of Vacation Pay Increase in Vacation Pay % of gross earnings
British Columbia After 5th day After 5 years 3 weeks To 6 %
Alberta First day After 5th year 3 weeks To 6 %
Saskatchewan First day After 10th year 4 weeks To 8 %
Manitoba First day After 5th year 3 weeks To 6 %
Ontario First day No No No
Quebec First day After 5th Year 3 weeks To 6 %
Newfoundland and Labrador After 5th day After 15 years 3 weeks To 6 %
New Brunswick First day After 8 years 3 weeks To 6 %
Nova Scotia First day After 8 years 3 weeks To 6 %
PEI First day After 8 years 3 weeks To 6 %
NWT First day After 5 years 3 weeks To 6 %
Yukon First day No No No
Nunavut First day After 5 years 3 weeks To 6 %

When can an employee take a vacation?

Where a lot of confusion occurs, is if an employer has the power to instruct their employees when they can take vacation. Simply, employers have the final say as to when an employee can go on their vacation.

"An employer has the right to manage its business as it deems best, and that includes setting the hours of operation and assigning vacation time for employees," said Robert S. Greenfield, employment lawyer for Heydary Hamilton.

Of course an employee can ask for certain times in the year, and more often than not, an employer will accommodate the employee, but in the end they do not have to. The final decision lies with the employer.

"Unless an employee has a contract stating otherwise or there is a workplace policy covering vacation time, the employer has the ultimate call about when an employee may take their vacation," said Greenfield. "However, once an employer tells an employee he or she can take time off, the employer could face consequences for revoking the decision later on without very good reason."

In workplaces where the employees are part of a union the way an employer goes about granting vacation time may change.

"In unionized workplaces there is usually a system in place based on seniority and employers in such workplaces may have an obligation to not act unreasonably in deciding whether to grant vacation requests," said Greenfield.

Can a business close down for a week in the summer and have the employees use that as part of their vacation time?

Yes. A company can close down for a week or two and have the employees take that as their vacation pay. It is legal, simply because it is up to the employer when an employee takes their vacation.

"If an employer wants to shut down for a week in July or at Christmas or even for the week of the Super Bowl, the employer is entitled to require its employees to take their holidays during that week," said Greenfield. "Employees do not have any right to declare when they will take their vacation unless they have a contract providing such a right, or there is an HR policy on the matter."

Be sure to give the employees as much notice as is possible, to make sure they can make their vacation arrangements.

"If you plan on closing down the business, give as much written notice as possible and advise your employees that they will be paid for the time as part of their vacations," said Levitt.

One thing to remember is a happy employee is a good employee. Not allowing them to choose their vacation could have a negative impact on their productivity.

"[By doing this] you will have very unhappy employees," said Levitt.

Are salaried workers paid vacation pay differently than those that get an hourly wage?

No. Because vacation pay is calculated from your earnings, it does not matter if you are on salary or paid an hourly wage. Either way, a percentage of your wages is calculated to vacation pay.

Therefore, for workers that are paid a salary, most companies will simply pay them their regular pay amount, which for the vacation time will be taken from the vacation pay accumulated account. If you are a worker that gets paid an hourly wage, than either the pay before your vacation or on your next regular pay, you will be paid out the vacation pay that you hae accumulated to that point.

When my employees go on vacation I just keep paying them their salaries. Now one employee believes that I still owe him vacation pay. Is that true?

As stated above, most companies pay their employees vacation pay as their salary, as this is what it equals out to. However, it is critical to keep track of employee's vacation pay, because an employee can say they worked for a certain week and they did not take vacation, in turn causing problems for the employer.

"Provided that the employee takes at least 2 week's paid vacation (this works out to 4 per cent of wages), the employer appears to be meeting its ESA legal obligations by paying the employee his or her regular salary while the employee is on vacation," said Mark Fletcher, Grosman, Grosman & Gale LLP.

It is important to keep accurate records of vacation paid and make sure that it is listed on an employees pay stub, in order to avoid problems down the line.

"Proper vacation pay must be kept, including a separate indication in the employee's payroll deposit as to the vacation pay," said Joe Conforti, Goodmans LLP. "The general rule is that vacation pay is to be paid prior to the employee taking vacation unless otherwise agreed. Although an employer can pay vacation pay by direct deposit the same as its regular wages as long as the employer does so on or before the pay day for the pay period in which the vacation time falls."

If an employee is short on cash and would like to just take their pay and not time, can they?

You can not simply say I do not want to take vacation time and receive your vacation pay; a certain procedure has to be followed.

"[In Ontario,] the ESA requires that the Director of Employment Standards approve and the employer agrees that the employee may forego his or her vacation time. The employee can't simply say I am going to forego my vacation time," said Fletcher. "Assuming that the Director approves and the employer agrees that the employee may forego the vacation time, the employer is required to pay the employee's vacation pay entitlement."

PROVINCES and TERRITORIES Can vacation pay be paid out without taking vacation time?
British Columbia No
Alberta No
Saskatchewan Must be okayed by employer and Director of Labour Standards
Manitoba N/A
Ontario Must be okayed by employer and Director of ESA
Quebec No
Newfoundland No
New Brunswick Allowed if you have written permission from your employer.
Nova Scotia Only if worked less the 90% of hours, and put forth a letter in writing to employer that they do not wish to take vacation time.
PEI No
NWT A Labour standards officer must approve an application not to take vacation.
Yukon Agreement must be made between the employer and employee.
Nunavut A Labour standards officer must approve an application not to take vacation.

Part-time, Seasonal and workers who don't work a full year

Since vacation pay is earned from the first day or week of work, employees who do not work a full year receive their vacation pay once they leave the company. At this point, the employer is required to pay out the vacation pay that they owe.

PROVINCES and TERRITORIES If an employee does not work for a full year, vacation pay must be paid out within:
British Columbia 48 hours (2 days)
Alberta 3 days with termination notice, 10 days without.
Saskatchewan 14 days
Manitoba After termination
Ontario 7 days or next regular pay day
Quebec After termination
Newfoundland After termination
New Brunswick Final regular pay day
Nova Scotia 10 business days
PEI Final regular pay day
NWT After termination
Yukon 14 days after last day
Nunavut After termination

If an employee has not worked for 12 months, the employer does not have to allow the employee to take any time off. The reason for this is that they do not earn any vacation time, only vacation pay.

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Author Info

Mario Cywinski is a freelance writer in the Greater Toronto Area (GTA).