Do statutory holidays affect the dollar amount of wages in lieu of notice?

Using the federal labour standards, and those of the 4 western provinces, this article explores how stat holidays and wages in lieu of notice (“WiLoN”) interact (or don’t). This is the first in a two-part series; next week we’ll look at whether employers have to pay stat holiday pay on top of WiLoN.

Let’s first look at how WiLoN are calculated in these 5 jurisdictions. Among these, there are 3 different ways this calculation is defined:

  • As an average of the wages or salary earned prior to the notice period;
  • As weekly pay rates in effect when notice is given; or
  • What employees would otherwise have earned during the notice period.

For example, in BC, WiLoN are calculated as an 8 week average. The period used in this averaging must be the last 8 work weeks in which employees worked regular or average hours. For example, if employees were on reduced hours from June 9 to June 29, 2013, or 3 weeks, and were terminated 4 weeks later, effective July 27, 2013, the 8 week average would have to be based on the 4 weeks prior and the 4 weeks after this reduction.

In Alberta, where employee wages vary by pay period, and in Saskatchewan, where these vary by week, the rules are similar. In Alberta, WiLoN for employees with varying wages are calculated based on an average in the 3 months prior to termination. In Saskatchewan, this is currently the 4 prior weeks, and when the new Saskatchewan labour standards apply, the 13 immediately prior weeks.

By definition, when WiLoN are based on such an average, stat holidays falling after notice has been given have no impact on the calculation of WiLoN.

Under the federal labour standards, employees may be entitled to 2 weeks WiLoN, plus 2 days statutory severance pay for each completed year of service. For example, an employee with 10 years of service would be entitled to 2 weeks WiLoN and 20 days in severance pay. Both WiLoN and severance pay are calculated based on rates in effect when employees are either terminated or given notice.

Just as in BC, this federal requirement isn’t affected by subsequent stat holidays. For example, an employee covered by the Canada Labour Code might be terminated without notice on Friday, August 31, 2013. The WiLoN and any severance pay owing are based on that employee’s pay rates in effect on that day. These aren’t affected by the fact that the following Monday is Labour Day.

By contrast, in Manitoba, WiLoN are the wages that would otherwise have been paid during the notice period. This isn’t simply the weekly equivalent of current rates, times the length of notice required. For example, where compensation is based on a salary grid, reflecting completed years of employment, and an employee would otherwise have moved up in the grid during the notice period, this affects the calculation of WiLoN. In Manitoba, the “wages” on which this calculation is based include stat holiday pay.

This means that, in Manitoba, depending on the amount of stat holiday pay owing, there may or may not be an impact on WiLoN.

Let’s start with an employee paid a weekly salary of $1,500, with no other incentive or exception earnings and no expected change in compensation during the notice period. If this employee is terminated and the notice required was 6 weeks, the WiLoN owing in Manitoba would be $9,000.

In practical terms, it would not matter whether the notice period included one or more stat holidays. For each of these, the stat holiday pay owing would have been the equivalent of a day’s pay. Since this pay would be included in any WiLoN required, it would not affect this requirement. In other words, either the day is a regular work day, and the equivalent salary would be included in the WiLoN; or the day is a stat holiday, and the same equivalent day’s pay would be included. There is no difference in the result, so long as the stat holiday pay is the same as a regular day’s pay.

However, where this is not the case, WiLoN will be affected.

Assume a Manitoba employee worked 40 hours per week, at $15 per hour, averaged over a 6 week rotation. During each 6 week rotation, the daily hours of work vary from week to week. The employee was terminated after working on Friday, September 27, 2013, at the end of a complete 6 week rotation and was entitled to a complete 6 week averaging period as notice. During these 6 weeks, the employee would normally have earned a total of $3,600 (240 hours , or 6 times 40 hours, at $15). However, Monday, October 14 is Thanksgiving in 2013. On that day, the employee would normally have worked 8 hours and, because of the averaging cycle used, was only entitled to $60 in stat holiday pay. As a result, the employee’s earnings during the notice period would only be $3,540 ($15 per hour, times 232 hours worked, plus $60 in stat holiday pay).

In other words, a notice period in Manitoba where the stat holiday pay required doesn’t equal a normal day’s pay will change the amount of WiLoN otherwise required.

For employees whose wages don’t vary by pay period or week, the rules in Alberta and Saskatchewan are the same as those for Manitoba. However, where these wages do vary, there is a difference between Alberta and Saskatchewan in the earnings on which WiLoN are calculated.

In Alberta, these wages exclude stat holiday pay. In other words, in Alberta WiLoN are based on what an employee would have earned for working on the regular days in the notice period. In the example above of a 6 week rotation, the WiLoN in Alberta would have been $3,480 (232 hours at $15), since WiLoN do not include any stat holiday pay related to the notice period.

This would be the same result under the current Saskatchewan labour standards, but not under the employment standards legislation just passed, but not yet proclaimed into law. Under the current Saskatchewan employment standards, the rules are the same as in Alberta, that WiLoN are not based on any stat holiday pay applicable to the notice period. Under the not yet proclaimed Saskatchewan legislation, stat holiday pay is included in the calculation of WiLoN. Under this pending legislation, the rules as described above for Manitoba will apply.

Alan McEwen is a Vancouver Island-based HRIS/Payroll consultant and freelance writer with over 20 years’ experience in all aspects of the industry. He can be reached at armcewen@shaw.ca, (250) 228-5280 or visit www.alanrmcewen.com for more information. This article was first posted to Canadian HR Reporter on July 16, 2013.

 

 

 

About Alan R. McEwen

HRIS/Payroll consultant and freelance writer
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