Across Ontario, Québec, and Manitoba, employment standards distinguish between vacation time (days off) and vacation pay (percentage of earnings). In all three jurisdictions, vacation time continues to accrue during periods of Short-Term Disability (STD) and Long-Term Disability (LTD) as long as the employment relationship continues. Disability leave generally counts as continuous service, meaning employees do not lose their entitlement to the statutory minimum number of vacation days while on disability.

By contrast, vacation pay is based on wages actually earned during the vacation entitlement or reference year. Where employees are receiving STD or LTD benefits paid by an insurance provider rather than salary from the employer, those benefit payments are not considered wages under employment standards legislation. As a result, statutory vacation pay does not typically accrue during STD or LTD, unless the employer’s contract or policy explicitly provides otherwise.

In Ontario, employees continue accruing their vacation time entitlement during both STD and LTD. If an employee has not yet reached five years of service, they accrue the two-week (10-day) minimum, and if they reach five years of service during leave, they become entitled to three weeks (15 days). Importantly, there is no statutory drop in entitlement when transitioning from STD to LTD; vacation time is tied to length of service, not the type or length of disability leave.

The same general approach applies in Québec and Manitoba: uninterrupted or continuous service during disability supports ongoing accrual of vacation time, while vacation pay is calculated only on actual earnings during the year. Employers may choose to provide more generous treatment through policy or contract, but from a minimum compliance perspective, continuing vacation time accrual without vacation pay during STD/LTD is consistent with employment standards in all three provinces.

I hope this helps!
-HRInsider Staff

Great question! Short answer: you generally cannot reduce an employee’s vacation time entitlement while they are on STD or LTD if your policy already grants more than the statutory minimum.

Longer explanation

Because disability leave counts as continuous service, the employee’s vacation time entitlement during STD/LTD is determined by your established policy or contract, not just the statutory floor. If your policy says “all employees receive 3 weeks (15 days) of vacation,” that is the employee’s entitlement as long as the employment relationship continues—whether they are actively working or on an approved leave such as STD or LTD.

Employment standards legislation sets minimums, but it does not allow employers to temporarily roll employees back to the minimum during protected leaves unless your policy explicitly and lawfully allows for that distinction.

So, in your example:

If you start all staff at 3 weeks from day one, and an employee goes on STD or LTD before reaching five years of service, you are required to continue accruing the 15 days of vacation time, not reduce them to the statutory 10 days for the duration of the leave.

Reducing vacation entitlement only during disability leave would likely be viewed as:

-A unilateral reduction of a contractual benefit, and
-Potentially discriminatory, since STD/LTD is a protected leave tied to disability.

Important nuance

You can differentiate vacation pay from vacation time:

-Vacation time continues to accrue at the policy rate (15 days).
-Vacation pay only accrues on actual wages paid by the employer, unless your policy says otherwise.

When could a reduction be possible?

Only if:

-Your written policy or employment contract clearly states that enhanced vacation entitlements apply only while actively working, and
-That policy is applied consistently and does not conflict with human rights protections.

Even then, this is an area where regulators and arbitrators tend to scrutinize employer decisions closely.

Bottom line:
If your organization voluntarily provides 3 weeks from the start, STD or LTD does not allow you to “pause” that generosity and revert to statutory minimums. The safer and more compliant approach is to continue the 15-day vacation time accrual, while limiting vacation pay to actual earnings unless your policy provides otherwise.

-HRInsider Staff

Great question — this is exactly where the vacation time vs. vacation pay distinction really matters.

Short answer
Yes, you would generally need to pay out accrued vacation pay, but only to the extent it actually accrued.
If no vacation pay accrued during STD/LTD, then there may be little or nothing to pay out, even though vacation time continued to accrue.

How this plays out in practice

When employment ends (including termination after STD or LTD), employment standards in Ontario, Québec, and Manitoba require employers to pay out any accrued but unpaid vacation pay.

However:
Vacation time (days) ≠ money owed on termination
Vacation pay is the monetary entitlement, and it is calculated as a percentage of wages actually earned

If the employee:
-Was receiving STD or LTD benefits paid by an insurer, and
-Was not receiving wages from the employer during that period,
No statutory vacation pay accrues during that time, unless your policy or contract says otherwise.

So at termination:

-You must pay out any vacation pay that accrued before the disability leave, and
-Any vacation pay that accrued on wages paid during the leave (if any), and
-Nothing further for the vacation time that accrued during STD/LTD without wages behind it.

Why this is not a problem legally (do not accept this as legal advice, though)
Employment standards legislation does not require a payout based on days accrued. It requires a payout of vacation pay earned. Vacation time continuing to accrue preserves the employee’s right to time off if they return, but it does not magically convert into money when no wages were earned.

Make sure your policy clearly states:

-Vacation time continues to accrue during approved leaves
-Vacation pay accrues only on wages paid by the employer
-STD/LTD benefits paid by insurers are not wages for vacation pay purposes

Bottom line:
On termination after STD/LTD, you pay out vacation pay actually earned, not vacation time that accrued without wages. In many LTD cases, that means the payout is minimal or zero beyond pre-leave earnings.

Employees who are on a statutory protected leave—such as medical leave—are entitled to continuation of employment and participation in benefit plans. During a protected leave, employers must continue contributions to pension, health, and disability benefit plans, unless the employee chooses in writing not to continue paying their portion. Therefore, if an employee’s absence due to illness or injury qualifies as CLC medical leave, employer-paid health and dental benefits generally must be maintained during that period.

Short-term disability (STD) and long-term disability (LTD) benefits, however, are income replacement programs and are not themselves statutory leaves. An employee receiving STD or LTD may also be on protected medical leave under the CLC, but the two are legally distinct. If the employee is on CLC medical leave, statutory benefit continuation obligations apply. If the protected leave period has ended but the employment relationship continues (for example, during extended LTD), statutory benefit continuation may no longer be required under the CLC—though human rights obligations related to disability accommodation remain relevant.

With respect to RRSP matching, the Canada Labour Code requires continuation of pension contributions during protected leave, but only to the extent that contributions would normally be made. If RRSP matching is structured as a voluntary contribution tied directly to employee earnings, and the employee has no earnings or is not contributing during STD/LTD, employers are generally not required to continue matching contributions unless a contract, policy, or past practice creates that obligation. However, consistently providing employer RRSP contributions during STD in the past may create expectations or potential contractual risk if the practice is changed without notice.

Finally, disability is a protected ground under the Canadian Human Rights Act. Even where statutory leave obligations end, employers must avoid discriminatory treatment and must accommodate employees to the point of undue hardship. Before discontinuing benefits or RRSP contributions during STD or LTD, employers should review plan documents, employment contracts, and past practice, ensure changes are applied prospectively with clear notice, and confirm whether the employee’s absence qualifies as protected medical leave under the Canada Labour Code.

-HRInsider Staff

Thank you for the additional info. With that in mind:

Because your organization is provincially regulated (ON/MB, with employees in ON/MB/QC), the relevant framework is provincial employment standards legislation, not the Canada Labour Code. Short-term disability (STD) and long-term disability (LTD) benefits themselves are income replacement programs under an employer’s insurance plan, not statutory leaves. Employment standards obligations—such as continuing benefits—are triggered when an employee is on a job-protected leave under provincial legislation (for example, Ontario’s long-term illness leave). During a statutory leave, employers are generally required to maintain participation in benefit plans (such as health, dental, and pension) as if the employee were actively employed, unless the employee elects in writing not to continue their share of contributions.

If an employee is receiving STD or LTD but is not on a statutory protected leave, employment standards legislation typically does not require benefit continuation. However, many employers continue benefits during STD or LTD because the insurance plan requires it, or because the employer’s policy or past practice provides for it. As a result, STD often overlaps with a statutory medical leave, particularly early in an absence.

With respect to RRSP matching, employers are generally not required to continue contributions during STD/LTD if the plan is structured as a match based on employee payroll contributions and the employee has no earnings or contributions during the leave. During a statutory leave where pension participation must continue, contributions are typically required only to the extent they would normally occur. However, if the organization has consistently provided employer contributions during STD in the past, that practice could create expectations unless the policy is clearly updated and communicated prospectively.

Finally, it is important to distinguish between statutory leave and disability benefits. An employee may be receiving STD or LTD benefits while also being on a protected leave under employment standards legislation, but the two are legally separate. Once the statutory leave period ends, benefit continuation requirements under employment standards may also end, though the employer must still comply with human rights obligations to accommodate disability to the point of undue hardship.

-HRInsider Staff

Generally, when employees are on STD or LTD and not receiving wages, they may still accumulate vacation time (the entitlement to time off) because their employment relationship continues during a leave. However, they often do not accumulate vacation pay because vacation pay is typically calculated as a percentage of wages earned, and no wages are being earned during unpaid leave.

From a compliance perspective, employment standards legislation does not require that vacation accrued during a leave be used during the leave itself. Normally, vacation must be taken after it is earned and within the legislated timeframe (often within 10 months after the end of the vacation entitlement year in Ontario). Practically, this means vacation earned during STD/LTD is usually held until the employee returns to work, unless the employee requests to take it earlier and the employer agrees.

Employers can set reasonable policies around when vacation must be used, including requiring employees to take accrued vacation within a certain period after they return to work. However, you cannot eliminate or apply “use-it-or-lose-it” rules to the statutory minimum vacation entitlement. Such limits can only apply to additional vacation provided above employment standards minimums, and the policy must be clearly communicated and applied prospectively.

With respect to capping accrual during long LTD absences, this is generally permissible if the entitlement being limited is above the statutory minimum and the policy is clearly set out in advance. Many employers structure policies so that employees stop accruing additional vacation after a defined period (e.g., 12 months on LTD) while still respecting minimum statutory entitlements. As with benefits and RRSP contributions, the key considerations are ensuring the policy does not breach employment standards minimums and that it is clearly documented and communicated before it takes effect.

-HRInsider Staff

Yes, statutory vacation entitlement generally continues to accrue during LTD, and it is difficult to stop accrual of the minimum statutory vacation time while the employment relationship continues. When the employee eventually returns to work, the statutory vacation time technically still exists, but employment standards legislation usually allows some flexibility in scheduling vacation, since employers ultimately control when vacation is taken (subject to minimum standards). Practically, employers often work with the returning employee to schedule the accrued vacation over time, rather than requiring all of it immediately. However, the statutory minimum vacation generally cannot be waived by the employee, because employment standards minimums cannot be contracted out of. In other words, even if the employee prefers not to take it, the employer typically must still provide the minimum vacation entitlement.