Employee Vacations: Good For Business

Encouraging employees to use all their vacation time each year helps a company’s bottom line and prevents legal liabilities.

Employee vacations | BCBusiness
Employees should be encouraged to take a summer vacation — using all their vacation time each year could prevent legal headaches down the road.

Encouraging employees to use all their vacation time each year helps a company’s bottom line and prevents legal liabilities.

Summer is now officially over, and for most of us, summer vacation is a pleasant memory. However, for a surprising number of employees, taking vacation either isn’t a priority or business metrics and/or culture indirectly discourage vacations. Whatever the reason, many employees have accrued unused vacation with no plans to use it up before the year ends. There are several reasons why employers should be concerned if they find themselves with employees in this situation. 

First and foremost, vacations allow employees the rest and recreation necessary to remain productive and healthy (both physically and mentally). Thus, vacations contribute indirectly to a company’s bottom line. Employers should encourage employees to take their vacations and to take vacations in stretches of at least a week, if not more, to ensure the maximum benefit is obtained from the time off.

Besides the obvious productivity and health benefits derived from regular vacations, there are significant financial and legal liabilities for employers with employees who do not take their accrued vacation. The BC Employment Standards Act prescribes the minimum time off that an employee must have each year (section 57), as well as the minimum vacation pay that an employee is entitled to (section 58) in conjunction with the vacation time. Some employers mistakenly think that if they simply pay out the accrued vacation, they will have met their legal obligations however, the Act still requires employers to provide their employees with at least the minimum time off. Thus, as a rule, employers should ensure that their employees take at least the minimum time off employers are required to provide under the Act. 

Employers who allow employees to accumulate and carry-over unused vacation from year to year also accrue significant financial liabilities that eventually have to be paid out at the termination of employment, if not earlier. Sizable accrued vacation liabilities can be a deterrent to potential investors or purchasers. Besides the financial burden, it may signal other management issues within the organization.  

Some employers have attempted to avoid accrued vacation liability by implementing policies mandating the use of vacation time, including rules on when payment of unused vacation will occur. Some policies go as far as stating all unused vacation time will be forfeited at the end of the year without vacation pay. Unfortunately, these use-it-or-lose-it policies are not enforceable if the result deprives employees of the minimum time off and/or vacation pay guaranteed by the Act.

Given all of the above, it is never too late to implement rules to:

  • Ensure that employees take at least their minimum time off each year (including scheduling vacation for employees who have not scheduled time off prior to the end of the year);
  • Limit the amount of vacation that can be carried over to subsequent years; and
  • Provide regular payout of unused vacation.

As with any change made to employee policies or rules, it is important that such changes be clearly communicated and that employers provide as much advance notice as possible of the changes (including some transition or flexibility in the rules) to allow employees to schedule vacation, especially if they have previously been allowed to carry over large amounts of vacation from year to year. 

As paradoxical as it may seem, establishing a business culture and setting rules that encourage employees to take all of their vacation every year is good for the bottom line.  

This blog is written by Nicole Byres of Clark Wilson LLP and made available by BCBusiness to provide general information on employment law, and is not a substitute for competent legal advice from a lawyer licensed to practice in your jurisdiction. Neither the reading of this blog nor the sending of unsolicited comments or emails creates a lawyer-client relationship with the writer or Clark Wilson LLP.