Overview of overtime: Employers should have a strategic plan that clearly defines overtime

Megan McCall

Megan McCall

Team Leader, Payroll | Payworks

Megan joined the Payworks team in 2011 and has spent over two decades in a variety of workforce management roles, including retail management, HR, payroll, training, pension and benefits administration. She serves as a knowledgeable resource on complex payroll issues and encourages education and clear communication to support best practice and improve processes.
Responsible d’equipe de la paie | Payworks

Megan a rejoint l’équipe de Payworks en 2011 et a occupé des postes variés dans la gestion de la main-d’œuvre au cours des 20+ dernières années, notamment en gestion de la vente au détail, RH, traitement de la paie, formation, administration des pensions et des avantages sociaux. Elle agit à titre de personne-ressource pour les questions complexes relatives au traitement de la paie. Elle encourage l’éducation et une communication claire pour encourager de meilleures pratiques et améliorer les processus.

Originally published: August 17, 2020 

Legislative and regulatory information can be overwhelming. Employment standards differ by province and it can be difficult to find, decode and apply them. Overtime laws are no exception; in fact, they’re a common source of confusion for both employees and employers across Canada.

It’s important for organizations to have a strategic overtime plan in place that adheres to overtime laws and clearly defines parameters and accountability relating to overtime pay.

Canada’s Labour Code sets standards that apply to employers and employees under federal jurisdiction, and several (but not all) provinces mirror these standards – more on that below. Canada’s Labour Code says the maximum number of hours an employee can work before overtime becomes applicable is eight hours per day and 40 hours per week, except in the case of averaging, modified work schedules, or special regulations applicable to certain industries and types of work.

Calculating regular wage

Calculating an employee’s overtime rate can be as straightforward as using the clearly defined provincial minimum wage rate. However, that can be complicated when an employee temporarily fills a position at a different rate. Best practice is for the overtime rate to be paid according to the position they actually worked the overtime hours in.

Capturing hours worked

Employers are required to keep accurate records of all hours worked (including overtime hours). When building a strategic overtime plan, employers can structure their time capture tools to require pre-authorization for overtime hours.

Defining exemptions

There are misconceptions when it comes to overtime pay for salaried workers, but contrary to popular belief, salaried workers are entitled to overtime compensation or time-off in lieu the same as those who are paid by the hour. There are certain occupations – including medical, legal, certified accounting professions – and management positions that are clearly defined as being exempt from overtime pay; the ambiguity surrounding the legal definition of the management role is where the misunderstanding often arises.

An employee’s position has to be primarily managerial in nature to be exempt from overtime; their actual job title is immaterial.

Employers should clearly define all management roles and employees’ prescribed job duties to ensure appropriate overtime compensation, especially where a role also includes non-managerial duties. Employers should consult provincial employment standards to determine which occupations are exempt from overtime provisions.

Setting expectations around mobile technology

In order to encourage and support a healthy workforce, employers should consider whether they’re unknowingly placing an added burden on certain employees with the implied demand to be available 24-7. Ultimately, this extra work may also accrue overtime.

The best way to avoid potential legal liabilities is to ensure the organization has appropriate policies and procedures in place, and that the method for tracking overtime or off-site work is established and communicated to all employees.

Checklist for overtime compliance

There’s no quick solution to guaranteeing compliance with overtime legislation, but to start from a strong foundation, pro-active organizations should:

  • Clearly define all management and supervisory roles
  • Keep up-to-date on current provincial and territorial legislation as it applies to their workforce. Note that many provinces have industry exceptions to the standard overtime legislation. Refer to the provincial/territorial employment standards for detail
  • Establish a comprehensive overtime policy and procedures documents that outlines all payroll calculations and how they are applied to various scenarios, including mobile technology, and effectively communicate the policy and procedures to employees
  • Provide managers, supervisors, and payroll practitioners with clear, consistent guidelines and training on the company’s overtime policy and procedures

The key to ensuring overtime pay compliance and preventing misunderstandings at the employee level is to communicate company overtime procedures to all staff and to incorporate overtime policies into training programs.

Overview of overtime wage calculations

It’s important for organizations when ensuring they’re adhering to overtime legislation to note that many provinces have industry exceptions to the standard calculations listed below. Employers should refer to the provincial/territorial employment standards for further details on those exceptions.

For a comprehensive overview of the overtime wage calculations by province and territory, download the Payworks Payroll Guide: https://info.payworks.ca/en-ca/payroll-guide-for-canadian-business.

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