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Annual Leave Entitlements in Canada: A Guide for Overseas Employers

Annual leave or vacation is an important employment benefit, and this is no less so when you hire employees overseas.  When you are setting up the employment contract, it has to meet the minimum leave entitlements in the country, which are often set by statute.

So, the question is how do you find out the minimum leave entitlements and local rules on accrual and taking leave?

Annual Leave Entitlements in Canada

If you are hiring employees in Canada, there are a variety of rules to follow set either at the national or provincial level, and we have put together this guide on annual leave entitlements to help you get started.

The national minimum entitlement in Canada is two weeks for every ‘year of employment’.  The year of employment begins on the date the employee is hired, and leave is accrued from that anniversary.  It can also be based on the calendar year if the employer prefers.

Although vacation days are PTO (paid time off with no deduction from wages), there is also a ‘vacation pay’ entitlement in Canada, where the employee receives 4% of their annual wages as an additional payment.  That needs to be paid within 14 days prior to start of the vacation so it can be used on holiday.

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The Accrual of Annual Leave in Canada

Accrual of leave is another issue to pay attention to, especially if an employee is terminated in the middle of the employment year, and needs to be paid out some unused leave.

Case Example

Issue: We had a client with employees in Canada that had a question about when leave is available (accrued) for employee use.  They wanted to know if the full year’s leave was available right away at the start of employment, or if it accrues over time.

Also, they wanted to know if it is customary in Canada to allow ‘negative paid time off”, in other words taking leave days that have yet to be accrued.

Response: We informed them that leave is accrued annually in the 12 month employment year, or in some provinces monthly pro rata.  Unused leave can be carried over to the following year within reasonable limits.

There are no strict rules or policies in Canada on negative PTO, but should be approved on a case-by-case basis.

Do Annual Leave Entitlements Vary Between Canadian Provinces?

The annual leave entitlements do vary between the Canadian provinces, but none are less than the standard two weeks leave.  Only Saskatchewan offers more than the minimum at 3 weeks, and the other provinces differ on the time frames for accrual.

It is worth checking the provincial rules on leave before employment begins, so that your employment contract reflects those requirements.

The Shield GEO Solution

The process of hiring employees overseas can be extremely involved, and as this example illustrates, something as simple as meeting leave entitlements takes on new complexity in a foreign country like Canada.

Compliance is not optional, and if you are hiring employees in Canada you will have the following issues to face:

  • How do you find the correct amount of leave to offer in the province where you hire an employee?
  • What are the rules for accruing and paying out leave?
  • What are the consequences of calculating leave incorrectly, or offering less than the statutory minimums?

In addition, you will find that there are many different laws on required social contributions, tax withholding and even the end task of terminating an employee.  This is where we can help you with our Canadian employer of record and in country experts, who are already in place ready to employ your new hires.

We make international employment simple by taking care of compliance with immigration, payroll and tax laws in 90 different countries.

Looking to Hire an Employee in Canada? Get in Touch.

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