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

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Megan McCall, CPHR
Megan McCall, CPHR
Payroll Lead, Payworks

Megan joined the Payworks team in 2011 and has spent the last 20 years 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.
Responsable 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.

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 (see “Provincial Highlights” below). 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.

Provincial highlights

The below provincial highlights are a comprehensive overview of the overtime wage calculations by jurisdiction in Canada. 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.

British Columbia: The overtime rate is 1.5 times the employee’s regular wage for hours worked in a day in excess of eight, and double time for hours worked in a day in excess of 12. When calculating weekly overtime, employees are paid 1.5 times the employee’s regular wage for any time worked over 40 hours worked in a week – even if an employee doesn't work more than eight hours in a day.

Alberta: Overtime is calculated on any hours worked in excess of eight hours per day or 44 hours per week at a rate of 1.5 times the employee’s regular wage.

Saskatchewan: Overtime is paid for each hour or part of an hour in which the employer requires or permits the employee to work or to be at the employer’s disposal for more than 40 hours in a week, or daily with hours set at either 8 or 10 per day. The overtime rate is 1.5 times the employee’s regular hourly wage.

Manitoba: Overtime is calculated on any hours worked in excess of eight hours in a day or 40 hours in a week at a rate of 1.5 times the employee’s regular wage.
Ontario: Overtime is calculated on any hours worked in excess of 44 hours per week, at a rate of 1.5 times the employee’s regular wage.

Québec: Overtime is calculated on any hours worked in excess of 40 hours per week at a rate of 1.5 times the employee’s regular wage.

Newfoundland and Labrador: Overtime is calculated on any hours worked in excess of 40 hours per week at a rate of at least 1.5 times the current minimum wage.

New Brunswick: Overtime is calculated on any hours worked in excess of 44 hours per week at a rate of 1.5 times the current minimum wage. Employees who earn more than 1.5 times the minimum wage do not qualify for overtime compensation greater than their regular wage.

Nova Scotia: Overtime is calculated at a rate of 1.5 times the employee’s regular wage for hours worked in excess of 48 hours per week. 

Prince Edward Island: Overtime is calculated at a rate of 1.5 times the employee’s regular wage for hours worked in excess of 48 hours per week.

Northwest Territories/Nunavut/Yukon: Overtime standards don’t differ significantly from the Canada Labour Code which states that employees must be paid a minimum1.5 times their regular rate for hours worked in excess of 8 per day or 40 per week.

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