The fundamental task in payroll is to pay employees accurately. To test your knowledge of the rules that apply to payroll, consider the following scenario — how much is the following employee entitled to be paid as overtime?
The employee, Linda, is subject to overtime after she works eight hours in a day. If she works eight hours, nine minutes and 25 seconds, how much overtime is she entitled to when her regular hourly rate if $12 per hour?
Here are a couple of options:
Option 1: Zero, as the employer only recognizes overtime greater than 15 minutes.
Option 2: $2.70. The employer recognizes overtime by the minute, rounded to the closest whole minute, so the employer pays Linda for nine overtime minutes (0.15 hours) at $12 per hour at time-and-a-half.
Option 3: $3.60. The employer pays overtime in six-minute blocks. Time worked is rounded to the closest, complete six-minute block — which in this case is 12 minutes or two blocks. Each six-minute block is one-tenth of an hour, so the employer pays Linda for 0.2 hours at $12 per hour at time-and-a-half.
Option 4: $4.50. The employer rounds any time worked to the closest quarter-hour. Linda’s nine minutes and 25 seconds are rounded up to 15 minutes (0.25 hours) and she is paid $12 per hour at time-and-a-half.
So, what is the overtime the employer is required to pay Linda, based on the applicable employment standards? We can all probably agree she is entitled to some overtime for her nine-plus minutes, so option one — zero — is not reasonable.
And employers are required to pay overtime for any work over the daily, weekly or workweek thresholds, so a policy that says overtime must be a minimum of 15 minutes before it will be paid is probably not viable.
Perhaps it will help to shift the emphasis in the question slightly. The answer might be clearer if the question is, instead, how are employers required to measure the overtime employees work? In whole minutes, as a decimal fraction of an hour, in blocks of time such as six minutes or 10 minutes?
Should the exact amount of time worked be paid for or can seconds be rounded up or down to whole minutes? Should part hours be rounded to the closest quarter-hour?
Would it shock you to know that, with one exception, there are no employment standards requirements on how hours worked, including overtime, must be measured?
The lone exception is Nova Scotia and this exception only applies for minimum wage purposes, including overtime payable at the minimum wage. Employees who work at least 15 minutes, but no more than 30 minutes, must be paid the equivalent of at least 30 minutes at the minimum wage.
For work greater than 30 minutes but less than one hour, the equivalent of at least one hour at the minimum wage must be paid. However, the standards say nothing about employees whose work time includes partial hours of less than 15 minutes.
Other than this, there are absolutely no specific requirements on how employers must measure the time employees work. Given this absence, there is nothing preventing employers from adopting any of the policies laid out in options two to four above.
To put it another way, employers should ensure the terms and conditions of employment clearly define how hours worked will be measured.
This means defining whether work will be measured as the exact time worked, whether seconds will be rounded to the closest whole minute or if only blocks of time worked will be recognized, with the employer rounding time up or down to the closest whole block.
Alan McEwen is a payroll consultant and freelance writer with 20 years’ experience in all aspects of the industry. He can be reached at email@example.com, (905) 401-4052 or visit www.alanrmcewen.com for more information. He also writes a weekly blog for Canadian Payroll Reporter. Visit www.payroll-reporter.com for more information.