Vacations and Vacation Pay
Part 7 of the Employment Standards Act provides for minimum levels of vacation time and vacation pay for your employees. Vacation time is the time an employee is entitled to take off from work, while vacation pay provides employees with pay while absent during vacation.
Section 57 provides for the amount of vacation time an employee must be given each year. Employees become entitled to vacation time on the anniversary date of their employment. The amount of vacation entitlement is based on the number of continuous years of service.
An employee who has worked at least 12 consecutive months for an employer becomes entitled to two weeks’ vacation time per year. After five years of consecutive employment, the employee becomes entitled to three weeks’ vacation time per year.
Vacation time is exclusive of statutory holidays, including any statutory holidays that occur during an employee’s vacation. In such cases, the employer may either extend the vacation by the number of statutory holidays that fall within the vacation or grant the same number of extra days’ vacation to be taken by the employee during that year.
Vacation time is not reduced by periods of leave
Vacation time entitlement is based on consecutive employment and not on actual hours worked. Therefore, periods of approved leave of absence do not affect the continuity of employment of an employee for the purposes of calculating vacation time.
Also, an employee who was temporarily laid off is considered to have been continuously employed even during the layoff.
When vacation time can be taken
There are no provisions in the act that govern when vacation can be taken. Generally, it is up to the employer. However, the annual entitlement of vacation time must be taken within 12 months after completion of the year of employment entitling the employee to the vacation, and the employee must be allowed to take vacation time in periods of at least one or more weeks.
Generally, the minimum vacation time under the act cannot be carried forward to a subsequent year. However, this does not prevent the banking of vacation time for employment contracts that provide for vacation in excess of the act minimums.
Unlike entitlement to vacation time, which can only be taken when an employee works for 12 months, vacation pay begins to accrue after five calendar days of employment.
Vacation pay is a percentage of an employee’s gross earnings from the previous year of employment. In the first five years of employment, vacation pay is calculated as four per cent of the gross wages from the previous year of employment. Employees who have completed five consecutive years of employment become entitled to six per cent of their total wages earned during the previous year. Thus, employees in their sixth year of employment are entitled to six per cent of the gross earnings from their fifth year of employment.
The calculation of vacation pay is based on an employee’s entire gross earnings or wages from the previous year. This amount includes all wages paid, including vacation pay, bonuses, or commissions paid in the previous year.
You may not include vacation pay as part of a commission structure or treat a bonus as vacation pay.
When to pay vacation pay
Vacation pay must be paid either at least seven days before the employee’s annual vacation, or on the employee’s regular scheduled payday, if agreed to in writing by the employee or provided by a collective agreement. Terminated employees are entitled to receive all of their vacation pay owed within the time limit specified in Section 18 for the payment of wages.
The policy of the Employment Standards Branch is to deem employees who continue to receive salary during their vacation to have received vacation pay, provided that the salary during the vacation pay is at least four per cent of their gross earnings for the first four years, and six per cent of gross earnings for subsequent years.
Employees covered by collective agreements
Remember, the vacation time and vacation pay provisions in Part 7 of the act do not apply to employees covered by collective agreements that already include provisions respecting vacation time or vacation pay. If the collective agreement does not provide for vacation time or vacation pay, then Part 7 of the act is deemed to be included in the collective agreement.
For further information concerning vacation time and vacation pay, view the Annual Vacation Fact Sheet, as well as the following Interpretation Manual Guidelines: Section 57 (Annual Vacation Entitlement) and Section 58 (Calculation of Vacation Pay).
Information provided by Ryan Anderson, an employment lawyer with Mathews Dinsdale & Clark LLP. The information provided in this article is necessarily of a general nature and must not be regarded as legal advice. For more information about Mathews Dinsdale & Clark LLP, please visit mathewsdinsdale.com.