1. Implementing Payroll for Canada
  2. Overview of Vacation Liability Processing

Overview of Vacation Liability Processing

Vacation liability is the minimum amount of vacation pay an employee is legislated to receive in a given year according to the provincial statutory requirements.

You may compare actual vacation paid in a given year to this minimum and pay the difference at the end of the vacation year.

Calculate the vacation pay as a percentage of the vacationable earnings. You can define percentages by length of service for each province within a vacation absence plan.

Policies for vacation are often enhanced from the minimum legislated rates by the employer or by union contracts. One of the more common enhancements is an accelerated accrual of vacation time and pay. Progression is usually based on the length of service of the employee.

Vacation is accrued based on a reference year. This may be a calendar, fiscal year, or other 12 month period. Employers may require the employee to earn the time in one reference year and take it in the following reference year or alternatively, earn and take vacation in the same year.

The components of vacation liability processing are:
  • Vacation Plan
  • Vacation Term
  • Vacation Payout
  • Employee Absences

High-Level Steps

The setup steps for the processing of vacation liability are in the Absences and the Payroll areas. Absence Management and Payroll Calculations are integrated. This table outlines the high-level list of all the absence and payroll steps to configure and process Vacation liability.

Procedure

Setup Task

Action

Create Absence Elements

 Elements

Create an absence element with a secondary classification of Vacation to transfer absence payment information from Absence Management to Payroll for payroll processing.

Create Absence Plans

 Absence Plans

Create an absence plan, and enroll the employee in the absence plan. To calculate the vacation liability, under Payroll Integration, select these options:

  • Select the Transfer absence payment information for payroll processing check box.

  • Select the element for the plan in the Element field to link it to the absence plan.

Create Absence Types

 Absence Types

Create absence types, and associate them to the absence plans. Select Canada Vacation in the Legislative Grouping Code. Add the absence plans to the absence type.

Configure Vacation Liability Rates

 Rate Definitions

Create vacation liability rates based on absence plan, province (optional), and length of service.

Configure Wage Basis Rules

 Component Group Rules

Create vacation wage basis rules for user-defined secondary classifications.

Note: The wage basis rules for the predefined secondary classifications are delivered by Oracle.

Creating Earnings Element

 Elements

Create a vacation payout element.

Defining Employee Information

To configure and process vacation liability in Canada, define the following employee information.

Procedure

Task

Action

Enroll Employees in Absence Plans

Absence Records task in Person Management area

Enroll employees in the absence plan, if explicitly required.

Assign a Vacation Liability Plan

Calculation Cards

Select a vacation liability plan on the employee's tax card.

Enter a Vacation Service Date, if applicable

Calculation Cards

Enter a Vacation Service Date on the employee's calculation card to override the hire or rehire date for vacation liability calculations, if applicable.

Assigning a Vacation Payout Element

Element Entries task in Person Management area

Assign a vacation payout element to the employee to pay the liability balance.

Create Employee Absence Records

Absence Plans

Record an absence for the employee. Approve the absence and select the option to transfer absence information to payroll, so that the absence information is transferred to payroll for absence processing.

Vacation Plan

Absence plans determine how entitlements are provided to an employee including eligibility and rates. Use the Absence Management application to configure an Absence Plan for processing vacation liability. Set up the plan based on a calendar year or anniversary date.

Vacation Term

A vacation term refers to the time period, or vacation period, for which the liability is calculated. It is represented as a year (YYYY) and it may represent a calendar term (January – December) or an anniversary date (for example, June – May). One vacation plan can contain multiple vacation terms. For example:

  • Vacation Plan = Oracle Vacation Plan
    • Vacation Term = 2018
    • Vacation Term = 2019
    • Vacation Term = 2020

If the term is not based on a calendar year, the year represents the start of the time period. For example, if the term is June 2018 – May 2019, the term for this period is 2018.

Vacation Payout

Vacation payout earnings reduce the vacation liability. Create a vacation payout element and assign it to the employee.
Note: The vacation payout reduces vacation liability balances, and not the accrued vacation balances in the Absences application.
Partial payouts and payout amounts in excess of an employee’s current vacation liability balance are supported.

Employee Absences

Employee vacation absences reduce the vacation liability balances.