Canadian Payroll Reporter

Published 12 times a year by Thomson reuters canada Ltd. subscription rate: $179 per year customer service tel: (416) 609-3800 (toronto) (800) 387-5164 (outside toronto) Fax: (416) 298-5106 e-mail: carswell.customerrelations @thomsonreuters.com Website: www.carswell.com One Corporate Plaza 2075 Kennedy Road toronto, ontario, Canada M1t 3V4 Director, Carswell Media karen Lorimer Publisher John hobel Managing editor Todd humber editor sheila brawn sbrawn@rogers.com Marketing Manager Mohammad Ali mm.ali@thomsonreuters.com (416) 609-5866 Circulation Co-ordinator Travis chan travis.chan@thomsonreuters.com (416) 609-5872 Payroll Reporter Can R Can R adian adian a www.payrollreporter.com ©2014 Thomson Reuters Canada Ltd isBn/issn: 978-0-7798-2810-4 all rights reserved. no part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, photocopying, recording or otherwise without the written permission of the publisher (Carswell, a thomson Reuters business). Return Mail Registration # 1522825 | Return Postage guaranteed Paid news Revenue toronto Canadian Payroll Reporter is part of the Canadian HR Reporter group of publications: • Canadian HR Reporter — www.hrreporter.com • Canadian Occupational Safety magazine — www.cos-mag.com • Canadian Payroll Reporter — www.payroll-reporter.com • Canadian Employment Law Today — www.employmentlawtoday.com • Canadian Labour Reporter — www.labour-reporter.com see carswell.com for information July 2014 | CPR News outstanding vacation pay if they end the employment relation- ship. If the employee quits, the deadline for paying the vacation pay is six days. For payroll, the 48-hour turnaround can cause headaches, Lindsey says. "Scramble, scramble, scram- ble. We get all kinds of calls all the time saying, 'Oh, B.C. says 48 hours. Is that (including) the weekend? I can't get the cheque ready; I need signatures' and all this. But it's 48 hours so to make it happen, they have to scram- ble." While payroll cannot control the timing of terminations, Lind- sey says they can be prepared by ensuring they know the require- ments in their jurisdiction. Recovering pay in advance Another area that can cause headaches for payroll is trying to recover vacation pay paid in advance. Sometimes employ- ers advance vacation pay to an employee before the employee has earned it. This may not be a problem unless the employment relationship ends before the em- ployee accrues the vacation time for which they were paid. In jurisdictions such as Prince Edward Island, Newfoundland and Labrador, and under the Canada Labour Code, employ- ers can require the employee to pay back the excess amount. In other provinces, such as British Columbia and Ontario, they will need the employee's written per- mission to recover the money. Lindsey says this may be almost impossible after an employee has left the job. Rather than waiting until the employer needs to recover the money to get permission, she says employers should have em- ployees agree to repayments in advance. "Either get something writ- ten in your company policy or contract of hire, or on a vacation request, like 'I, Theodora Lind- sey, authorize Thomson Reuters to deduct any overpayments on my final pay.' That way you can recoup the advance. If you don't have anything in writing, then the employee is just looking at it as a gift." The ideal time to get employ- ees to sign the statement is when they are hired, adds Chong. Em- ployers will also have to make sure they get something in writ- ing from existing employees. "You definitely want to, as an organization, look at renewing the policy and having new signa- tures (from all staff ) just so that you have it on file in the event that (they) do take more than they are entitled to," she says. "Payroll should probably get HR involved because I would think that this is more of an HR responsibility. Certainly payroll needs to communicate the re- quirements to HR, but HR needs to enforce that within every or- ganization." Before paying vacation pay, payroll must also ensure the pay- ment is for the correct amount. Employees have to receive a min- imum of four per cent of vacati- onable earnings for vacation pay (except for Saskatchewan, which specifies 3/52s). Most jurisdic- tions increase the requirement to six per cent after a specified number of years of employment (or 4/52s for Saskatchewan). "Defining vacation earnings is very, very important because that increases the value of their vacation pay," Chong says, add- ing that vacation pay can com- prise more than the employee's regular earnings. Depending on the jurisdiction, it can include other payments such as over- time, work-related bonuses, statutory holiday pay and previ- ously paid vacation pay. For this reason, Chong says it is important that all employers have a vacation reconciliation process that clearly defines the vacation year period and which payments paid in that time are included when calculating vaca- tion pay. Otherwise, payroll may shortchange employees. "That's a really important ele- ment to paying out vacation pay which a lot of companies, to my surprise today, do not do," she says. Reconciliation process Properly tracking vacation time in the reconciliation process is also important, says Chong — especially for the Record of Em- ployment (ROE). "With Service Canada, you have to ensure that you are track- ing insurable hours when the employees are physically taking their vacation. A lot of compa- nies don't do that." This can sometimes mean in- dividuals are short hours when they apply for employment in- surance benefits. To avoid this, Chong suggests that the tracking of vacation hours be part of ev- ery employee's vacation record. She advises payroll practitio- ners to use the chart that Service Canada publishes in its How to Complete the Record of Employ- ment Form guide to know which earnings attract insurable hours. "(The chart) tells them exactly what they should set up on their payroll system to track those hours," she says. "When you've got that system all set up, then every pay it's going to attach the necessary hours. When it's time to produce your record of employment, it's just a matter of moving those numbers over to your ROE." Both Lindsey and Chong say that by knowing the vacation pay requirements in their jurisdic- tion, payroll practitioners can help to ensure that the employer complies with the law. Some- times, though, despite payroll's efforts to do everything right, practitioners can run into prob- lems because company man- agement does not want to pay vacation pay within the required timeframe or include certain earnings when calculating vaca- tion pay. Fear of reprisals Chong says this can put pay- roll practitioners in a difficult position, knowing they need to comply with the law, but fearing reprisal for not following their employer's instructions. She advises payroll practitioners to do what they can to influence change within their organiza- tion by putting together a case to sway the employer. "Justify your position and (state that) 'These are the re- quirements.' Also let them know what the consequences are if you are not in compliance," she says. Sometimes this will persuade employers to change their view and sometimes it will not, she says. "At the end of the day, if they don't want to make changes or they don't care, then be prepared (for the consequences)." Get signed statements from VACATION on page 4

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