Policy Statement

This policy allows employees who wish to take an extended period of leave for personal reasons, to plan and self-finance that leave of absence.


All employees listed below who have completed their probationary period are eligible for Earned Deferred Leave.

  • Non-union full-time permanent employees
  • CUPE local 79 full-time permanent employees in the Full Time Unit
  • CUPE local 416 permanent employees
  • TPFF Local 3888 permanent employees (with specific limitations) as provided in the Earned Deferred Leave – Letter of Intent attached to the collective agreement.


Earned Deferred Leave:

an authorized leave for six months or one year, in which an employee receives reduced pay during the enrolment period and receives the accrued deductions and interest during the leave period. The leave period must commence within 6 years from entering into the program.


Leave Options

Employees may apply for any of the following earned deferred leave options:

  • 90% Option: 4.5 years of work at 90% pay and 6 months of leave
  • 80% Option: 4 years of work at 80% pay and 1 year of leave or 2 years of work at 80% pay and 6 months of leave
  • 75% Option: 3 years of work at 75% pay and 1 year of leave or 1.5 years of work at 75% pay and 6 months of leave

Under each of these options, an employee receives the specified percentage of their salary for the period worked and receives the banked percentage plus accrued interest during the leave period, paid out in equal pay period installments. The accrued interest is taxable on an annual basis during the enrolment period and will be reported on an employee’s T4 form.


An employee may apply for enrolment in the plan at any time of the year.

An employee must obtain approval to enrol in the plan, from his/her executive director/general manager/division head or designate.

The executive director/general manager/division head or designate may:

  • approve the request for immediate enrolment
  • approve the request but defer enrolment for a year
  • deny the request.

The executive director/general/division head manager or designate must send written approval, deferral or denial of the request to the applicant. If the request is deferred he/she should indicate when the employee’s request can be granted. If the request is denied he/she must explain the reasons to the employee.

The executive director/general manager/division head or designate should evaluate applications on the basis of consistent criteria to ensure employees are treated in a fair and equitable manner. In a situation where a number of employees within the same division or section apply for leave at the same time the executive director/general manager/division head or designate may need more information to prioritize requests. Guidelines for Assessing Competing Requests are included in this policy under the Implementation Section. The division will most often receive notice three or four years in advance of a leave; this will provide substantial opportunity for planning.

The terms of the enrolment in the plan are documented in an Earned Deferred Leave Contract signed by both parties, when a leave is approved. This can be changed in one of the following ways:

  • The terms of the contract are changed by mutual consent.
  • An executive director/general manager/division head may require an employee to withdraw from the plan if the employee transfers or is promoted to a different division that did not authorize the leave and that division cannot accommodate the employee’s absence because of operational requirements.
  • An employee, who wishes to withdraw from the plan during the enrolment period, may do so in exceptional circumstances only e.g. financial hardship. If the employee withdraws from the plan he/she receives one lump sum payment for deferred salary and accrued interest, which becomes fully taxable in the year of receipt.

An employee must take an Earned Deferred Leave all at once i.e. the leave cannot be split up.

The Earned Deferred Leave program and Earned Deferred Leave Contract are governed by and administered in accordance with Section 248(1) of the Income Tax Act and Regulation 6801.

An employee is not allowed to enter into more than one Earned Deferred Leave Contract at a time.

Employees on Earned Deferred Leave may not work in any city division in either a full-time or part-time capacity during the period of leave.

While an employee is on leave a position may be filled with acting or temporary staff, or left vacant.

Return from leave

An employee returning from Earned Deferred Leave will return to his/her former position if available, or a suitable alternate position.

In accordance with regulation 6801 of the Income Tax Act, employees are required to return to their employment after the leave for a period that is not less than the leave of absence.


Guidelines for Assessing Competing Requests for Earned Deferred Leaves

Requests will be received a year or more in advance of the leave, providing substantial opportunity to prepare for the period of absence.

On some occasions, two or more employees may request leaves at the same time. If it is not possible to accommodate all those applicants, an attempt should be made to negotiate some satisfactory alternative schedule with the parties involved. If no satisfactory resolution can be obtained, the following criteria can be taken into account when making the decision.

Priority should be given to employees requesting a leave under the following circumstances:

  • an employee plans to use the leave as a means of easing the transition to full retirement, subject to conditions stated above
  • a leave is being requested on “compassionate” grounds, for example to provide care to an ill family member
  • an employee has been appointed to a leadership position with a professional or volunteer organization, and requires a leave in order to take the position
  • a leave has been requested for a specific time-dated activity that cannot easily be postponed (e.g. attendance at a course of studies).

The executive director/general manager/division head or designate may also wish to take the following factors into account when determining priority among competing requests:

  • a leave date has been requested to co-ordinate with that of other family members.
  • a leave date has been requested to provide for a specifically seasonal activity.

If it is not possible to resolve the conflict given these factors, it is recommended that an objective criterion such as seniority or date of application be used to determine priority.

Starting the Leave

Employees should begin their leaves as soon as the deferral period is over. In exceptional circumstances, employees may defer their leaves, however, income tax regulations require that the leave of absence must begin no later than six years after the start of the deferral period. For example, if the deferral begins on June 1 2001, the leave of absence must start no later than June 1, 2007.

Illness during Leave

If an employee becomes seriously ill during the leave, and wishes to defer part of the leave, the employee should contact his/her executive director/general manager/division head or designate. These situations will be dealt with on a case by case basis. Adjustments will be made in cases where the illness is of such severity and duration so as to effectively frustrate the purpose of the leave, and are within the latitude allowed by Revenue Canada regulations.

Salary & Benefits


During the enrolment period, an employee receives and is taxed upon the elected percentage of his/her current salary. While on leave the employee receives and is taxed upon the deferred amount plus accrued interest paid out.

During the enrolment period, interest credited on deferred amounts is reported for tax purposes each December 31.

Performance Pay – non union employees

There are two kinds of pay increase:

Across the Board Increase (ABI) A pay increase based primarily on cost of living allowance, subject to Council’s approval. The ABI is applied as an across-the-board increase to the salary ranges and the employee’s salary, provided the employee received a performance level of “met objectives” or “developmental”.

Performance Pay A pay increase that is determined by the employee’s performance level, i.e. 1% (developmental), 2.5% (met objectives), or 4.5% (exceeds expectations). This increase is added to the employee’s current salary up to the maximum salary of the range.

The employee receives no ABI or performance pay increase while on earned deferred leave. When the employee returns, he/she receives a prorated performance pay increase for the time worked prior to his/her earned deferred leave. Payroll adjusts the employee’s pay to reflect any missed ABI increase(s), effective on the employee’s return date.


The employee and manager set objectives on January 1, 2016.

The employee starts an earned deferred leave on April 1, 2016 and returns on April 1, 2017.

A closing review meeting is held with the manager before the employee begins the leave. The performance pay increase, based on performance is prorated for three (3) months (January 1 to March 31, 2016) The prorated performance pay and full ABI are applied to the employee’s base salary upon the employee’s return from his/her earned deferred leave. The manager completes the Pay for Performance Form and sends it to Payroll for processing upon the employee’s return.

The employee returns from leave on April 1, 2017, and sets objectives with the manager for nine months (April to December). A review is held in the first quarter of 2018 and any performance pay increase is prorated for nine (9) months. The full ABI is applied from January 1, 2018.


The employee receives his/her usual benefits during the enrolment period of the plan and the leave period. Most employee benefits are not related to level of income. There are some exceptions:

  • Group Life Insurance
  • Long Term Disability
  • Pensions

Contributions and premiums for these programs during the enrolment period will be based upon full (100%) salary. During the leave period benefits related to salary shall be at the salary level (100%) at the time the leave started.

During the leave period an employee may elect to maintain any optional life insurance coverage that he/she has and pay the appropriate premiums. If the employee declines to maintain this coverage, upon return from the leave it may be necessary to provide proof of insurability to re-instate optional coverage.


Under the OMERS Plan, the leave period is considered broken service. When the employee returns from leave if he/she wishes to buy back pension service he/she must pay both the employee and the employer’s contribution to the pension plan, for the period of the leave. If the employee elects to purchase this period of broken service, the city will make a one-time lump sum payment equal to the employer’s contribution to the employee. This lump sum is a taxable benefit.

The Income Tax Act restricts the number of broken service periods for which an employee can purchase pension credit to a lifetime maximum of 5 years plus up to an additional 2 years for periods of parental leave.


  • Employees do not earn vacation while on leave.
  • Any vacation that is owing to employees when they begin the leave will be available to them when they return from leave.
  • The period of the leave counts towards service requirements for calculating increases in vacation entitlements.

For example: On January 1st 2002 an employee begins his 7th year of employment and has 15 days entitlement in his vacation bank when he goes on leave on January 1st 2002. He takes 6 months leave. He still has 15 days entitlement when he returns to work on July 2nd 2002. However, in 2002 he works for 6 months only and therefore earns 7.5 days of vacation, which is made available to him on January 1st 2003. On January 1st 2004, in the employee’s 9th year he is entitled to 20 days of vacation.

Canada Pension and Employment Insurance

Employment Insurance premiums are deducted during the enrolment period on the full salary. During the leave an employee does not contribute to employment insurance and the leave period is not counted as insurable employment. If this is of concern to an employee he/she should check the implications of his/her particular situation by contacting the local Employment Insurance Commission office. Canada Pension Plan deductions are calculated on the reduced salary during the enrolment period and during the leave CPP is calculated on the deferred amount.

Sick pay

No sick pay is accrued during the leave. Any sick credits owing to employees when they begin the leave will be available to them when they return from leave.

Approved by

Workforce Strategy Team for the Executive Management Team.

Date Approved

April 12, 2001


December 5, 2006

Related Information

See also: Leave without Pay, Voluntary Leave of Absence

Related links

CUPE L79 Full-Time Collective Agreement

TCEU Local 416 Collective Agreement