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Reporting overtime on a Record of Employment

QUESTION: How do I calculate and report overtime hours when completing a Record of Employment (ROE)?

ANSWER: Report overtime hours in block 15A on an ROE. The way in which you calculate overtime hours will depend on whether the employee was paid for the hours or took them as paid leave.

If the employer paid the employee for the overtime hours, calculate the hours to report on the basis of one hour of overtime work equals one hour of insurable employment, regardless of the rate of overtime pay.

For example, if an employee works six hours of overtime and the employer pays the employee 1.5 times his regular rate for the hours worked, the number of insurable hours to report would be six. On the ROE, the employer must allocate the hours to the pay period in which it paid them.

If instead of being paid overtime pay an employee takes paid time off work, the insurable hours are the number of hours of leave the employee takes. For example, if an employee works five hours of overtime (at 1.5 times his or her regular rate) and later uses it to take 7.5 hours off, the number of insurable hours the employer would report on an ROE would be 7.5 insurable hours. On the ROE, the employer must allocate the hours to the pay period for which it paid them.

If an employee banks overtime hours and, without taking time off, is later paid the outstanding amounts on or after termination, the number of insurable hours to report would be calculated on the basis of one hour of overtime work equals one hour of insurable employment. On the ROE, the employer must allocate the hours to the pay period in which the employee worked the overtime.

Employers do not have to report overtime hours worked more than 52 weeks before they issued the ROE. For overtime pay paid on or after termination, allocate the earnings to the last pay period of regular pay.

Deadlines for paying overtime

QUESTION: Are employers required to pay employees for overtime in the pay period in which they earn it, or can they pay it later?

ANSWER: Overtime pay is governed by labour standards laws in each province and territory and by the Canada Labour Code for federally regulated workplaces.

The requirements, therefore, vary depending on the jurisdiction.

In general, employers must pay employees for overtime in the pay period in which they earn it. Exceptions may apply when an employee banks overtime hours and when there is a termination of employment.

When paying employees for overtime pay earned in a pay period, employers must ensure that they comply with the following labour standards deadlines for paying wages:

Note: Different payment rules may apply if a labour standards board allows it or if there is a collective agreement in place. Different rules may also apply if the employee banks overtime hours or if the employer is paying out the overtime pay when there is a termination of employment.

Source deductions on DPSP contributions

QUESTION: Are employers required to take source deductions from contributions to employees’ deferred profit-sharing plans (DPSPs)?

ANSWER: No.

The amount of money that an employer allocates to a deferred profit-sharing plan (DPSP) on behalf of an employee is not subject to Canada/Quebec Pension Plan contributions, employment insurance premiums, Quebec Parental Insurance Plan premiums, or income tax deductions.

However, the employer must report the contribution as a pension adjustment in box 52 on the employee’s T4. The amount contributed will reduce the amount the employee can contribute to his or her registered retirement savings plans.

Note: When the DPSP benefit is actually paid to the employee, it will be subject to income tax deductions, using the lump sum tax rates.