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The new year is a meaningful time for companies to conduct an audit of unused vacation time their employees have accrued over time.
Under the Ontario Employment Standards Act, 2000 (the "ESA"), vacation entitlements are separated into vacation time and vacation pay. The right to vacation pay under the ESA cannot be waived if an employee elects not to use their vacation time. Vacation pay is based on gross wages for the year, including commissions for example, not only base pay.
Further, if an employer does not have a vacation policy, and an employee has more time than is set out under the ESA, that time will continue to accrue and be payable to the employee — there is no default "use it or lose it" rule. Employers are mandated by the ESA to maintain records of vacation for their employees, and an absence of records can be a liability for a company even if the employee has taken their vacation.
This means that for many employers with long service employees, there could be a large vacation payout in the event the employee is terminated or resigns.
The good news is that this large payout can be mitigated by implementing a new vacation policy for employees. There are various ways this can be rolled out.
Does your company have employees with large amounts of unused and accrued vacation? If so, now is an ideal time to implement a vacation policy.
Our team is ready to assist you with your vacation audit and setting your business up for clarity when it comes to vacation — used and unused.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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