MaRS Library Vacation policy: What Ontario employers should know
As an Ontario employer, your vacation policy can be a key part of your attraction and retention strategy. It is a competitive element of the compensation package. Having a clear policy that extends to all employees helps you manage vacations fairly and effectively.
The Ontario Employment Standards Act requires that employers provide a minimum of two weeks of vacation to full-time staff. However, when recruiting, this vacation policy may not suffice to attract the best candidates.
Key vacation policy statistics for employers to note:1
- 62% of professional environments offer three weeks of vacation to new employees. This policy trend extends to small companies as well
- Of these organizations, 82% provide an increasing amount of vacation with length of service
- 61% of these employers in Ontario provide four weeks of vacation to new executives
- It is quite common for employers to negotiate an extra week for certain positions or skills, or to recognize relevant industry experience in offering vacation benefits
- 88% of Ontario employers allow employees to carry-over a limited amount of unused vacation. Capping the maximum carry-over limits the employer’s financial liability, and also protects small companies from having too many people away at once
Scheduling vacation time
Employers need to arrange employee vacation schedules as far in advance as possible, especially in small organizations where covering for absences can pose a challenge. Try to balance the employee’s needs and preferences with the needs of the business to ensure productivity is maintained.
Whenever possible, accommodate employee requests—being denied vacation can frustrate and upset employees. Make the policy rules clear, and if a request must be denied, explain the circumstances to the employee to help them understand the rationale. Maybe, together, you can find a solution.
Tips for employers to help you manage vacation scheduling
- Communicate a clear vacation policy
- Ask employees to submit vacation requests as far in advance as possible. You might require they submit plans by a certain date so that a vacation schedule can be developed and any conflicts resolved
- If there are certain days or times during the year when your startup truly needs everyone at work, make those dates clear in your vacation policy and communications with staff. (For example, the finance team may be too busy to accommodate vacations in the months surrounding the year-end)
- Know which team members can cover for each other, and make sure that if only two people can cover a certain task they are not both away at the same time
Vacation benefits and the Ontario Employment Standards Act: Highlights
The Ontario Employment Standards Act details employers’ responsibilities with respect to managing vacation allowances. Employers in Ontario should consult this law and seek legal advice as required. The Act outlines a number of “what-if” scenarios, which can help employers navigate different circumstances.
Highlights from the Act include:
- The Ontario Employment Standards Act requires that employees are provided two weeks of vacation time after each year of service. You can choose to assign vacation in two ways:
- A block of time at the end of each year of service
- An accrual on a pro-rated basis each month or pay period
- Vacation is earned as a percentage of time worked, so if an employee leaves the company before receiving their first year’s vacation allotment, the employer must pay out the earned vacation on a pro-rated basis. The pro-rated accrual system has grown popular with the increasing use of outsourced payroll services. Key benefits include:
- It tracks the amount earned and used so both the employee and employer know exactly what’s available at all times
- At the employer’s discretion, it allows a newer employee to take a few days off before their first year is up
- It keeps the accounting very clear for budgeting and accrual purposes
- Vacation earned in a given year must be taken within 10 months of the end of that year. The employer has the right to schedule vacation as well as an obligation to ensure the vacation time is scheduled and taken before the end of that ten-month period
- Employees can choose to give up vacation time, but not the right to vacation pay
1 TechEdge. (2013). Ontario Technology Survey 2012/13. Retrieved from http://www.tech-edge.ca/content.php?doc=216.
2 Ontario Ministry of Labour. (n.d.). Your Guide to the Employment Standards Act, 2000. Retrieved March 25, 2014, from http://www.labour.gov.on.ca/english/es/pubs/guide/publicholidays.php.