Do vacation days carry over to the next year in Canada?

Vacation time is essential for employee well-being and productivity. Yet, many employees fail to use their vacation entitlements yearly.

Whatever their reason for not taking a break from work may be, such employees may wonder if their unused vacation days can carry over to the following year.

In this article, we'll answer some pressing questions employers and employees often have about their unused vacation time so you can be sure your business's approach to handling vacation requests is in accordance with the law.

Can employees carry over their unused vacation time?

The concept of "vacation carry-over" refers to the ability to transfer any unused vacation time from one year to the next. According to Canadian employment legislation, employers don't have to give their staff extra time off work if they don't use all their vacation entitlements. It's up to each business to decide if they want to make this extra accommodation for their staff however, it isn't mandatory.

As an employer, it’s your duty to provide paid vacation time and encourage employees to take it within the year it’s earned. You may only offer to ‘pay out’ your employees unused vacation time when they don’t use it only if the employee agrees to it.

This means that if your employee doesn’t take their vacation time within the year, you’re required to make sure they take time off work either within the same year or, in some cases, in the next year as soon as possible.

What is the law around vacation entitlement and payout?

In most Canadian jurisdictions, vacation entitlement legislations ensure that employees receive a minimum amount of time off each year, typically two weeks after one year of employment, with an increase to three weeks after five years. If an employee does not use their vacation days in a year, you can offer to payout for any remaining days, rather than those days carrying over automatically. This is an option many business owners use although this is not explicitly stated in employment legislation.

This approach balances employees' rights to time off with employers' administrative needs, offering flexibility while ensuring employees receive total compensation for untaken time.

Vacation pay entitlement and unused vacation payouts

For employees with unused vacation at the year's end, the employer must provide a payout, which is calculated based on a percentage of their wages. For example, in Ontario:

• Employees with less than five years of service receive at least 4% of their gross wages as vacation pay.

• Employees with five or more years receive 6%.

You may also choose to offer your staff more than the minimum vacation entitlements through more generous vacation policies, such as allowing carry-over of unused days. Remember that you must meet the minimum requirement of either vacation payout or vacation time provided.

Job-protected leaves and vacation accrual

Many employers and employees often ask if staff are still allowed to use their vacation entitlements if they took a job-protected leave in the same year. The short answer is yes.

If an employee has been away from work for some time on a job-protected leave like maternity leave, they continue to accrue vacation time.

For example, suppose an employee in Alberta who has been with your business for 2 years takes 3 weeks off work to care for a critically ill family member. They are still entitled to take an additional 2 weeks of vacation time off work or be eligible for vacation payout, as the case may be.

If you need help managing accrued vacation time after job-protected leave, we advise you to speak with a qualified employment relations expert for more guidance.

Simplify vacation management with BrightHR

Failure to manage your employees' vacation entitlements can expose your business to costly employee claims; you may be ordered to backpay any vacation pay owed, which can amount to thousands. In addition, poor vacation management can lead to employee burnout, dips in productivity and lower morale, which is terrible for your company's reputation and bottom line.

That's why it's essential to have water-tight policies and documentation on vacation management in your business and ensure they're drafted in line with minimum employment standards.

Understanding vacation carry-over policies and ensuring compliance with employment standards can be complex, but it doesn't have to be; with access to 24/7 employment relations experts and an end-to-end vacation management tool, your business has everything it needs to easily track vacation balances, manage payouts and approve vacation requests without any hassle.

Interested in a more efficient way to manage vacation pay and entitlements? Book a free demo to see how our tool simplifies time off management while staying compliant with vacation pay requirements.