Confusion regarding overtime pay is common across Canada. Unless organizations have prepared a strategic overtime plan that clearly defines overtime pay and have effectively communicated this plan to employees, it is likely many employees don’t understand how to interpret overtime legislation and how it relates to their own positions.
For employers — particularly those with multiple locations across the country that are subject to conflicting provincial legislation — remaining compliant can be challenging.
Canada’s Labour Code sets standards that apply to employers and employees under federal jurisdiction, and several provinces mirror these standards.
According to federal standards, the maximum hours an employee can work before overtime is applicable is eight hours per day and 40 hours per week, except in the case of averaging, modified work schedules or special regulations for certain industries and types of work.
Provincially, these standards range from weekly calculations only (at a maximum of 48 hours per week in Nova Scotia and Prince Edward Island), to various other daily and weekly thresholds.
In general, the minimum overtime rate is 1.5 times an employee’s regular hourly wage and this calculation varies across provincial legislation, with some provinces basing the overtime rate on the current minimum wage (such as New Brunswick, Newfoundland and Labrador), the employee’s hourly wage or a prescribed rate for specific employees (such as Quebec).
Several jurisdictions allow employers and employees to agree to replace the payment of overtime with paid leave equivalent to 1.5 times the overtime hours worked or to establish averaging agreements that vary the overtime compensation otherwise required by provincial legislation.
As well, some jurisdictions consider overtime to be optional and allow employees to refuse to work overtime.
Provincial employment standards provide the details.
To manage the variance in maximum hours worked or rate discrepancies across provinces, national employers may consider making organizational policies compliant with standards beyond the minimum requirements of one specific jurisdiction.
As well, because weekly standard hours must be reduced by eight hours for each general holiday that occurs, national employers must pay special attention to provincially legislated holidays, even if they do not apply to the province or territory of the head office.
Aside from the challenges national employers face when it comes to overtime rules, HR professionals and payroll practitioners face general challenges when it comes time to apply overtime rules to payroll.
The manner in which overtime pay is calculated varies depending on whether an employee is paid on an hourly basis, on a fixed salary, on a fluctuating salary or on commission.
Additional challenges include the following:
Calculating regular wage
Overtime rate calculations are fairly simple when based on a provincial minimum wage rate or when employees’ regular wage rates are clearly defined. But what happens when employees temporarily fill in for a position at a different wage rate and put in overtime?
While best practices suggest an employee’s overtime rate should be paid to the position actually worked, it is also common practice to pay employees at the higher rate for the day.
Capturing hours worked
Employers are required to keep accurate records of all hours worked, but there is no prescribed standard method for time-keeping (manual timesheets or biometric finger readers are equally acceptable methods).
It is advisable that some method of time-capture be used or that all overtime require authorization, because if an employee legitimately works overtime, he is entitled to overtime pay or time-off in lieu.
Non-compliance in this area can have legal implications, as illustrated by various Canadian court cases.
Misconceptions surround the topic of overtime pay for salaried workers. Salaried workers are equally as entitled to overtime pay as those who are paid by the hour.
Certain occupations, including medical, legal and certified accounting professions, are clearly defined as being exempt from overtime pay; however, management positions are also exempt, and the ambiguity surrounding the legal definition of the management role is where the misunderstanding arises.
As a general rule, if a position is primarily of a managerial nature with duties including managing direct reports, performance evaluations and hiring and termination responsibilities or control over hours worked, it may be exempt from overtime.
Organizations should clearly define all management roles and employees’ prescribed job duties to ensure appropriate overtime compensation.
Provincial employment standards determine which occupations are exempt from overtime provisions.
As mobile technologies such as tablets and smartphones become increasingly prevalent in workplaces, a new situation has developed as employees accrue overtime when using mobile devices to check email or work on documents after hours.
Mobile technology also makes overtime difficult to track if specific policies regarding its use haven’t yet been created.
The best way to avoid potential legal liabilities is to ensure the company has appropriate policies and procedures are in place, and that a method for tracking after-hours or off-site work is established and communicated to all employees.
There is no quick solution to guaranteeing compliance with overtime legislation. Organizations should clearly define all management and supervisory roles, keep on top of provincial legislation and updates, and establish comprehensive overtime policies and procedures that outline all payroll calculations and how they are applied to various scenarios, including mobile technology.
The key to ensuring compliance and preventing misunderstandings at the employee level is for HR to effectively communicate company overtime procedures to all staff and to incorporate overtime policies into training programs.
Nicole Stewart is director of human resources and Amanda Soloway is communications specialist at Payworks, a provider of total workforce management solutions, including payroll, HR and time management. For more information, visit payworks.ca.
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