As an employer, it’s your job to ensure employees’ work times are following the hours of work rules outlined in the Employment Standards Act (ESA). But what if you need employees to work beyond their scheduled hours? This is called overtime, and the ESA also includes overtime legislation. As an employer in Ontario, here are 5 things you should know about overtime pay.
How to Calculate Overtime Pay in Ontario
If an employee works beyond their regular hours of work, they are entitled to overtime pay. Overtime pay is 1 ½ times the employee’s regular pay rate, and is often referred to as “time and a half”. For example, if an employee was making minimum wage at $14.00 an hour, their overtime pay rate would be $21.00. To calculate overtime pay simply use the following formula: regular pay rate x 1.5 = overtime pay rate.
When to Calculate Overtime
Generally, overtime is not calculated on a daily basis. Overtime is calculated on a weekly basis or under a longer period under an averaging agreement. This means if an employee works more than their set number of hours in a day, but still works the same number of hours a week in total they are not entitled to overtime. However, the Employment Standards Act states that overtime can be calculated daily if an employer and employee have a collective agreement or a signed contract that says so.
Who is Entitled to Overtime Pay
Not every employee in Ontario is entitled to overtime. If an employee works a job that is exempt from overtime provisions of the ESA they are not entitled to it. Other forms of work may also have an overtime threshold that is more than the standard 44 hours of work in a week. Ontario employers should know that managers and supervisors do not qualify for overtime if the work they do is managerial or supervisory. Even if they perform non-managerial or supervisory tasks, they may not be entitled to overtime pay.
What is the 50 per cent Rule
Ontario employers may have heard about the “50 per cent rule”. Some employees have jobs where they are required to do more than one kind of work. If some of the work is exempt from overtime pay, and other parts are covered, it can be confusing to know whether they qualify for overtime or not. The 50 per cent rule states that if the employee spends at least half of their work hours doing the job that is covered by the ESA overtime legislation, they qualify for overtime pay.
Can Employers and Employees Come to Alternative Agreements
Employees and employers cannot agree that an employee will give up overtime pay, and any agreements like this would be considered void. However, employees can make an agreement electronically or in writing to receive paid time off in lieu of overtime pay. This is referred to as “banked” time or “time off in lieu” Ontario employers and employees can also agree on an averaging agreement, which means an employee’s hours of work are calculated over a period of two to four weeks when calculating overtime. For example, if they agree to an averaging of four weeks, employees are only entitled to overtime pay after working 176 hours during that time. Understanding overtime legislature and calculating overtime pay are some of the top issues Ontario employers struggle with. Call us on our 24-hour line if you have any questions!
