What you need to know about vacation
Summer is in full swing! For many, the warm weather and longer days serve as the perfect time to enjoy a well-deserved vacation. The Employment Standards Act, 2000 (the “ESA”) prescribes the minimum amount of vacation an employee must receive in most Ontario workplaces. Vacation has two parts: vacation time and vacation pay.
Under the ESA, employees are entitled to at least 2-weeks of vacation time after each vacation entitlement year (a vacation entitlement year refers to the 12-month period over which an employee earns vacation). This means that an employee who starts a new job is not legally entitled to take vacation until he or she has completed the first vacation entitlement year (though most employers vary this requirement – see the paragraph below). Vacation pay is at least 4% of the gross wages earned by the employee during the vacation entitlement year or stub period (i.e. the period in which the vacation is being given). Therefore, a full-time employee, earning $60,000 annually is entitled, at minimum, to 2-weeks (i.e. 10 days) of vacation time, with vacation pay of $2,400.00 per year.
In some workplaces, an employee takes vacation as un-paid time away from work and receives vacation pay of at least 4% of their earnings on each pay. In most workplaces, an employee receives vacation as paid time-off and vacation is managed like a bank account, where the employee earns (i.e. accrues) vacation time and vacation pay. Using the same example above, the full-time employee would accrue vacation time at a rate of .833 days per month (10 days/12 months) and vacation pay at a monthly rate of $200.00. If the employee wanted to take vacation, she could use some or all of the accrued vacation time and pay. If the employee took more vacation than she had earned and resigned or was terminated during the vacation entitlement year, then her employer would be able to recoup the unearned vacation pay from her final earnings. Conversely, if the employee resigned or was terminated before using her accrued vacation, the employer would be required to payout her ‘banked’ vacation pay.
Employees can agree to give up some or all of their vacation time, but can never agree to give up their right to vacation pay: an employer must always pay an employee’s minimum vacation pay entitlement under the ESA. Furthermore, employees on pregnancy or parental leave (or any leave under the ESA) continue to accrue vacation time and in some circumstances, vacation pay (where the employee receives earnings from his or her employer during the leave of absence).
Though employees are legally entitled to take vacation time, the law gives an employer the final say about when an employee can take vacation. Therefore, employees should always confirm that they have obtained the necessary approvals before they make any vacation plans. Likewise, every workplace should have a vacation policy that clearly outlines the process for requesting and obtaining approval for vacation, as well as any ‘black-out’ periods when vacation is not permitted or mandatory office closures when employees must use their vacation or take unpaid time away from work.