Employers have the responsibility to ensure that employees receive their legislated vacation leave and pay – a responsibility they should take seriously. Yet, efforts of employers could be undermined as the result of some common and potentially costly misconceptions related to vacation entitlement and pay.

Misconceptions are far more dangerous than questions. When you have questions, you need to seek answers. Unfortunately when someone makes decisions based on a misconception, they expose their organization to the potential risk of fines and penalties.

It is required of employers and payroll practitioners to stay abreast of the current industry practices and ensure that the organisation payroll structure is compliant with legislation and regulatory requirements, to minimise the mistakes that could expensive on their business.

A clearly defined vacation policy relieves half the stress of payroll practitioners and employers on issues to deal with when it comes to employee vacations (whether timely or untimely). However, depriving employees of the vacation benefits and leave privileges is definitely not a way to sneak out for employers.

Most employers understand that they have an obligation to provide all employees with vacation whether they work full or part-time. They also know they have the discretion to approve or deny the timing of vacations based on business needs. However, they may also believe they have the rights outlined below, which they actually don’t.

Use it or Lose it

A common misconception is that employers have the right to impose a “use it or lose it” policy on vacation entitlement. Minimum vacation entitlement is determined by the legislation in place in the jurisdiction where the employee works. When an employer chooses to exceed these minimum standards, it is referred to as a “greater benefit.” This is an important differentiator.

See: Why Branson’s Vacation Policy Makes Sense

A use it or lose it policy is only allowed in certain jurisdictions, and where it is allowed it pertains only to the greater benefit. For example, if legislation requires that an employee gets two weeks of vacation, but the employer provides three weeks, then the employer may be allowed to impose a policy where the employee loses the extra week if it is not taken in the required time frame.

Recovering Vacation Overpayments

Another error employers sometimes make is deducting vacation overpayments from the final pay when an employee terminates employment. If an employer has a policy that allows employees to take their vacation in advance (before it is earned), a written agreement should be in place whereby the employees acknowledge that if their employment ends before the vacation is earned, they must repay the employer any unearned amounts.

Some jurisdictions and/or collective agreements require the specific dollar amount of a deduction be authorized by the employee. Otherwise, the employer does not have the right to deduct overpaid vacation.

Having clearly defined policies and procedures assists payroll practitioners in the difficult job of managing vacations and other employment standards. But it’s very important that those policies comply with current legislation and regulatory requirements.

Also read: Happy Employees, but Not Costly

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