Vacation Policy

Vacation Policy

Every one of your employee’s compensation will include paid vacation, and that is usually referenced in terms of “weeks” per year. Though vacation times given will differ amongst your team, what needs to be detailed in your vacation policy is some universal practices, as well as any details that are specific to your company.

It is important to note that in Canada it is a legal requirement for Employers to allow a minimum amount of 2 weeks each year. Period.

Forward-thinking companies highlight the benefits of vacation in their policies (and culture) and encourage their teams to take time for themselves! Your vacation policy will also allow you to articulate important information to your staff, in terms of limitations, procedures (i.e. ‘how to book time off’), or benefits offered– these can be tedious to communicate in conversation, and could easily be misinterpreted without clear guidelines set out in writing.

What decisions do I need to make when crafting my Vacation Policy?

When employees book their vacation days, they will likely have several options and will benefit from being able to review your vacation policy so that they are aware of any fine details and understand the procedures and limitations involved.

The choice of when and how much time off is granted by the employer depends on what’s best for your company, and, your company culture.

When crafting your vacation policy, decide which specific details are important to your company, then, ensure that you outline them accordingly. Your policy should provide:

  • Instructions on how they can book time off; you’ll likely utilize your HRIS system for this, and this can also be detailed thoroughly in your Employee Handbook.
  • Details on when they should book time off (i.e. 4 weeks in advance) – this helps avoid employees booking trips, then not being approved.
  • Information regarding the length of time an employee can take off. While they are entitled to a minimum of two weeks of vacation, they should know whether or not they can take this time off in chunks, or an extended duration (such as two weeks back to back).
  • An overview of any limitations, such as not allowing two employees of the same department to book the same days off, or, ‘black out’ periods during busy seasons where vacation requests will be denied; be clear on this so that your employees aren’t disappointed, and make these decisions with your company operations and efficiency in mind.
  • Details on whether or not you allow new hires to book paid time off once they’ve completed their probationary period; this is entirely your call, some employers find offering this option boosts morale!
  • A clear statement of how much vacation time you offer your employees; for example, some employers, like Castle HR, opt for a flexible vacation policy, and many offer additional vacation time that exceeds the minimum legal requirements…and, exceeds employees’ expectations.
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Other Important Considerations

While it is imperative that you allow your employees to take the minimum amount of time off, it is just as crucial that employees actually take their paid vacation within 12 months of earning it.

Some employees may not be aware of this; it is essential that you use space in your vacation policy to highlight that this is a legal requirement, and you, as the employer, are at risk of being penalized if employees are not using the time they are allotted.

Most employees are excited to take vacations, so, they may just need a gentle reminder that they must use them before the end of the year and that they are entitled to 2 weeks (or, 4% of their gross earnings) toward a vacation. Encouraging vacations–and providing a clear vacation policy that outlines the steps to booking them–should help avoid this situation!

If the employee decides against taking their required vacation time, you, as the employer, can only offer these three options:

  • Force use; discuss potential dates/weeks with your employee if you are able to, or simply tell them when they are to take a vacation; often, employers will assign dates between Christmas and New Years Day to be allocated as vacation time for employees who need to use their vacation days before the end of the year.
  • A payout; takes the accrued vacation time an employee has earned and pays it out to them directly, usually during the final pay period of the year.
  • A rollover; allows the employee’s vacation time to accumulate and ‘roll over’ into the next calendar year, however, there is still a deadline involved with a rollover–often the first quarter– and this should be detailed in your policy (if you choose to offer this as an option).

The bottom line is, employees must take the vacation time they are entitled to, and you, as their employer, must ensure that they understand this…this is when a concise vacation policy comes in handy!

It’s also important to note that sometimes, life happens, and employees may need to request time off with limited notice, or, they may be faced with extenuating circumstances. You may find it beneficial to include a few notes regarding such circumstances in your vacation policy, and let your employees know that they can approach you, or the appropriate members of your management team, if they should ever have a unique request.

And, remember, personal days, sick days, and leaves of absence are not covered under vacation policies, these should be outlined in your Employee Handbook. 
A vacation policy ensures that your employees understand their rights and entitlement to use their paid vacation days, and makes them aware of your company-specific procedures regarding taking time off.

Companies operating without a concise vacation policy are at risk of experiencing mishaps and miscommunication, which could lead to staffing shortages, missed payments, disgruntled employees, and a lot of confusion throughout the HR department. A working vacation policy) allows for smooth operations and communication between employers and employees!

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70 Percentage

increase in new
hire quality

59 Percentage


21% - Castle HR