What if a terminated employee owes the company vacation?

Asking employee to return the overpayment

If an employee takes more vacation than they have earned, you can request that they pay it back upon leaving.

If this was not discussed prior to the employee leaving the company, the employee is not required to pay back the vacation taken. We highly recommend adding a relevant policy to an employee's contract when they join the company, or sending the employee an email with these details before they take the unearned vacation.

Getting the amount back from the employee using the input sheet

The easiest way for the employee to return money is to have it reduced from their final paycheque. You want to use a Deduction instruction Off Net to deduct the amount. Follow the steps in our article on How to create a deduction pay code to create a new deduction instruction if desired.

If this deduction results in a negative net pay for the employee, you cannot process the full deduction from the employee's net pay. This is because Rise does not have the ability to take money out of an employee's bank account; therefore, we would not be able to process this paycheque. If this is the case, please ask the employee to write the company a manual cheque for the amount. 

Updating the ROE

If the employee does pay back the negative vacation balance upon leaving, you will need to update the ROE in two ways:

1. Make sure Pay Period 1 in the ROE shows the employee's final gross earnings before the vacation is deducted. You must represent to Service Canada how much money was earned in the final pay period (not how much was paid out).

2. Reduce the vacation amount from the pay period when the unearned vacation was taken.

Sam took 2 days of vacation in pay period 11 (of block 15C). At the time, she was paid her full pay period earnings, and 86.67 insurable hours were recorded. Of her 16 hours of vacation, 8 hours were unearned. When she leaves the company, she pays back the equivalent of 8 hours of vacation. Pay Period 11 of block 15C must be adjusted from 86.67 hours to show 78.67 hours and the insurable earnings also adjusted.

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