Use it or lose it: Dealing with leftover vacation days as year-end approaches

Can employers require employees to take vacation?

Legally, employers in Canada have the right to schedule vacation time for their employees, according to Olivia Cicchini, an HR and employment law expert at Peninsula Canada in Toronto.

"Yes, employers are permitted to force employees to take their vacation time as long as they do so in accordance with the applicable employment standards legislation," she says.

However, the wisdom of this approach depends on the individual circumstances of each employee, she said. Some employees may welcome the initiative.

"Some employees may forget to book time off due to their demanding workloads and will appreciate their employer taking the initiative to pencil in vacation on their behalf," Cicchini adds.

This proactive step can prevent burnout and signal an employer's commitment to mental health and work-life balance. On the other hand, mandatory vacation scheduling can backfire.

"Conversely, some employees may not be so appreciative," she says. "Employees who hoard their vacation time may have misunderstood your vacation policy... or are saving it for one long vacation.”

Stuart Rudner, an employment lawyer and founder of Rudner Law in Ontario, agrees that while employers have the legal right to dictate vacation schedules, it's crucial to consider the human element.

"You can just flat out say you've got three weeks' vacation; this is when you're going to take it," he says. "Whether that's a good idea or not is a different question, but legally you can do that."

Rudner’s advice is to start with a conversation rather than unilaterally imposing dates. "Usually, this should start with a conversation where you ask the person when they want to take their vacation, but if they are refusing to, then you can just schedule it."

Implementing 'use it or lose it' policies

For vacation days exceeding the statutory minimum, employers have more discretion. In Ontario, for example, employees are entitled to a minimum of three weeks' vacation after five years of employment. Any additional time is subject to company policy.

"If an employer chooses to give employees additional vacation — over and above the minimum standards — in an employment contract, they can implement a 'use it or lose it' policy for the additional time," says Cicchini.

But that practice needs to be clearly stated in the vacation policy, she instructs.

Rudner echoes the need for precise documentation. For example, when he drafts a vacation policy, he splits out the statutory entitlements from additional time — because the statutory time must be taken, he says.

Employers can then decide whether to allow employees to accrue additional vacation time or enforce a 'use it or lose it' approach.

"Either one is legally acceptable,” said Rudner. “You just want to make sure that it's clear what their entitlement is because otherwise, as we know, any ambiguity is going to work against the employer.”

Encouraging employees to take time off

Creating a workplace culture that values rest and well-being over relentless productivity is key to ensuring employees use their vacation time.

"Employers should encourage workers to use their time off by creating a culture that values wellbeing instead of glorifying overworking," Cicchini observes. Clear communication about vacation policies, carryover provisions, and the importance of taking time off helps employees feel comfortable stepping away from work.

Leading by example is also a powerful strategy. "If they see their boss take a vacation, they are less likely to feel guilty or that they aren’t working hard enough," Cicchini adds.

Using HR software can also aid in tracking vacation usage, setting reminders for unused time, and making the process transparent and straightforward for employees, she says.

Addressing the 'too busy' employee

When employees claim they are too busy to take vacation, it's a red flag that deserves attention, Cicchini points out.

"If an employee says they’re 'too busy' to take time off, it’s important to uncover the underlying issue," she says.

The reasons might include staffing shortages, excessive workload, or poor time management. "Maybe there has been turnover in their team, and they are stuck picking up the slack... or the employee just isn’t being productive with their time," she says.

Employers should work collaboratively with these employees to find solutions. This might involve redistributing workloads, providing support, or addressing productivity issues through performance improvement plans. Emphasizing the importance of rest is also crucial.

"While they’re busy, taking time off is crucial for long-term productivity and wellbeing," Cicchini says. Without breaks, employees risk burnout, which can negatively impact their performance and the company's bottom line.

Rudner adds that, from a legal standpoint, employers can insist on employees taking their statutory vacation. However, he suggests careful documentation to prevent disputes.

"If you're going to either, on an ad hoc basis, allow someone to accrue it, or if you just have a system where they can accrue it, just make sure you're tracking it carefully," he says.

This diligence helps avoid situations where employees claim significant amounts of banked vacation time, leading to unexpected liabilities.

Time off is important

"Employers should encourage workers to use their time off," Cicchini reiterates. "Taking time off is crucial for long-term productivity and wellbeing."

Rudner agrees, highlighting the importance of rest. "From an HR perspective, I don't think you want your people working 51 or 52 weeks a year. I think you want them to take some time off and rest."

SIDEBAR: Best practices for managing vacation time

To effectively manage unused vacation time and mitigate risks, employers should:

• Develop clear policies: Clearly articulate vacation entitlements, accrual limits, and 'use it or lose it' provisions in writing. Ensure employees understand the distinction between statutory and additional vacation time.
• Communicate regularly: Remind employees of their available vacation time throughout the year. Use internal communications, meetings, and HR software notifications to keep vacation planning on the agenda.
• Foster a supportive culture: Encourage leaders to model healthy behaviours by taking their own vacations. Promote a culture where taking time off is valued and not seen as a lack of commitment.
• Address workload issues: Proactively manage workloads to ensure employees feel they can take time off without negative consequences. This might involve cross-training staff or hiring temporary support during peak periods.
• Document agreements: Keep detailed records of vacation time taken, accrued, or carried over. Ensure any deviations from standard policy are documented and agreed upon in writing.
• Consult legal expertise: When in doubt, seek legal advice to ensure compliance with employment standards and to navigate complex situations involving accommodations or disputes.

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