Why your business needs a vacation leave policy
Partner, M Hamel-Smith & Co

The legislative provisions governing vacation leave in T&T are limited.

In the public sector, provisions governing vacation leave are set out in the individual pieces of legislation that deal with each service (eg the Civil Service Act, Police Service Act and Fire Service Act).

In the private sector, a handful of industries, including the restaurant and catering industry, are governed by Minimum Wages Orders which entitle employees in those industries to a prescribed amount of paid annual vacation leave. For employees falling outside of those specific services and industries—in other words, the majority of the T&T workforce—there are no statutory provisions that expressly deal with vacation leave.

Does this mean that the majority of employees in T&T have no legal entitlement to paid vacation leave? The answer is not so simple.

Our Industrial Court has recognised in its judgments that international labour standards, as promulgated by the International Labour Organisation (ILO), require employers to provide employees with a reasonable period of paid vacation leave in order to enable them to rest and recuperate. An argument could also be made that allowing employees a reasonable period of rest and recuperation is part and parcel of an employer’s general duty under the common law and the Occupational Safety and Health Act to ensure the safety, health and welfare of its employees.

It can be said that employers do have a general duty to provide employees with a ‘reasonable’ period of paid vacation leave.

However, the actual amount of leave that they are obligated to provide, and the way that employees can actually utilise that leave in practice, is not governed by legislation or regulation. It is therefore important for employers to have a vacation leave policy that expressly deals with such issues.

The ineffective management of employee vacation leave can have a significant and negative impact on business. 

How much leave is an employee entitled to?

For employees falling outside of the specific services and industries mentioned above, there are no statutory provisions prescribing the amount of leave to which they are entitled. That said, the leave periods set out in public sector legislation and Minimum Wages Orders (which range from about two to five weeks) can be used as a guide.

Industry standards are also an important factor in helping employers to determine what is reasonable and appropriate in their particular line of business. In practice, most employees provide employees with two to five weeks paid vacation after completing one full year of service.

It is advisable to clearly set out the amount of paid vacation leave to which an employee is entitled in his offer of employment or employment contract, in order to avoid any confusion, misunderstanding or disputes later on down the road.

When can leave be taken?

An employee’s entitlement to vacation leave is generally subject to the demands of the employer’s business. In other words, an employer has the right to turn down an employee’s request to take vacation leave at a particular time, depending on the needs of the business. This right must, however, be exercised reasonably and in keeping with good industrial relations practice. An employer should consult with the employee before making a final decision and should take the personal wishes of the employee into account as far as possible.

From a practical perspective, it is in an employer’s interest to pro-actively manage vacation leave requests. This includes anticipating what are likely to be its peak business periods as well as popular leave request periods (eg school holidays or days immediately preceding or following public holidays), thinking through its approach for dealing with leave requests during those periods (eg first come, first served?) and clearly communicating its policies to employees.

This can help to avoid situations in which too many employees apply for leave during the same or a particularly inconvenient period, which can in turn either result in short staffing or, on the flip side, employees becoming disappointed and disgruntled when their leave requests are denied.

Pro-actively managing vacation leave also includes actively monitoring and encouraging employees to utilise their vacation leave throughout the year, so as to avoid a bottleneck of leave requests in July or December.

Use it or lose it?

As a matter of good industrial relations practice, vacation leave is seen as an earned entitlement that employees become entitled to after putting in an agreed amount of service. On termination of employment, employees are generally entitled to payment in lieu of any vacation leave that they have accrued, but not used.

Whether or not an employee can roll over unused vacation leave can be a bit of a grey area. Allowing an employee to roll over an unlimited amount of unused vacation leave can have a negative impact on business.

Not only does it defeat the main objective of vacation leave—ie affording employees a reasonable period of rest and recuperation—but employers can be placed in a difficult situation if an employee seeks to utilise weeks or months of accumulated leave all at once.

Employers are entitled to implement “use it or lose it” policies that limit an employee’s ability to roll over unused vacation leave. However, any such policy should be clearly set out in the employment contract or a written policy document and expressly drawn to the attention of employees. Having such policies also goes hand in hand with pro-actively monitoring and managing leave and encouraging employees to utilise their vacation leave during the year.

How does vacation leave benefit employers?

It should go without saying that the rest and recreation that vacation leave affords to employees would have a positive impact on their general attitude, productivity and well-being. Tired, burnt out employees are more liable to make mistakes. In the long run, it is also easier for employers to plan around scheduled vacation leave than to have to deal with unscheduled absences due to employee fatigue and illness.

Vacation leave can also have other, less obvious, benefits for employers. It allows junior employees the opportunity to fill in for employees on vacation leave and to gain experience handling new responsibilities. It encourages employers to more pro-actively engage in cross training, knowledge transfer and succession planning, and even to develop more efficient processes and systems.

If you can never agree on a convenient time for certain employees to take vacation leave because you fear that your business cannot run properly without them, this could actually be a symptom of much bigger problems in the way your operations are organised.

Vacation leave can also allow problematic issues, including employee negligence, fraud and workplace bullying, to surface when they might not otherwise have done if not for a particular employee’s absence from the office. Some employers are even experimenting with new and innovative vacation leave policies designed to encourage employees to take vacation leave, such as offering unlimited paid time off or paying vacation bonuses. Whether your business decides to follow suit, or sticks to a more traditional approach, having a vacation leave policy is vital for any organisation.

Catherine Ramnarine is a partner at M Hamel-Smith & Co. She can be reached at mhs@trinidadlaw.com Disclaimer: This column contains general information on legal topics and does not constitute legal advice.