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Options for paid time off

By Yosie Saint-Cyr, LL.B., Managing Editor, in collaboration with Nancy Currie, assistant editor at HRinfodesk.com---Canadian Payroll and Employment Law News, March/April 2007

It appears that employers are favouring paid time off in lieu of overtime pay as the best option for time off with pay and flexible work practices. According to the latest HRinfodesk Poll that asked our subscribers what options their employees had for paid time off, 67.27percent of respondents allowed employees to bank overtime hours. In 1998 an HRSDC study (1) indicated that, in spite of recognizing the value of alternative treatment of overtime, only 39 percent of employers provided their workers with access to time off in lieu of overtime, and this was not accessible to all workers (only 20 percent of workers reported they could take time off in lieu of overtime). Generally, the 1998 surveys indicated that Canadian employers have only limited interest in flexible work practices. How times have changed.

Results from the March 19th Paid Time Off Poll:

Total Responses: 110




Banked overtime



Sick days



Personal days



Paid time off credits (PTO)



No policy



Banked overtime

Time Banks (banking time) is an option that allows employees to work extra hours and receive paid time off later by extending their holidays at Christmas or on New Year's Day, taking longer vacation days, taking personal days off or an extended leave of absence, or supplementing short-term leave for illnesses instead of receiving overtime pay. Banked hours programs track accumulated prepaid or unpaid hours owed to employees, including overtime hours. However, allowing employees to ”bank” time is governed under employment/labour standards which varies between jurisdictions.

Generally, if an employee takes a paid leave in accordance with a time bank policy, each day of leave is drawn as one day from the time bank, and the employee is paid for that day at his or her current salary or regular wage. To comply with employment/labour standards provisions, if the extra time worked is greater than the allowable maximum weekly working hours, the employer has to pay overtime rates (usually time and a half) for banked hours. This occurs unless the employer has an overtime averaging agreement with the employee, or an averaging permit with the Director of Employment Standards (depending on the jurisdiction).

An averaging overtime agreement or permit allows the employer to either limit overtime pay by averaging hours of time off instead of overtime pay, or by averaging an employee's hours of work over a period of time. Generally, this takes a number of weeks to determine the employee's entitlement, if any, to overtime pay. For example, in Ontario, an employer can agree with his or her employee to average overtime hours over a maximum period of four weeks and/or compensate the employee for overtime hours by giving the employee one and one half hours of paid time off for each hour of overtime worked. Employers must consult the employment standards legislation of their province or territory for applicable provisions.

HRinfodesk provides the legislated provisions for banking overtime by jurisdiction. To find the information, go to the Library section on HRinfodesk.com; click on the jurisdiction of your choice; choose Pay and Working Conditions; and then click on the Hours of Work and Overtime subheading.

Employers who would like to offer this option to employees will need to first establish a Time Bank Policy indicating all essential legal and policy elements such as:

  • Eligibility
  • Maximum number of hours that can be banked
  • Legislative provisions
  • When time off can be taken
  • An overtime bank record that records and reports the overtime bank record for each employee and tracks overtime hours worked, bank hours earned, bank hours used or paid and balance remaining, and expiry date for use
  • A sample overtime bank agreement
  • A sample request for compensation of overtime hours by paid time off instead of overtime pay
  • A sample agreement for averaging hours for overtime entitlement

A tool to create a Time Bank policy and agreements is available in the Human Resources PolicyPro, Ontario, British Columbia, and Alberta Editions.

Sick days, personal days and PTO credits

Is an employee entitled to legislated sick leave? Well, that all depends on your jurisdiction.

Sick leave enables employees to take time off work when they are ill. It is not really leave for family obligations, although it may sometimes be used as such. Not all provinces or territories have legislated paid or unpaid sick leave. Currently there are eight jurisdictions that offer sick leave provisions in their employment/labour standards legislation, and they are: the federal jurisdiction, Quebec, Yukon, Newfoundland and Labrador, New Brunswick, Nova Scotia, Prince Edward Island and Saskatchewan. Effective April 30, 2007, Manitoba employers will be required to provide unpaid family leave to deal with personal illness or the needs of their families. In all of these jurisdictions, the leave period is unpaid. In addition, employees may not be dismissed, suspended, laid off or demoted when using sick leave entitlements.

Alberta, British Columbia, the Northwest Territories and Nunavut don't have any statutes in their employment/labour standards for sick leave.

In Ontario employers are not required to provide unpaid or paid sick leave, or paid benefit plans for sickness to employees. However, employees who work for employers that regularly employ at least 50 employees or more are entitled to unpaid emergency leave in certain situations under the Employment Standards Act, which includes for the employee's illness.

In provinces or territories where unpaid leave for illness is not required, it is left at the employer's discretion within its workplace policies. In addition, some employers provide paid sick leave, personal days, and paid time off credits on top of legislated leave for illness. When the employer pays the employee's salary during the leave, that period of leave is generally called paid sick leave.

  • Some companies offer employees the opportunity to be off work for a set period of time for illness without loss of wages as part of their benefit plans.
  • Generally, some of these days may be taken each year without a medical certificate.
  • If the employee needs to take a longer sick leave because of health reasons, he or she may be entitled to take longer unpaid sick leave. He or she may then be eligible for Employment Insurance (EI) sickness benefits or benefits from other compensation plans for work-related illness or injury.
  • Some employers may allow their employees to use part of their banked sick leave for certain family obligations.
  • Sick leave may also be combined with maternity leave if there are complications related to the birth of a child.

While the size and location of the business have a substantial impact on if an employer will provide these types of paid leave, according to several studies these options are crucial to the ability of employees to meet their own health needs and family responsibilities. When sick employees come to work, they may spread infectious illnesses or reduce productivity. A sick adult cannot perform to his or her best ability at work, care for children and dependent adults, or participate in the community as well as he or she could when in good health.

Often, entitlement to a period of paid leave is based on a formula related to the length of employment. A long-term employee may be entitled to more paid sick leave than someone who has recently started with the same company. On the other hand, a long-term employee who has suffered from ill health may not have any sick leave entitlement remaining.

Among those organizations with these types of benefits the waiting period before employees are entitled to paid sick leave, personal days, and paid time off credits is three months; the median amount of sick leave earned by employees in organizations which provide paid sick leave is 12 days annually. A majority of those organizations allow employees to accumulate sick leave, personal days, and paid time off credits. While most allow unlimited accumulation, the amount allowed varies widely. Most organizations do not allow accumulated sick leave to be converted to cash or additional vacation time.

A successful paid sick leave depends upon having a disability management program which consists of the following elements:

  • Determining the number of days to grant.
  • Having criteria for entitlement and an approval/denial process (in accordance with the applicable policy, Collective Agreement or Handbook).
  • Reporting procedures such as reporting the absence to the immediate supervisor in accordance with policy and/or Collective Agreement/Handbook requirements.
  • Tracking absences and timelines procedures.
  • Maintaining regular contact with the immediate supervisor while absent.
  • Ensuring that employees seek the appropriate medical treatment and comply with the treatment plan to ensure a timely regular or graduated return to work where indicated.
  • Employer requesting and employee providing acceptable medical certification, substantiating the inability of the employee to perform regular duties for the period of absence, confirming appropriate treatment is being sought, indicating the expected date of return to work, fitness to resume normal duties and any medical restrictions and/or functional limitations upon the return to work (e.g., restriction on hours of work or modified duties as a result of a specific medical limitation such as inability to concentrate, stand/sit, etc. for prolonged periods of time).
  • Having a return to work policy and program in place.

In 2000, paid time off plans represented about 10% of payroll. Paid time off is highly valued by employees, especially because of the pressures of balancing work and family responsibilities. Companies should have a formal policy that allows for flexible schedules and time off from work with pay. Types of paid time off benefits vary and can include the following:

  • Personal time off (PTO), sometimes combined vacation, sick and personal days; on the average, employees are granted 17 days of paid time off after one year of service, 21 days after five years of service, and 24 days after 10 years of service.
  • A sick day is paid time off for employees with illnesses. Most companies also allow employees to use sick leave for the illness of a family member. Nine days per year is the average amount of sick leave granted.
  • Holidays are paid days provided to all employees in the company in conjunction with or above and beyond employment standards minimum requirements for public (statutory) holidays. The average number of holidays provided is 10.5 days per year.
  • Short-term disability plans or salary continuance plans are another type of paid time off. A salary continuance plan continues to pay the employee's full salary for the first month of a disability, and the short-term disability plan ranges from 60 to 70% of the employee's salary for up to three months of disability.
  • Long-term disability is provided after an employee has been disabled for a period of time, usually three months. The benefit amount ranges from 60 to 70% of the employee's salary.
  • Sabbaticals are paid time off in addition to vacation and holidays. The length of the sabbatical ranges from four to six weeks and is usually granted after every five-year period of service.
  • Jury Duty, Military leave (usually two weeks), bereavement leave (usually three days), maternity and parental leave (combined usually one year), and voting leave (usually three hours) are all unpaid leaves offered by companies because of legislative requirement. Most companies go above and beyond these requirements by either paying the employees during the time on leave or subsidizing the leave.
  • Other government mandated benefits are Workers' Compensation when an employee must take time off because of an injury or disease; Employment Insurance for sick, maternity and parental leave; and loss of employment, or Old Age Security when a limited disability and/or retirement occurs.

HRinfodesk provides the legislated provisions for sick leave by jurisdiction. To find the information, go to the Library section on HRinfodesk.com; click on the jurisdiction of your choice; choose the heading, Benefits; and then click on the Sick Leave subheading.

Under the Benefits heading in any jurisdiction, including National, additional information can be found on other types of leaves of absence. In addition, under the National jurisdiction (which is applicable to all jurisdictions), under Policies and Procedures, subscribers will find sample polices, forms and checklist related to leaves of absence.

An article is also posted on HRinfodesk on how to establish a disability management process. To find the article, go to the HRinfodesk search engine and type the article number: 7657 in the article number field, then click search.

[1] A Study Concerning Federal Labour Standards: Balancing Work, Family and Learning in Canada's Federally Regulated Workplaces, Final Report, Evaluation and Data Development

Strategic Policy, Human Resources Development Canada, January 2000, SP-AH116-01-00E