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Scheduling employee vacation is a challenge

By Yosie Saint-Cyr, LL.B., Managing Editor at HRinfodesk.com---Canadian Payroll and Employment Law News, May 2007

According to JustJobs.com in France, workers earn a whopping 39 vacation days a year. In Great Britain, employees get 24 vacation days off. If their typical workweek is five consecutive days just like ours, then the British are getting about a month and a week off from work, and the French are getting nearly two months off. And most French and British workers use every minute. According to the 2005 Expedia Vacation Deprivation Survey conducted by Ipsos-Reid, on average, Canadian workers have 4 weeks' vacation time (21 days). And, as a whole, Canadian workers take a mean average of 20 vacation days a year. When the number of vacation days Canadians say they usually receive are calculated versus the number of vacation days they say they usually take, one-quarter (24%) of Canadians don't usually take all of their days. Two-thirds (65%) have 0 days left over. The possible reasons why Canadian workers may not be using all of their vacation time include the cost of taking a vacation (18%), the option of cashing out the days instead (10%), kids' school schedules (9%), fear of missing something important at work (8%), and/or concern that taking all of their vacation time will be perceived negatively by their employer (5%).

When asked to think about an average year, 54% of employed Canadians say they use all of their vacation days, 20% use most of their vacation days, 13% use some of their vacation days, and only 3% use none of their vacation days. Of the 54% of employed Canadians who take all of their vacation days, they say they return from vacation feeling better about their jobs and feeling more productive.

In addition, roughly one-quarter (23%) of Canadian workers have had to cancel or postpone a vacation because of work, 15% check their work messages while on vacation, and 5% say their boss is not very supportive of employees using their vacation time.

By and large, the stats have not changed since 2005. Our latest HRinfodesk Poll indicates that employers find it a challenge to ensure employees schedule and take all their allotted vacation time. The question asked in the poll was: Is it a challenge getting your employees to use all of their paid vacation time? The results of the poll indicated that 73.05% of respondents found it a challenge getting their employees to use all of their paid vacation time and only 26.95% of employers did not.

Specifically, results from the April 16, 2007 Poll were:

Overview on vacation entitlements

In most Canadian jurisdictions any employee who has been at their job for more than one year is entitled to a minimum of two weeks of paid vacation each year. However, in Saskatchewan, an employee who has been at their job for more than one year is entitled to a minimum of three weeks paid vacation. And, in most jurisdictions, if an employee stays at their job for a longer period of time they will earn more paid vacation time, except for in Ontario. In Ontario, vacation does not increase with the length of employment.

The jurisdiction (province or territory or federally regulated workplaces) in which the employee reports to work (which in general is the same as the province or territory where the employee resides, except for federally regulated workplaces and certain other types of workers) will determine the minimum rules regarding annual vacation entitlements and pay. For example, each jurisdiction has its own way of determining when an employee has been employed for one year. In some jurisdictions it's measured by working days or shifts, in others by what percentage of working hours have been worked in a twelve month period, in still others the employee must simply have had a period of twelve months of continuous employment.

In general, each jurisdiction has rules that determine how soon after completing a year of employment an employee must be granted their vacation. The timing varies from four months following the completion of a year's service (in New Brunswick and PEI), to 10 months in seven jurisdictions, and 12 months in Alberta, British Columbia, Quebec and Saskatchewan.

Some jurisdictions also require employers to offer annual vacations in one unbroken period (Alberta, Nova Scotia, PEI, and Saskatchewan) or in periods of at least one week (British Columbia, Manitoba, Newfoundland and Labrador, Ontario, and Quebec). However, employees, at their request, may take their vacations in two or more periods, with the consent of their employers. This is recognized explicitly in some employment standards legislation which allows vacations to be taken in one-day increments.

Most jurisdictions provide for a one-day extension of vacations if a public (statutory) holiday occurs within the vacation period.

Generally, the minimum vacation time under the Act cannot be carried forward to a subsequent year. The principle being that the law requires employees to utilize vacation in the year in which it is accrued. However, this does not prevent the banking of vacation time for employment contracts that provide for vacation in excess of the act minimums. This should be stated in a policy: employees may carry forward unused vacation from one fiscal year to the next.

In general, when employees waive or postpone vacation time or any of the vacation time they've earned, the employer is still obligated to pay out any vacation pay earned with respect to that vacation time. Meaning that vacation pay constitutes earned wages and not a gift or gratuity, but as additional wages for services performed. However, waiving vacation is not allowable in all provinces or territories or may require the approval of the Director of Employment Standards. For example, in Ontario, any agreement to provide pay in lieu of this minimum vacation time entitlement requires the approval of the Director, Employment Standards of the Ontario Ministry of Labour. If an employee is entitled to receive more than two weeks vacation a year, the employee may accept pay in lieu of vacation for that portion of the vacation entitlement in excess of the basic two week minimum. This policy of insisting on at least two weeks of time off emphasizes the basic principle of providing employees with an opportunity to rest, relax and rejuvenate.

Furthermore, in several jurisdictions, like Alberta and British Columbia, failure to grant an annual vacation is a contravention of the Act even if vacation pay is paid out.

As for vacation pay, it is usually set at 4% of the employees' earnings in the year that established their right to paid vacation. Just as with defining a year of employment, each jurisdiction has its own method of calculating vacation pay. In most jurisdictions, if an employee stays at their job long enough to earn more paid vacation time; they will also earn more vacation pay, except in Ontario. Also, in general, laws require that vacation pay be delivered no later than the day before the vacation is to begin.

Earned vacation time cannot be forfeited. An employee cannot forfeit earned but unpaid wages, and this principal applies to vacation pay.

The policy of several Employment Standards Branches 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 percent of their gross earnings (or any other applicable percentage point).

Employers can, and often will, give vacation and benefits that are greater than the applicable legislation. They may not give less vacation time or pay than the applicable legislation states.

Employers should consult employment standards legislation for their jurisdiction for specific entitlements and requirements. This information can be found by jurisdiction in the Library section of the HRinfodesk website. Under Benefits choose Vacations.

How to deal with the challenges to help employees use all of their paid vacation time

Scheduling the holiday

The employer has the right to schedule vacation as well as an obligation to ensure the vacation time is scheduled and taken before the end of the maximum time frame within which the vacation must be taken. As a rule, employment standards legislation stipulates that, in the absence of mutual agreement, an employer can decide the date of employees' vacations, provided advance notice is given.

Thus, the principle is, an employer has the right to control when vacation time is taken, and how much can be taken at one time. An employer can thus prevent all of its employees from taking vacation leave at the same time, and limit how much vacation may be taken at a time, in the event employees have accrued several months of vacation time.

However, companies should require their employees to take all their vacation. It benefits employers in that they can have some type of measure when that employee is gone to determine his or her productivity.

As indicated by Howard A. Levitt from the employment and labour group at Lang Michener, scheduling vacation time is best planned in advance. This planning will be based upon the employer's judgment of the presence of the employee related to the necessity of productivity. As a strategy for loyalty and retention, the time for vacation or the split timing of the vacation may be left to the employee's discretion. This will be effective if the planned time (duly noted and presented by the employer well in advance) does not create lost productivity due to their absence, or if too many employees in the same department are not absent at the same time. A contract term or policy respecting vacation time and pay is useful. An escalating benefit tied to 1. productivity targets and/or seniority; and 2. allied with employee choice of time off, creates positive conditions. These will be conducive to employee morale and loyalty, especially in highly competitive industries.

It has often been asserted that “happy workers make for happy customers.” Since employers succeed or fail on the basis of customer goodwill, such apparently innocuous issues as vacation time and pay need to be conscientiously applied for maximum effect.

When employers want to communicate to employees their option to schedule vacation, the vacation policy should state the following:

Employees must notify the employer of preferred vacation time before [insert month and day] in any given year.

The employer reserves the authority to designate vacation periods with reasonable notice for all employees in a manner consistent with the efficient operations of the Company.

Once vacation decisions have been made, they should be considered final. If an employee wants to change plans, let the employee involved try to exchange vacation days. If changes can't be worked out, the existing schedule should be followed.

Allow flexibility

As stated by the HRSDC, a relatively easy and cost-efficient way for workplaces to become more family-friendly is to allow employees more flexibility in the use of their vacation time.

Companies may help their employees by allowing them sufficient flexibility by proposing alterations to the calculation of vacation time and pay such as:

  • breaking the vacation time into shorter periods;
  • taking vacation at the same time as their spouse;
  • taking vacation time during the summer when children are at home.

Breaking vacation time into shorter periods means that managers do not have to replace certain essential employees. This measure enables employees to divide up vacation time in a way that best suits them. Allowing employees to take vacation during the summer makes it easier for managers to plan for hiring seasonal workers.

However, employers are advised that any strategy that may appear to offer flexibility must comply with employment standards and even human rights law. Theft of time by employees through abuse of absenteeism policies may lead an employer to offset sick days from vacation time. This could place the employer in a double bind. They could be violating employment standards rules and/or human rights laws relevant to handicap or disability where a medical condition may be asserted as a cause as well as violating vacation time and pay rules outlined in employment standards.

Employers are advised to consult legal counsel regarding alterations to the calculation of vacation time and pay.

Additional resources:

Vacation pay and public holidays: payroll implications.

Furthermore, it is suggested that employers vacation practices according to minimum standards for vacations, or that exceed the minimum standards, should be reflected in policy. A clear statement is required to avoid misunderstandings and/or misinterpretations related to vacation time and vacation pay.

A sample Vacation Policy can be found in the Alberta Human Resources PolicyPro under Chapter D: Benefits Policies. For more information, or a 30 day trial, go to the PolicyPro website.