Complexity of statutory holiday pay challenges employers

’It’s one of the top 5 non-compliance issues in Canada’
By Marcel Vander Wier
|Canadian HR Reporter|Last Updated: 05/24/2019
Fireworks
Statutory holidays such as Victoria Day can prove difficult for small employers and payroll professionals calculating holiday pay. Elena Elisseeva/Shutterstock

The days following Victoria Day or any other statutory holiday in Canada are anything but relaxing for Karima Balfoul of the Canadian Payroll Association (CPA).

Following the May holiday, employers inevitably begin calling the Toronto association en masse, she said.

“It seems like the first time that they are paying a stat — it’s always the same issue,” said Balfoul, a payroll compliance officer in Toronto. “How do I do the calculations?”

“I have been working with the CPA for 10 years and always after a stat, it’s almost all the time the same issue,” she said. “It’s like the members forget how to do the calculation, or they want sometimes to double-check. Even if the legislation does not change, they still want to confirm.”

“Statutory holidays is one of the top five non-compliance issues in Canada.”

Provincial holiday pay rules vary in terms of employee eligibility, company tenure, days worked prior to the holiday, and full-time or part-time status, according to Faiz Abdulla, CEO of Rise People, a human resources software company in Vancouver.

“It is pretty complex,” he said. “It gets pretty complicated and intricate… People just don’t like thinking about it.”

“There’s really a lot of fine details that apply to these stat holidays, where employers need to ensure they’re following them to a tee to maintain compliance.”

Legislation varies

Employers operating across provincial boundaries have it particularly tough, as they need to abide by multiple employment standards documents, said Balfoul.

“They have to keep up with the legislation and some legislations are not very clear on the wages to use for this calculation.”

Legislation can change as well, as seen with the Ontario government’s recent reversal on averaging public holiday pay formula, she said.

Alongside specific pay regulations, other legislative rules can include holiday substitutions, business closures, eligibility criteria, eligible earnings, and more.

The most common issues that arise are employee eligibility for holiday pay, as well as the calculation of holiday wages, said Balfoul.

Overtime is also an issue when combined with holiday pay, she said.

Compliance is necessary, said Balfoul, as employers can face monetary fines and penalization that includes a public listing online if they fail to comply with appropriate legislation.

Differences in provincial legislation can make payroll more complicated, said Abdulla. For example, in British Columbia, vacation pay itself is eligible for vacation pay — a difference from other provinces, he said.

And as for eligibility rules, the province requires workers to be employed for 30 days prior to the statutory holiday in question, and paid for at least 15 of those 30 days for work done by their current employer. Calculation is total earnings for the past 30 days prior to the stat holiday, divided by days worked, according to Abdulla.

Further complications come when an employee has scheduled a statutory holiday as a day off, as well as those working the holiday and receiving time-and-a-half or double-time compensation, he said.

For a small business assembling payroll manually using the Canada Revenue Agency’s (CRA) online calculator to ensure compliance, holiday pay can become particularly complicated, said Abdulla.

“In addition to stat holiday calculations, there are a lot of other complexities when it comes to compliance with CRA, Service Canada and employment standards.”

Another holiday?

While not yet law, discussions on establishing Sept. 30 as a statutory holiday marking Indigenous reconciliation continue in the House of Commons.

A National Truth and Reconciliation Day was initially proposed for June 21, but the date was altered to Sept. 30 to commemorate the experiences of residential-school students.

Bill C-369 passed third reading on March 20 and is now before the Senate.

If passed as a federal holiday, it would apply to workers in federally regulated industries. Provincial and territorial governments could then decide to observe the statutory holiday or not. Federally regulated employees are currently entitled to nine paid general holidays every year.

At present, only five statutory holidays are recognized across all Canadian jurisdictions: New Year’s Day, Good Friday, Canada Day, Labour Day and Christmas.

“The challenge with these holidays is if employers are still using older systems or manual systems… it might be a bit more challenging,” said Abdulla.

“It’s just another detail that they need to comply with strictly, and they need to manage properly. There are a lot of rules around it.”

Automated systems are available to employers that struggle with payroll regulations, he said.

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