As we move into 2011 most companies are starting a new vacation year. This often is when companies realize that their vacation policies may not be properly defined and their employee’s previous year vacation entitlement has not been used.
Each province has minimum vacation entitlements that employers must provide to their employees. If an employee does not use their full entitlement by the end of the year, it must be rolled into the next year, or paid out. Although many companies would like to have a use it or lose it policy, this is not legal as per employment standards.
Vacation time taken by employees must be tracked and documented. If there is a dispute between the employee and the employer regarding how much vacation has been taken, it is the employer’s responsibility to prove when the vacation days have been taken. If the employer is unable to provide proof that this time was taken, and an employment standards claim is filed, the employer may be liable for the full entitlement. As there is no statue of limitations for unused vacation time, the employee could ask for this sum to be paid. This total would then be calculated from their initial start of employment with the company. The most common scenario where this issue comes up is when an employee leaves a company. Accrued vacation time that has been earned and not used is paid out upon termination of employment regardless of whether it is employee, or employer initiated.
In order to mitigate the risk of an employment standards violation, or having to payout large vacation dollars, companies should have a vacation policy. It should stipulate the guidelines for taking time off, as well as outlining statutory holidays (observation days) and office closures. Employers should also make sure that their employees are using their vacation entitlement. Employers should regularly check on employee’s entitlement balances. If an employee has a large amount of vacation time accrued, the employer should request that the employee schedule some time off. Employers can schedule time off for the employee by providing proper notice, in accordance with Provincial Employment Standards
PEO Canada is more than happy to assist with reviewing or creating vacation policies. Please feel free to contact your HR Specialist or a PEO Canada representative for assistance.