Are your vacation policies and practices compliant with legislation?

If you are a federally-regulated employer, and the organization pays vacation pay each pay period, the federal labour program would say that this not compliant.

All employees, regardless if they are full-time, part-time, permanent, temporary or casual, must receive their vacation pay in one (1) of the following ways:

1. Within fourteen (14) days before the employee takes their vacation leave
2. On the regular pay day during or immediately following the employee’s vacation leave

In addition to this, many employers may have established the practice of paying out vacation as opposed to providing vacation leave entitlements. This is also not compliant. All employees, regardless if they are full-time, part-time, permanent, temporary or casual, must receive the minimum vacation leave entitlements under the Canada Labour Code.

When discussing this with clients, one of the more common questions we hear is, “What about casual employees?”. In thinking about those casual employment relationships, it’s hard to see how these regulations would be applied.

Casual employees are only called into work when needed, so how would they take vacation leave?

To answer this, we would refer to the Canada Labour Standards Regulations. These regulations do provide some room for exception, where it indicates that by way of a written agreement, employee’s may waive their right to vacation leave entitlements so long as the employer pays out their vacation within ten (10) months of the vacation year. 

In other words, the casual employee does not need to take vacation leave in order to receive their vacation pay. Instead, the employer can pay out their vacation pay once per year, so long as a written agreement is in place. 

Provincial Standards

It is important to note that these regulations only apply to the federal sector. If an organization falls under provincial jurisdiction, it is possible that the employer would be able to pay vacation each pay period.

For example, Manitoba Employment Standards has stated on their website that: “Employers may put vacation pay on every cheque. Employees are still entitled to take time off as vacation, but because it has already been paid, they do not receive any additional vacation pay while they are off.”

Again, it’s important to highlight that while vacation pay can be paid out each pay period, employees are still entitled to vacation leave. We have heard some misconceptions out there, where employers might naturally assume that since vacation pay is paid out each pay period, they do not need to offer employees vacation leave since it would be an unpaid leave. As we see here, this may not be the case. 

Taking all of this into consideration, we recommend that our clients “double-check” their vacation policies and practices to ensure they are compliant with legislation.