Vacation Leave Entitlements and Severance Pay

Date: December 14, 2017

To: Heads of Human Resources, Directors/Chiefs of Labour Relations and Compensation, Public Service Pay Centre, Miramichi

This Information Bulletin provides clarification to departments and agencies of the core public administration (CPA) regarding the calculation of vacation leave entitlements for employees who have received severance pay prior to joining the CPA.

Vacation leave entitlement is defined in collective agreements based upon years of service in the public service, whether continuous or discontinuous. The definition of “public service” in the collective agreements is the same as found in the Federal Public Sector Labour Relations Act.

For vacation purposes, most collective agreements contain language that excludes any public service for which an employee received severance pay upon leaving the public service. Accordingly, the Treasury Board of Canada Secretariat provided guidance in the past indicating that periods for which severance was paid upon being struck-off-strength were to be excluded, regardless of whether a break in service occurred.

The term “a break in service” refers to an interruption of at least one compensation day (i.e., a regular paid day).

A 2016 decision from the former Public Service Labour Relations and Employment Board (now the FPSLREB) found that employees who left one organization and joined another within the public service, without a break in service, were not considered to have left the public service. Therefore, the period of service for which severance was paid should not be deducted for the purposes of calculating vacation leave entitlements. Although employees have received severance, they had not left the public service.

Consequently, for the purposes of calculating service for vacation leave entitlements, employees who join the CPA from another public service organization without a break in service, will have their periods of continuous/discontinuous service count, even if severance was paid.

The same principle applies to severance payments received under the severance termination provisions of collective agreements. These severance payments do not reduce the calculation of service for vacation entitlements for persons who have not yet left the public service.

Receipt of payments from severance termination provisions will only reduce service for vacation leave entitlements purposes when an individual has terminated their employment and there is a break in service.

In summary, when calculating service for the purpose of determining vacation leave entitlements, all periods of service (continuous or discontinuous) will count except where a severance payment (including payments from severance termination clauses) is received and there is a break in service.

All questions should be directed to your Departmental Corporate Labour Relations or Corporate Compensation Official who, if required will direct their questions to the Compensation and Collective Bargaining Management group at the following email address: Interpretations@tbs-sct.gc.ca.

Original signed by
Zia Proulx
Senior Director
Compensation and Collective Bargaining Management
Compensation and Labour Relations
Office of the Chief Human Resources Officer