Vacation and Compensatory Leave Cash-Out for 2022–26

January 11, 2022 - Defence Stories

As many of you know, there is a limit on the amount of earned leave that you can carry over each year. For most collective agreements and terms and conditions of employment, the allowable carry-over of excess vacation leave is 35 days or 262.50 hours. Excess vacation leave is typically paid out each March and compensatory leave in September.

This annual mandatory cash out of excess leave credits has been suspended since 2016 to allow the compensation community to focus on efforts to stabilize the Phoenix pay system and address outstanding pay issues. In November 2020, with significant progress made to stabilize the pay system achieved, public servants were informed that the cash out of excess earned leave would restart in March 2022.

As stated in Treasury Board’s Vacation and Compensatory Leave Cash-Out for 2022–26 information notice, effective April 2022, a process is being put in place to gradually reduce any excess vacation and compensatory leave public servants may have accumulated since 2016.

At DND, the lifting of the leave carry-over moratorium applies to represented, unrepresented and excluded employees as well as executives, except for employees in the Ships’ Officers (SO) Group.

What this means for you

Excess leave amounts will be based on the leave balance recorded in HRMS/PeopleSoft as of March 31, 2022. Employees are strongly encouraged to verify their leave balances in HRMS/PeopleSoft and ensure accuracy of information.

Leave accumulated in excess through 2021-2022

Starting in April 2022, if you have accumulated vacation leave during 2021–22 that is above the carry over maximum on March 31, 2022, you will be paid out 100% of any earned but unused vacation leave for the 2021–2022 fiscal year (note that this 100% pay out does not apply to leave accumulated in previous fiscal years and carried over).

Any remaining vacation leave balances prescribed in your collective agreement or terms and conditions of employment as well as any compensatory leave that is above the carry-over limit will be paid out over a period of five years. This means that each year, until March 2026, 20% of all excess leave will be cashed out. As of March 31, 2026, you will be paid in full for any remaining leave you have over and above the allowable limit.

This two-pronged approach will ensure that you do not continue to accrue vacation leave over the carry-over limit between April 1, 2021 and March 31, 2026. Please remember that 100% of unused vacation leave in the current year will only be cashed out if you are carrying over more than the allowable limit in vacation leave.

For most organizations, excess leave payments will be issued between April 2022 and December 31, 2022. While Government of Canada employees will receive the first year’s cash out by December 31, 2022 at the latest, their excess leave will be removed from HRMS/PeopleSoft in April 2022.

As with any income received, leave cash-out payments are subject to income tax. When leave is cashed out instead of used to take planned breaks from work, it increases your taxable income for the year in which you receive the payment. This increase in taxable income may affect other benefits provided by the Federal government, where income is a determining factor for eligibility. For questions related to income tax or government benefits, please contact Canada Revenue Agency or Revenu Québec (you are now leaving the Government of Canada website).

Please remember that you also continue to have the option to request a cash out of all of your excess leave at any time. Should you wish to receive a voluntary cash out, submit a Pay Action Request through the Human Resources Services and Support (HRSS) (accessible only on the National Defence network) and attach the completed and signed form GC 178 (accessible only on the National Defence network) and include the following information:

• Work type: Leave
• Leave type: Liquidate Leave (voluntary)
• GC 178 – 115 – Vacation Leave Paid

Provisions for executives

A special communique from Director Civilian Executive Services will be sent to executives.

Importance of scheduling and taking leave

Vacation leave provisions are part of collective agreements in recognition of the benefits it brings to a healthier work-life balance and mental health. As such, in accordance with operational requirements, employees are expected to use their vacation leave within the current fiscal year. All employees are encouraged to use their vacation leave the year it is earned and not carry over more than the amount allowed according to their respective collective agreement.

If you have any questions about your leave balance or about scheduling leave, please speak with your manager.

For more information about the mandatory leave cash-out process or if you have questions about your leave balances, please contact HR Connect RH or submit a request through HR Connect RH to book a pay consultation with a DND Compensation Advisor. You will be contacted within 5 business days to set up an initial appointment.

Stay tuned for more information.