Calculating Vacation Leave in 2021
Like so many other labour laws, our laws on vacation leave are out-of-step with the way we do business in the 21st Century. This was made worse by the pandemic which caused layoff and salary cuts for many employees. In this article, we look at the effect the virus will have on your vacation leave.
Vacation leave pay is calculated based on the worker’s “normal wages”. But there is nothing about 2020 that was normal, especially with salary reductions being the unfortunate norm in many industries. Our Holidays with Pay Order, 1973 offers limited assistance in understanding what “normal wages” means. It simply says that it is the remuneration that is “regularly paid” by the employer. Depending on the circumstances, it is possible, therefore, that any employee who resigns, is dismissed or made redundant while earning a reduced salary will only be paid unused vacation leave pay based on that reduced salary. The same could be true for all elements of the severance package, including the notice pay and the redundancy payment.
On a strict interpretation of our law, vacation leave is not accrued during a layoff period or any period that the business is closed and the employee is not working. There are between 312 and 260 work days in a year. If an employee works for more than 110 days but less than 220 days, he will earn vacation leave at the rate of 1 vacation day for every 22 days worked. Once an employee works on more than 220 days in the year, he will be entitled to the full allotment of vacation leave for that year. Thus, any employee who was laid off for more than 2 calendar months is likely to be entitled to less vacation leave in respect of 2020.
Vacation leave earned in the any year of employment is, by default, granted in the following year of employment. Unused vacation leave will be forfeited at the end of the year in which it should have been taken unless there is a policy or agreement with the employer to carry over unused vacation leave from one year to the next. To be clear, there is no automatic carry-over of vacation leave in our law. It matters not that your vacation plans for 2020 were cancelled due to COVID.
Calendar Year vs Work Year
The date by which unused vacation leave will be forfeited depends on when the employee started working – not the start of a new year. By way of illustration, an employee who was hired on March 1, 2019, would be eligible to apply for his 2-weeks’ vacation on March 1, 2020 and would forfeit those days if not taken before March 1, 2021. Vacation leave does not, therefore, expire at the end of a calendar year, but for ease of administration, this is what many businesses tend to do. They pro-rate the vacation leave earned prior to January 1 and then use the calendar year to calculate everyone’s vacation leave entitlement. It remains to be seen how that will work out in a year where most employees did not earn their normal entitlement and were not interested in applying for vacation leave. It is not unlikely that, faced with forfeiture of vacation days, employees will take a closer look at our vacation leave laws.
The 110-day qualifying period for vacation leave applies to every year, not just the first year of employment. By law, an employee ought to work for at least 110 days in every year in respect of which he is seeking to take vacation. This is easily satisfied when the employee is taking leave in the subsequent year of employment. It means, however, that businesses that require employees to take their vacation leave in the same year that it is earned, will not be legally bound to grant any leave for up to 5 months in that year. In that case, a reasonable employer will often grant the vacation leave in advance.
There has never been a more urgent need for labour law reform as there is right now. Until then, a vacation leave audit performed by a professional familiar with our employment laws is likely to save a lot of money and avoid future liability and claims from former employees.
Gavin Goffe is a Partner at Myers, Fletcher & Gordon and Head of the Firm’s Litigation Department and Labour Law Practice Group. Gavin may be contacted at email@example.com or through www.myersfletcher.com . This article is for general information purposes only and does not constitute legal advice.