Employees who work a lot of overtime or extra hours could earn more vacation pay than is needed to cover their time off. What happens to the “extra” vacation pay? It goes to the employee.
Under the Employment Standards Act (ESA), vacation pay is treated the same as an earned wage or overtime pay. It is very important that vacation accrual and use is tracked on an employee’s paystub.
An example: Jane works 37.5 “regular” hours plus 3 hours of overtime every week. Let’s assume that Jane uses her 10 days of vacation in July and her accrued vacation pay is used to cover the time off. However, the overtime results in more money in Jane’s “bank” of accrued vacation pay than was needed to cover the vacation in July. Jane should be given all of the accrued vacation pay earned, at the time she takes the vacation.
Alternatively, I recommend that employers establish a policy to determine when and how this extra vacation pay will be paid out, for example in time for Christmas or summer holidays.
If Jane quits her job (or is fired), she is entitled to any vacation pay earned (accrued) between the end of her vacation in July and the date of the termination, even though she has taken all 10 days of her vacation time.
Got HR Questions? We have the Answers! Call us Today!