Getting it just right

Tracking employees’ vacation properly both sanity-saver and legal obligation
By Cori Maedel
|Canadian HR Reporter|Last Updated: 05/07/2012

The only thing better than a vacation is a paid vacation. It’s a precious resource to which many employees are entitled, and it’s one employers have a legal obligation to track.

But tracking vacation is easier said than done, especially if employees are spread over multiple jurisdictions, each with its own employment laws, minimum standards and record-keeping requirements for basic entitlements such as vacation time and vacation pay.

Before getting into vacation-tracking details, it’s important to understand the difference between vacation time and vacation pay because, under many circumstances, these two figures are tracked separately.

Vacation time is how much paid time off an employee is entitled to. Vacation pay is how much money employees receive for their vacation time. Vacation pay is calculated as a percentage of an employee’s paycheque and paid out in return for vacation taken or, sometimes, as an additional amount on each paycheque. So whether employees are paid hourly or salaried, the way vacation pay is calculated (for the majority) remains the same.

While this seems straight-forward enough, it’s incredibly important to pay attention to provincial employment laws to clarify the legal ins and outs of vacation time and vacation pay for any given province.

For example, in British Columbia, employees are entitled to a minimum of two weeks’ vacation time after working for 12 consecutive months. They start accumulating vacation pay from the fifth day of employment based on four per cent of their paycheque.

In Saskatchewan, however, employees receive a minimum of three weeks’ vacation time (after working 12 consecutive months). They start earning vacation pay on their first day of employment based on six per cent of their paycheque.

Tracking vacation goes beyond a legal obligation — it’s also a sanity-saver and makes a great deal of operational and financial sense. While there’s no one vacation practice or tracking system that suits all, records kept must be clear, accurate and comply with all employment standards legislation.

In general, these records must be kept for three years after an employee leaves. One of the reasons for this is there is no time limit for when former employees can come back and claim unpaid vacation pay.

If an employee leaves a company, whether by choice or not, the employer has a legal obligation to pay any outstanding vacation pay. If there is a dispute over what was paid or if a claim is filed, the burden of proof is on the employer. Without clear and accurate records to back up its decision, the employer may face substantial fines in addition to any outstanding vacation monies.

Many of these complications can be avoided with a vacation policy that sets out guidelines for taking vacation time, as well as outlining statutory holidays and office closures. However, a common mistake employers make when creating policies is in trying to implement a “use it or lose it” policy. Each province (and the federal sector) has minimum standards employers must provide employees and it is an employer’s legal obligation to make sure employees take this minimum time so none remains at the end of the year. If employees don’t take it, an employer is within its rights to schedule it for them.

Of course, employers are also welcome to extend the number of vacation days (or increase vacation pay) and many do so as a reward for service, but they aren’t obligated to pay out or carry forward these extra vacation days. This further complicates vacation-tracking because employees may be on a spectrum of vacation time and pay, based on their length of service and the number of days carried forward.

Vacation time is also pro-rated for new employees in their first year — so vacation time is allocated based on the time between their first day of work and the end of the employer’s 12-month vacation period — and this too must be recorded.

Best practices in vacation-tracking

In terms of communicating vacation-tracking to employees, a best practice to minimize costly disputes is to confirm the vacation time taken or earned by employees on a quarterly basis to ensure any errors in record-keeping can be addressed as early as possible. In addition, create an end-of-year vacation reconciliation form for each employee to be reviewed, signed and filed.

Consider also reviewing bonus and commission policies to make sure the outcomes of a termination are clear, so departing employees understand what will and won’t be paid. It’s also vital managers, supervisors and the payroll team understand these policies to ensure only the necessary deductions are taken out of the final paycheque and the payment is received in a timely manner, without reason for dispute. (Regulations differ based on the province and whether or not the employee left by choice.)

Remember also that emotions run high when employment comes to an end, creating a greater likelihood of disagreement. If there is a dispute over what is owed, don’t ignore it in the hope it will go away. Resolving issues early by reviewing accurate tracking records will help prevent the stress and financial heartache created by claims being filed.

One common mistake is paying out vacation pay to employees who forego their vacation time. Although it’s possible to reach this agreement in some provinces, the decision is often one that must be approved externally by employment standards and cannot be made by an employer.

Can an employer, therefore, make an employee take vacation? Yes, although it may not be a popular decision with employees. If an organization wishes to close its business over Christmas or during a sporting event, it can ask employees to take this time as vacation time. Employers also have the final say over an employee’s requested vacation time and can refuse it, if necessary.

Although employment laws set out what details should be tracked and for how long, there is no set format for the actual tracking. There are many online tracking templates to use but it’s most effective to use these only for inspiration and, instead, create a tracking system based on your needs, rather than trying to shoehorn in practices to suit someone else’s spreadsheet.

Ultimately, whether you track your vacation with hand-written records or intricate databases, make sure the information is clear, accurate and complete because efficient and effective record-keeping will go a long way in protecting both the employer and employee.

Cori Maedel is CEO of the Jouta Performance Group in Vancouver, HR and coaching professionals. She can be reached at (604) 488-8885 or cori@jouta.com. For more information, visit www.jouta.com.


Vacation time

5 things employers should track

Each province’s employment standards set out what should and shouldn’t be recorded but, in general, employers must track:

• vacation time earned since the date of hire but not taken before the start of the vacation entitlement year

• vacation time earned during the vacation entitlement year

• the amount of vacation time taken during the vacation entitlement year

• the amount of vacation pay paid to an employee during the vacation entitlement year

• the wages on which the vacation pay was calculated and the period of time to which these relate.

Remember, these details can be inspected by an employment standards officer at any time.

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