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A Refresher on Vacation Entitlement Under the Employment Standards Act

The holiday season is approaching, and many employees will be taking well-earned vacation. It is a good time for a refresher on statutory vacation requirements under the British Columbia Employment Standards Act (the "Act").

British Columbia employers must give employees who are subject to the Act both vacation time off of work and vacation pay.

Vacation Time

Employers are required by the Act to give employees an annual vacation of at least 2 weeks after the employee has worked 12 consecutive months and at least 3 weeks after the employee has worked 5 consecutive years.

Under the Act, vacation entitlement accrues in the year before the year in which the employee is entitled to take the vacation (note that the basis for calculating a year is the employee's start date, unless the employer elects to use a common date for calculating annual vacation entitlement which does not result in a reduction of the employee's vacation or vacation pay entitlement). In other words, the annual vacation you take this year is based on last year's work. This means that employers are not required to give 2 weeks of vacation to an employee within the employee's first year of employment -- that entitlement arises after 12 months of work. That said, many employers allow employees to take vacation on a pro-rated basis during their first year of employment.

Employees are entitled to annual vacation under the Act regardless of whether they work full-time or part-time. Statutory holidays, such as Christmas Day and New Year's Day, are excluded when calculating an employee's vacation entitlement. 

The Act requires employers to ensure that employees take an annual vacation within 12 months after completing the year of employment entitling the employee to the vacation. There is no provision in the Act permitting employers to simply "pay out" unused vacation at the end of the year -- rather, the Act requires employers to make sure the employee actually takes time off.

Vacation Pay

Vacation pay under the Act is treated separately from vacation time. Vacation pay is calculated based on the employee's "total wages" earned in the previous year of employment, which includes:

  • commissions;
  • incentive pay;
  • overtime;
  • statutory holiday pay; and
  • previously paid vacation pay;

but does not include:

  • gratuities;
  • allowances;
  • expenses; or
  • money paid at the discretion of the employer that is not related to hours of work, production, or efficiency (e.g. Christmas bonus paid to all employees).

Employers are required to pay vacation pay to employees as follows:

  • at least 4% of the employee's total wages during the previous year (equating to approximately two weeks' wages) after 5 calendar days of employment; and
  • at least 6% of the employee's total wages during the previous year (equating to approximately three weeks' wages) after 5 consecutive years of employment.

Employers may either pay an employee's vacation pay at least 7 days before the beginning of the employee's annual vacation, or, if the employer and employee have agreed in writing (or if provided by collective agreement), the employer may pay vacation pay regularly on each of the employee's scheduled paydays.

We note that most employers do not pay vacation pay to employees 7 days before the employee's vacation, and many employers simply continue to pay the employee their salary during the employee's annual vacation. Although this practice may not be technically compliant with the Act, the Employment Standards Branch tolerates this practice provided that the salary paid to the employee during the vacation amounts to at least 4% or 6% (as applicable) of the employee's total wages in the previous year. In its recent Consultation Paper on the Employment Standards Act, the British Columbia Law Institute has recommended amending the Act to expressly permit this practice, although its recommendations are not binding on the government.

Vacation time and vacation pay may be further modified by contract between the employer and employee provided that any modification meets or exceeds the minimum requirements of the Act.

Note that the Act provides that employers must provide employees with at least the prescribed amount of vacation time and vacation pay, so the Employment Standards Branch has jurisdiction to enforce any vacation and vacation pay terms set out in an employment agreement.

Lawson Lundell’s Labour, Employment & Human Rights Group has extensive experience advising employers on how to craft policies in compliance with the Act. For further information, please contact a member of our group.

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Lawson Lundell's Labour and Employment Law Blog provides updates on the most recent legal developments impacting the Canadian workplace and offers practical tips for employers. We cover a range of topics, including labour relations, employment law, collective bargaining, human rights, employment standards, employment equity, workers' compensation, business immigration, privacy, occupational health and safety and pensions and employee benefits. 

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