Setting an effective vacation policy is an important part of a company’s people and culture strategy and should be at the top of any employer’s mind.

Ensuring that team member vacations are well taken care of can help prevent employee burnout and boost employee retention. Additionally, a well-thought-out policy for managing vacation time and vacation pay will save your people and culture team plenty of headaches.


Related reading: The Smart Guide to Managing Employee Paid Time Off in Canada


Legislation and requirements in Canada

Employment and labour standards legislation for each Canadian province and territory require that all team members, from part-time and full-time, receive a minimum amount of vacation time and pay. There is also an act that sets out minimum vacation requirements for federally regulated companies and organizations.

Vacation time

Vacation time is earned after every 12 months of consecutive employment and must be taken within four to twelve months of when it’s earned. Vacation pay is calculated as a percentage of vacationable earnings (wages and other forms of compensation) from the 12 month period in which a team member earns vacation time.

Every province and territory requires a mandatory two week minimum for vacation time (except in Saskatchewan where it’s three). That minimum can increase with a team member’s length of service depending on what jurisdiction you’re in. For example, in Alberta, British Columbia, and Quebec, team members earn a minimum of three weeks vacation after five consecutive years of employment.

There are mandatory statutory holidays to consider as well. Full-time team members are eligible for paid statutory holidays, and part-time team members may be eligible as well depending on the rules in each province and territory for determining whether part-time team members must receive stat holiday pay.

Many employers allow team members to choose their own vacation time, within reason, but it’s actually up to an employer to make sure team members take their time off. Some provinces and territories, including Alberta and British Columbia, don’t allow team members to waive vacation time, recognizing the need for their team to get much-needed breaks. There are differing rules on whether vacations may be taken in one-week chunks or in single days as well.

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Vacation pay

In terms of vacation pay, team members in Canada earn a minimum of four percent of vacationable earnings, although this goes up to six percent after a number of years in certain jurisdictions. Albertans earn six percent after five years of consecutive employment, while in New Brunswick, it’s six percent after eight years. In Newfoundland and Labrador, team members can wait fifteen years before earning six percent. In Saskatchewan, employees earn three weeks of vacationable earnings or four weeks after ten years of consecutive employment.

Whether or not a type of compensation counts as “vacationable” can differ between jurisdictions as well, as there is often more than just regular wages involved in calculating vacation pay. Overtime pay counts as vacationable in most provinces and territories, but not in Alberta and Manitoba. Statutory holiday pay is only vacationable in some jurisdictions, while bonuses count in most places as long as they’re work-related rather than discretionary.

Vacation pay is usually paid out when a team member goes on vacation. It can also be paid differently, for example, as a lump sum each year or on each paycheque. Be careful, however: while most provinces and territories allow vacation to be paid out on each paycheque, federal legislation does not, and Quebec only allows it under certain circumstances.

These are just the legislated minimums. If a collective agreement or employment contract provides a greater right or benefit (i.e., more vacation time or pay), payroll and HR professionals must adhere to those rules instead.

Lastly, you need to have a clear form and process for vacation requests and keep track of how much vacation time and pay has been taken. Some jurisdictions require it, and since it’s up to employers to prove they’ve given vacation time, they could end up paying team members twice if there’s no record that they’ve already been paid.

What works and what doesn’t?

Setting a vacation policy that exceeds the minimum legislative requirements and offers a great vacation package goes a long way towards fostering team member satisfaction and retention.

One strategy that’s garnering a lot of attention lately is the practice of offering “unlimited vacation time.” Unlimited vacation policies have been implemented by the likes of Virgin, Foursquare, BuildDirect, and Tumblr, with proponents such as Richard Branson believing that unlimited vacation time will boost “morale, creativity, and productivity.”

The idea, of course, is that team members will feel free to take whatever time off they need without worrying about using up their allotment of vacation days. This idea, however, isn’t without its potential drawbacks. Some team members abuse the policy, whereas others feel pressured not to take any time off.

Related Reading: Happier Holidays: Getting Employees to Take Time Off

Unbounce has a unique approach to vacation time. They’ve implemented policies that actively encourage their team members to take a vacation, ensuring that everyone on their team gets recharged. Unbounce offers a generous four weeks of vacation to everyone on their team, as well as a $1,000 bonus for those who take it. The company says it hopes that the cash “helps [team members] explore new avenues and experiences.”

Sometimes a team member simply needs a day off to recharge. Offering paid birthdays off, personal days, or sick days helps team members get the time they need when they need it. Not only does that increase productivity, it also helps to prevent presenteeism.

Once you’ve decided how much vacation time and pay your team gets, you’ll need to consider things like how team members will receive vacation pay, whether they’ll be able to carry over any unused vacation to the next year, and how vacations will be requested and scheduled. Whatever you choose, ensure that the rules are clearly stated and communicated to your team so that everyone is on the same page.

The importance of a good vacation policy

Coming up with an effective vacation policy really just requires more than simply knowing how to stay compliant. It’s about understanding how important it is to recharge, and ensuring a smooth process so that team members can do so will make everyone’s life easier.

In addition to having well-written and effective rules regarding vacation pay and time off, it’s important to make sure that the policy is being implemented correctly and consistently. It would not look good if one team member was allowed to carry over unused vacation time while another was not.

It’s also a good idea to encourage open communication within your organization so your team feels comfortable speaking up if the current vacation structure isn’t working. This is especially true when making any major changes to your policy.

Beyond that, it’s best to double check that your policy meets all the requirements for the province or territory you’re operating in.

Over to you

Vacation is an important consideration in any working environment and taking the time to come up with a solid policy will ensure team members are well-rested and refreshed. So get creative and draw up a vacation policy your entire organization will love!


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