Vacation – “Use it or Lose it” Policies

Vacation – “Use it or Lose it” Policies

April 11, 2014

Employees can lose their vacation time by failing to take vacation BUTemployees cannot lose their vacation pay. This is often misunderstood. Many employers have a “use it or lose it” policy with respect to vacation. But this simply means that an employer can require an employee to take vacation time or lose the vacation time but this does not alleviate the employer’s obligation to pay that employee the vacation time. For example, when a salary worker who is entitled to 2 weeks’ vacation time per year but fails to take the 2 weeks’ vacation time, and his/her employer does not force him/her to take the vacation time, the employer is required to pay the employee an extra 2 weeks’ pay.

Ontario’s Employment Standards Act, 2000 (“ESA”) provides a minimum entitlement of 2 weeks’ vacation time to all workers to be paid at 4% of gross wages. Employers and employees can agree to more but not less. Some employed persons are exempted from the ESA such as some qualified or registered practitioners (for example, architects, lawyers, accountants, dentists, massage therapists, pharmacists, and others).

How Much	Deadline for Taking Vacation	What time away from work is included?	Foregoing Vacation	Scheduling Vacation Time
2 weeks upon completion of every 12-months from date of hire If employer establishes an alternative vacation entitlement year, employee is entitled to 2 weeks vacation time after each alternative vacation year plus a pro-rated amount of vacation time for the “stub period” (preceding the start of the first alternative vacation entitlement year)	Earned vacation time must be taken with 10 months following completion of the vacation entitlement year or stub period Employer has the right to schedule the vacation time as well as an obligation to ensure the vacation time is scheduled before then end of the 10 month period	layoff sickness/injury leaves of absence under ESA any other approved leaves	Employee can give up some or all of his/her earned vacation time *BUT* the employer must still PAY the employee vacation pay in other words, you may lose your vacation time if you fail to take the vacation time within the time required to do so, BUT the employer must still pay the employee for the vacation time not taken	Employers are required to schedule vacation time in blocks of 1 week or 2 weeks *unless* the employee and employer agree in writing to schedule shorter periods. Vacation time earned for Stub Period is calculated as single days. If vacation time earned is 2 to 5 days, the vacation days must be taken consecutively unless agreed otherwise

How Much	When to Pay	End of Employment	Vacation Records
A minimum of 4% of gross wages Gross wages include: regular earnings commissions bonuses/gifts overtime pay public holiday pay termination pay allowances for room and board Gross wages do not include: vacation pay tips/gratuities discretionary bonuses/gifts expenses and travelling allowances living allowances benefit contributions/payments federal employment insurance benefits severance pay	Must be paid to employee in a lump sum sometime before he/she takes the vacation time earned EXCEPT: vacation time is taken in periods of less than 1 week – employee must be paid vacation pay on or before the payday for the period in which vacation falls when employee has agreed in writing that his/her vacation pay will be paid on each pay cheque as it accrues (employee’s wage statement must clearly show amount of vacation being paid) when employee and employer agree in writing otherwise if employer pays the employee wags by direction deposit into an account at a financial institution (employee must be paid vacation pay on or before the payday for the4 period in which the vacation falls)	Employee is entitled to be paid vacation pay earned but not yet paid Vacation pay is payable on termination pay but not severance pay Unpaid vacation pay must be paid either within 7 days of the employment ending or on the next regular pay day	Employees may request a statement of employer’s vacation records and employers are required to provide the statement no later than 7 days after the request or the 1^st pay day after the employee makes the request, which is later.

How Much

When to Pay

End of Employment

Vacation Records

A minimum of 4% of gross wages

Gross wages include:

regular earnings
commissions
bonuses/gifts
overtime pay
public holiday pay
termination pay
allowances for room and board

Gross wages do not include:

vacation pay
tips/gratuities
discretionary bonuses/gifts
expenses and travelling allowances
living allowances
benefit contributions/payments
federal employment insurance benefits
severance pay

Must be paid to employee in a lump sum sometime before he/she takes the vacation time earned EXCEPT:

vacation time is taken in periods of less than 1 week – employee must be paid vacation pay on or before the payday for the period in which vacation falls
when employee has agreed in writing that his/her vacation pay will be paid on each pay cheque as it accrues (employee’s wage statement must clearly show amount of vacation being paid)
when employee and employer agree in writing otherwise
if employer pays the employee wags by direction deposit into an account at a financial institution (employee must be paid vacation pay on or before the payday for the4 period in which the vacation falls)

Employee is entitled to be paid vacation pay earned but not yet paid
Vacation pay is payable on termination pay but not severance pay
Unpaid vacation pay must be paid either within 7 days of the employment ending or on the next regular pay day

Employees may request a statement of employer’s vacation records and employers are required to provide the statement no later than 7 days after the request or the 1^st pay day after the employee makes the request, which is later.

Requests	Deadline	Current Vacation Entitlement	Exception
Employers must keep records of: vacation time earned vacation time taken balance of vacation time remaining vacation pay paid and how it was calculated	Employees may request in writing a statement of the employer’s vacation records, Employer required to provide information statement with respect to each vacation entitlement year or stub period only once	Employer must provide vacation statement to employee within 7 days after the request or the 1st pay day after the request, which is later	Employer must provide vacation statement to employee within 7 days after the start of the next vacation entitlement year or the 1st pay day after the stub period or vacation entitlement year ends, whichever is later	If the employee has agreed that vacation pay will be paid on each pay cheque as it is earned, the employer does not need to keep separate records or provide statements (but the vacation amount paid must be clearly set out on each pay cheque)

Requests

Deadline

Current Vacation Entitlement

Exception

Employers must keep records of:

vacation time earned
vacation time taken
balance of vacation time remaining
vacation pay paid and how it was calculated

Employees may request in writing a statement of the employer’s vacation records,

Employer required to provide information statement with respect to each vacation entitlement year or stub period only once

Employer must provide vacation statement to employee within 7 days after the request or the 1st pay day after the request, which is later

Employer must provide vacation statement to employee within 7 days after the start of the next vacation entitlement year or the 1st pay day after the stub period or vacation entitlement year ends, whichever is later

If the employee has agreed that vacation pay will be paid on each pay cheque as it is earned, the employer does not need to keep separate records or provide statements (but the vacation amount paid must be clearly set out on each pay cheque)

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Vacation – “Use it or Lose it” Policies

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