How to handle cash-in and carryover vacation days for employees

Are your employees thinking of vacation time all year round? That’s not a bad thing. Taking vacation time mandated by employment standards, after all, is part of the law.  

What happens if they have unused vacation time? Can they carry over vacation days? Is there an option to cash them in? We’ll look at what federal, provincial, and territorial labour laws say. These are the minimums, so you can use these as the baseline for drafting your own policies on vacation time. 

Can you carry over vacation days in Canada? 

The practice of carrying over unused vacation days depends on a few factors: 

• whether the employer allows it 
• whether it’s covered by federal or provincial/territorial law 
• whether it’s stated in a collective agreement 

Rolling over unused vacation time became common during the pandemic. At that time, 18 percent of Canadian employers allowed carrying over vacation days. 

HR leaders are best placed to suggest whether a carryover policy would benefit the organization and its people. As a starting point, let’s look at employment standards for each province and territory. We'll see what the minimum standards are and what the law says about carrying over unused vacation days. 

Employment standards by province/territory 

Here’s an overview of labour standards laws for each province/territory, focusing on the main points regarding vacation days. Some key aspects to highlight: 

• In most provinces/territories, employees are entitled to vacation days after 12 months of continuous employment with the same employer 

• Employees start earning vacation pay once they are employed 

• The minimum vacation pay rate is 4 percent of gross wages 

• Vacation pay increases with length of employment, with provinces/territories setting different timelines  

• Each province/territory has its own set of labour standards, but many of the core provisions are similar 

What follows are labour standards per province/territory. These are minimums set out by law; employers can exceed but should not fall short of these standards. Many organizations, through individual contracts or collective agreements, offer more generous vacation benefits. 

Federally regulated employers 

Vacation time: two weeks' vacation time after one year; three weeks after five years; four weeks after 10 years  

Timelines for use: within 10 months after vacation time is earned 

Vacation pay: minimum at 4 percent of wages, depending on length of service 

Cash-in/carryover vacation days allowed? Yes, see below 

Employees can carry over unused vacation days up to a set limit, and any excess may be automatically paid out. Additional provisions, such as voluntary cash-outs and extended leave entitlements, may apply based on the employee's collective agreement or terms of employment. 

Alberta 

Vacation time: two weeks of vacation for each of the first four years of employment; three weeks per year after five consecutive years of employment 

Timelines for use: within 12 months of earning vacation time 

Vacation pay: 4 percent of wages during each of the first four years; 6 percent after five consecutive years of employment 

Cash-in/carryover vacation days allowed? Not stated 

An employer and employee should agree on when to take vacation. If no agreement is reached, the employer will decide. This will be relayed in writing at least two weeks before the employee starts their vacation.  

Vacation pay can be given any time or, at the latest, on the next payday after the start of the employee’s vacation.  

British Columbia 

Vacation time: two weeks from the second to the fifth year of employment; three weeks from the sixth year onwards 

Timelines for use: within 12 months of earning vacation time 

Vacation pay: at least four percent for each year below five years; at least six percent from the sixth year onwards 

Cash-in/carryover vacation days allowed? Cash-in not allowed – see below 

British Columbia’s employment standards state it clearly: “Employees cannot skip taking vacation time and just receive vacation pay.” Employees must take time off. It’s up to the employers to schedule vacation time depending on business needs.  

Manitoba 

Vacation time: two weeks after each of the first four years; three weeks after the fifth year onwards 

Timelines for use: within 10 months of earning vacation time 

Vacation pay: 4 percent of gross wages for two weeks’ vacation; 6 percent for three weeks  

Cash-in/carryover vacation days allowed? not stated 

Vacation pay must be given no later than the last day of work before vacation, at the latest.   

Employees and employers should agree on when vacation will be taken. If they fail to agree, the employer will set the vacation date, giving the employee at least 15 days’ notice. 

New Brunswick 

Vacation time: see below 

Timelines for use: within four months after vacation time is earned 

Vacation pay: minimum at 4 percent of wages, depending on length of service 

Cash-in/carryover vacation days allowed? Not stated 

Vacation time and pay for New Brunswick is a bit more complex compared to the other provinces or territories. Here's a table to map out conditions around vacation time/pay more clearly: 

Employers and employees can agree on when vacation is to be taken. Otherwise, the employer can decide when vacation starts. They must give at least one week’s notice.  

Newfoundland and Labrador 

Vacation time: Two weeks for each year for less than 15 years of employment; three weeks from the end of the 15th year onwards 

Timelines for use: within 10 months after vacation time is earned 

Vacation pay: 4 percent of gross wages for two weeks’ vacation; 6 percent for three weeks 

Cash-in/carryover vacation days allowed? Not stated 

An employee must have worked at least 90 percent of normal working hours in a 12-month period to qualify for vacation with pay. 

Both employer and employee should agree on dates for annual vacation. If they fail to agree, the employer decides on vacation dates, giving the employee at least two weeks’ notice. 

Northwest Territories 

Vacation time: two weeks after each of the first five years; three weeks from the sixth year onwards 

Timelines for use: within six months after vacation time is earned 

Vacation pay: 4  percent of wages for each of the first five years; 6 percent from the sixth year onwards 

Cash-in/carryover vacation days allowed? Cash-in and postponement allowed, see below 

There are no specific rules on carryover of vacation days, but the Employment Standards Regulations (section 8) covers an option to waive or postpone annual vacation. In both cases, the employer and employee must submit an application to the Employment Standards Officer under section 24 of the Employment Standards Act.  

If the request to waive vacation is approved, the employer issues vacation pay for the period covered by the waiver.  

If the request to postpone is approved, the Employment Standards Office will issue an order that annual vacation with pay be moved to next year.  

Nova Scotia 

Vacation time: two weeks from the second until the eighth year; three weeks from the ninth year onwards 

Timelines for use: within 10 months after vacation time is earned 

Vacation pay: at least 4 percent of gross wages for first seven years; 6 percent from eighth year onwards 

Cash-in/carryover vacation days allowed? Cash-in allowed, see below 

Under Nova Scotia’s Labour Standards Code, employees must take vacation time. Employers assign vacation time, with vacation pay given at least one day before employee vacation starts. 

There is an exception to taking vacation time. Those who work less than 90 percent of their regular hours can give up their vacation time and collect vacation pay instead. In this case, the employer must arrange vacation pay within one month after the end of the 12-month earning period.  

Nunavut 

Vacation time: two weeks at the end of each of the first five years; three weeks after the fifth year onwards 

Timelines for use: within 10 months after vacation time is earned 

Vacation pay: 4 percent of gross wages for first five years; 6 percent for sixth year onwards 

Cash-in/carryover vacation days allowed? Not stated 

Vacation pay is to be given, at the latest, one day before the employee’s vacation starts.  

Ontario 

Vacation time: two weeks at the end of each year for less than five years of employment; three weeks from the sixth year onwards 

Timelines for use: within 10 months after vacation time is earned 

Vacation pay: at least 4 percent of gross wages, depending on length of service 

Cash-in/carryover vacation days allowed? Cash-in allowed, with conditions – see below 

Employees can forgo vacation time, but both the employer and the Director of Employment Standards must approve this. Employees must still receive vacation pay. 

If they choose to take vacation time, employees must do so within 10 months of earning it. Employers have the right to schedule vacation time and make sure that it is taken within that 10-month period. Employees should receive their vacation pay before they take vacation time.  

Here’s a detailed explainer on vacation time and vacation pay in Ontario. 

Prince Edward Island 

Vacation time: two weeks from years two to eight of employment; three weeks for each year after that 

Timelines for use: within four months after vacation time is earned 

Vacation pay: at least 4 percent of wages, depending on length of service  

Cash-in/carryover vacation days allowed? Cash-in allowed, with conditions – see below 

Employees can forego their right to take vacation if: 

• they worked for the same employer for 12 straight months 
• they worked less than 90 percent of their hours during that period 

Employees must request to waive vacation time, in writing, to their employer. Once they approve the request, the employer should issue vacation pay within one month after the 12-month period of employment.  

Under PEI’s Employment Standards Act, vacation pay is considered legally belonging to the employee, held in trust by the employer. If they go bankrupt, vacation pay must be paid to the employees as a priority, even before taxes owed. 

Québec 

Vacation time: see chart below 

Timelines for use: within 12 months after vacation time is earned 

Vacation pay: at least 4 percent of wages, depending on length of service 

Cash-in/carryover vacation days allowed? Both allowed, with conditions – see below 

Vacation time and pay (called indemnity) are based on length of continuous service: 

Payment in lieu of time off is only allowed if: 

• an exception is made under a collective agreement or decree 
• the company closes for two weeks, but the employee gets three weeks' vacation and asks that they get paid for the third week instead 

A request to defer vacation days to the following year can be made under certain conditions only: 

• accident or illness not related to work 
• organ or tissue donation 
• domestic abuse 
• serious injury from a criminal offence 
• family reasons, including caregiver duties 

This is subject to approval by the employer. For more details, visit guidelines on vacation pay and indemnity on CNESST. 

Saskatchewan 

Vacation time: at least three weeks after each year of employment; at least four weeks for over 10 years of employment 

Timelines for use: within 12 months after vacation time is earned 

Vacation pay: 5.77 percent of wages for each of the first nine years; 7.69 percent from the 10th year onwards 

Cash-in/carryover vacation days allowed? Cash-in allowed, see below 

Vacation pay is given at employee’s request before vacation or on a usual payday during vacation. If employees don’t take their vacation, pay must be given within 11 months after vacation time was earned.   

Employers can require all employees to take vacation when the workplace is closed (holiday yearend closures, for example). The employer should give written notice at least four weeks in advance.  

Yukon 

Vacation time: two weeks for every completed year of employment 

Timelines for use: within 10 months after vacation time is earned 

Vacation pay: 4 percent of gross wages 

Cash-in/carryover vacation days allowed? Cash-in allowed, see below 

Under Yukon’s Employment Standards Act (section 20), all employees are entitled to vacation pay/time except the employer’s family. 

Employees can choose not to take vacation time, covered by a written agreement between employer and employee. If this is the case, the employer should give vacation pay within 10 months after the employee has earned vacation time. 

Risks of unused vacation days: legal and financial considerations 

Failing to manage vacation time properly can lead to serious compliance, financial, and workplace culture issues. Here are the main risks: 

• Employment standards violations. Not ensuring that employees take vacation per legal minimums can result in fines, inspections, or retroactive compensation orders 

• Costly payouts at termination. Earned and unused vacation must be paid out when employees leave. Unused days can accumulate into financial liabilities if not tracked 

• Growing financial liability. Vacation pay builds up over time. Deferral of vacation can lead to large, unexpected payouts 

• Burnout and productivity loss. Skipping vacation leads to burnout, reduced engagement, and lower productivity. These hurt both morale and performance 

• Union grievances. Ignoring vacation terms in collective agreements may lead to formal grievances or claims of contract violations 

• Audit and reputational risks. Poor vacation tracking or non-compliance with pay rules can raise red flags during audits. This can hurt your brand with both regulators and prospective hires 

Best practices for managing carryover vacation days  

We’ve outlined what could happen if employees fail to take vacation days. What can HR teams do to make sure that minimum standards on vacation uptake are followed? 

• Set clear limits on carryover amounts. Define a maximum number of days that can be carried over or cashed in. These limits should be clearly outlined in employment contracts or policy documents. 

• Use vacation tracking tools or HRIS systems. These can help you monitor vacation uptake. Use these tools to set reminders to help prevent vacation time from building up. For a list of the best HRIS tools, visit our list of the best Canadian HR software providers. 

• Create a structured vacation approval process. Encourage managers to go over vacation time with employees throughout the year. This helps address burnout while monitoring vacation usage. 

• Differentiate between statutory and extra vacation. Vacation time set out in labour standards should be used unless exceptions apply. Only additional days provided by the employer can fall under carryover rules. State the terms in handbooks and contracts. 

• Remind employees to use their time off. Set quarterly reminders to encourage employees to take time off for their health and well-being. If your organization has a carryover policy, be clear about what this involves. Avoid a “use-it-or-lose-it" policy; nobody wants to be caught by surprise that their vacation time is no longer valid. 

As we have seen, vacation days aren’t nice to haves; they're required under law. Knowing the minimum standards set by provincial/territorial law and collective agreements will help you in handling carryover vacation days and other similar issues.  

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