Can we deduct amount for vacation taken but not earned by resigning employee?

Question: We allowed an employee to take paid vacation time before it was earned. The employee has now resigned from the job. Can we deduct the amount owing in vacation pay from his final pay?

Answer: The answer depends on the jurisdiction of employment since employer payment obligations are covered under provincial/territorial employment/labour standards and the Canada Labour Code for federally regulated employees.

In most jurisdictions, the only deductions employers may take from an employee’s pay are statutory deductions (Canada Pension Plan, employment insurance, income tax), court-ordered deductions (such as garnishments) and deductions to which an employee has given written consent (such as benefit plan premiums, pension contributions and Canada Savings Bonds purchases). In order to deduct amounts for other reasons, the employer must have the employee’s written consent.

In Nova Scotia and Prince Edward Island, employers are allowed to make the deduction. For Manitoba, employers are advised to check with the Employment Standards Board.

Including statutory holiday pay in vacationable earnings

Question: Is statutory holiday pay included in vacationable earnings for calculating how much vacation pay to pay an employee?

Answer: It depends on the jurisdiction since vacation pay is governed by provincial and territorial employment/labour standards and the Canada Labour Code for federally regulated employers and employees.

Statutory holiday pay is included when calculating vacationable earnings in all jurisdictions but Alberta and New Brunswick.

Taxability of employer-paid language courses

Question: We are paying for some of our employees to take language courses. These employees work in Canada in either English or French, but we do have overseas offices and the language courses could help the employees if they ever choose to work in one of our overseas offices. Are the courses a taxable benefit to the employees?

Answer: The Canada Revenue Agency (CRA) states that business-related courses, including language skills, that are not directly related to the employer’s business are generally considered non-taxable benefits. If you are unsure whether or not the language courses you are paying for are taxable, you can request that the CRA provide an advance income tax ruling on the issue.

The CRA regards advance income tax rulings as binding, subject to qualifications set out in the ruling. For more information on advance income tax rulings, refer to the CRA’s website at

Annie Chong is manager of the payroll consulting group at Carswell, a Thomson Reuters business, which publishes the Canadian Payroll Manual and operates the Carswell Payroll Hotline. She can be reached at [email protected] or (416) 298-5085.

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