The vacation policy of an organization is a key part of an organization’s total compensation package. Vacation time and pay falls under the provincial jurisdiction and vary across the Canadian provinces and territories. That being said the minimum mandated annual vacation in every Canadian province except Saskatchewan after a year of work is two weeks. In Saskatchewan, it’s three weeks.

Let’s say you’ve been working at a company for many years and you have a solid foundation of vacation time. Can your company then say “if you don’t use your vacation time by the end of the year you’ll lose it”? Otherwise known as a “use it or lose it” vacation policy? Keep reading to find out.

Is a “Use It Or Lose it” Vacation Policy Illegal?

The understanding of a “use it or lose it” vacation policy can be confusing. In essence, it is not illegal to have a use it or lose it vacation policy. An employee can lose their vacation time by failing to take vacation BUT employees cannot lose their vacation pay. In other words, employees can decide if they want to take their vacation time but their employers must pay them their vacation pay if the employee doesn’t take their vacation time.

Vacation Time and Pay in Ontario

Vacation time and pay in Ontario are governed by the Employment Standards Act. Employees are entitled to 2 weeks of vacation time after each 12-month vacation entitlement year unless they have 5 or more years of employment, in which case they are entitled to 3 weeks. Ordinarily, an employee’s vacation entitlement year is a recurring 12-month period beginning with the date of hire. Where the employer has established an alternative vacation entitlement year that began on a date other than the date of hire, the employee’s employment standards entitlements will be adjusted accordingly.

Additionally, vacation pay is a minimum of 4% of gross wages. Employers and employees can agree to more but not less. Gross wages include regular earning, commissions, bonuses/gifts, overtime pay, public holiday pay, termination pay, and allowances for room and board. The vacation pay must be paid to an employee in a lump sum sometime before they take the vacation time.

Deadline For Taking Your Vacation

Earned vacation time must be taken with 10 months following completion of the vacation entitlement year or stub period. Your employer has the right to schedule the vacation time as well as the right to ensure your vacation time is taken before the end of the 10 month period. Vacation time is also required to be scheduled in blocks of 1 or 2 weeks unless agreed otherwise by the employer and employee.

What Happens If You Get Fired?

If you get fired from your job and still have vacation time and pay your employer must give you your outstanding earned vacation pay. Any unpaid vacation pay must be paid either within 7 days of the employment ending or the next regular payday.

Should You Take Your Vacation?

It’s important to unplug from work and give yourself a break. Mental health is extremely important and more and more businesses are encouraging their employees to not feel scared to unplug. Take your vacation time and spend it with your family or doing something you love. You’ll feel refreshed and ready to get back to work when you come back.

In the end, not it’s not illegal for companies to have a “use it or lose it” vacation policy so take your allotted vacation! As usual, feel free to contact us if you’re seeking someone to hire. We’d be delighted to start a conversation with you.