Overtime 101: Revisiting the payroll rules

Any time worked over a fixed threshold must be paid as overtime – but the devil is in the details
By Alan McEwen
|Canadian Payroll Reporter|Last Updated: 02/04/2014

 Recently, I wrote about statutory

holiday employment standards

in my blog on www.payroll-reporter.com, where the emphasis was on the questions that must be asked, rather than the detailed answers to those questions in each jurisdiction. The following applies something of this same approach to overtime.

In principle, overtime requirements are quite simple: Any time worked over a fixed threshold must be paid as overtime. But, as always, the devil is in the details.

First, there are two different types of overtime thresholds: a daily versus a weekly basis for calculating overtime.

There is a clear geographic distribution to daily overtime requirements: Daily overtime does not exist in any jurisdiction from Ontario east to Newfoundland and Labrador, inclusive. In every other jurisdiction, overtime must be calculated on both a daily and weekly basis.

Where daily overtime applies, work after eight hours per day has to be paid at time and a half. However, in British Columbia, any time worked over 12 hours per day must be paid at double time. For the purpose of calculating daily overtime, if a work shift crosses the boundary between two calendar or work days, the "day" for the eight-hour test starts with the beginning of work.

For example, if an employee starts work at 11 p.m. on Monday night and stops work at 8 a.m. the next morning, the hour after 7 a.m. is the ninth work hour that Monday "day" — and so is overtime.

Every jurisdiction has a weekly threshold for overtime. What you must know is whether this is a Sunday-to-Saturday calendar week or is an employer-defined workweek. Most jurisdictions permit an employer to define the workweek for overtime purposes, to align with weekly or bi-weekly pay period boundaries.

Only British Columbia and Saskatchewan require that overtime must be calculated on a Sunday-to-Saturday calendar-week basis.

Overtime thresholds are not maximums on the permitted hours of work.

For example, in Ontario, despite the fact there is no requirement to calculate overtime on a daily basis, the hours of work an employer may lawfully expect an employee to work are capped at the employer-defined regular work day (eight hours, by default). Employees are only required to work in excess of the regular work day with their written consent.

For weekly overtime thresholds, most jurisdictions permit employers to average the applicable hours across multiple weeks.

When averaging applies, it’s not that the weekly overtime threshold changes; it’s just that this threshold is only applied to an average for the period, rather than to each separate week within the period. For example, if:

• work hours for overtime purposes are averaged over three consecutive weeks;
• the threshold for weekly overtime is 40 hours (federal, BC, Saskatchewan, Manitoba, Quebec, Newfoundland and Labrador and the three territories);
• in one averaging period, the applicable weekly hours worked are 48, 37 and 25;
• the weekly average is 36.7 hours (48, 37 and 25, divided by three);
• no overtime has been worked, since the average is less than 40.

Overtime calculated on a weekly basis may also be affected by weeks that include statutory holidays. Here payroll has to know whether:

• weekly overtime thresholds are reduced for each statutory holiday;
• the time off work for a statutory holiday counts against weekly overtime thresholds; and
• any hours worked on a statutory holiday count against these weekly overtime thresholds.

Based on these factors, statutory holidays either have no impact on overtime or they make it more difficult for employees to qualify for overtime. For example, in Ontario:

• the threshold for overtime, 44 hours, does not change when a workweek includes one or more statutory holidays;
• the time off work for a statutory holiday does not count toward the workweek threshold; and
• any hours worked on a statutory holiday (although paid at time and a half) do not count towards that threshold.

The third Monday in February — Feb. 17, 2014 — is the Family Day statutory holiday in Ontario. Assume the employer uses a Sunday-to-Saturday calendar week for overtime purposes and the regular hours of work are eight:

Since the workweek overtime threshold in Ontario is 44, there is no overtime.

By contrast, in Manitoba, the regular hours that would otherwise have been worked on a statutory holiday do count against the weekly overtime threshold. Since, as in Ontario, the Manitoba threshold for workweek overtime (40 hours) does not change when there are statutory holidays, there would have been eight hours of overtime in the above.

The final point is the calculation of overtime pay. This may be more than simply an employee’s straight-time hourly rate at time and a half. For example, under the federal Canada Labour Code: For employees paid by the hour, the straight-time rate has to include any "wages" paid for a regular hour of work. This means any earning paid under the contract of employment on an hourly basis, such as shift premiums. For all other employees, the straight-time rate has to be calculated as gross earnings (exclude vacation pay, statutory holiday pay, bereavement pay and any earnings related to overtime hours), divided by the number of non-overtime hours worked.

Since the federal jurisdiction has both daily and weekly overtime, the time period is the day or workweek concerned.

For example, when calculating the straight-time rate on a daily basis, the applicable earnings for that day have to be divided by that day’s regular work hours.

Alan McEwen is a Vancouver Island-based HRIS/Payroll consultant and freelance writer with over 20 years’ experience. He can be reached at