Understanding overtime pay is essential for small business owners in Canada who want to create a fair and compliant workplace. Most provinces require that employees be paid at least 1.5 times their regular wage for hours worked beyond a weekly standard threshold, which varies by province and territory. Staying informed and proactive about overtime requirements helps businesses stay aligned with employment standards and helps foster employee satisfaction and trust.
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Federal overtime rules in Canada
Overtime rules are governed by the Canada Labour Code for businesses operating in federally regulated industries. Under this legislation, employees are entitled to overtime pay at 1.5 times their regular hourly rate for any hours worked beyond eight hours per day or 40 hours per week. Federally regulated industries include financial services, telecommunications, broadcasting, interprovincial transportation and more. However, specific categories of workers, such as some public-sector roles, are exempt from mandatory overtime pay requirements.
Provincial overtime rules in Canada
Most employees in Canada fall under provincial or territorial employment standards. In many provinces, including Ontario and Alberta, overtime is 1.5 times the regular rate after 44 work hours a week. Other provinces, such as British Columbia, also apply daily thresholds of 8 hours per day and 40 hours per week. It’s important for small businesses to be aware of these regional differences and that certain employees may be exempt from overtime. Knowing the overtime pay rate and threshold for the province or territory in which the business is operating as an employer helps companies stay compliant and manage labour costs.
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Compare PackagesHow to calculate overtime pay for hourly employees
Overtime pay is typically calculated at 1.5 times an employee’s regular hourly wage for any hours worked beyond a standard threshold set by provincial or territorial law. To calculate overtime, first determine the employee’s regular hourly rate. Then, multiply that rate by 1.5 and apply it to the overtime hours worked. For example, if an employee earns $20 an hour and works 48 hours weekly, with a 44-hour threshold, they would receive four overtime hours at $30 per hour, equaling $120 in overtime pay.
Calculating overtime for multiple pay rates
When an employee works at different pay rates during the same pay period, overtime is calculated using a blended rate or weighted average hourly rate. To find this rate:
- Total the employee’s earnings from the week at different rates: (35 hours times $17) plus (13 hours times $20) equals $855 in base pay
- Divide the total by the number of hours worked: $855 divided by 48 hours equals $17.81
- This is the blended rate. Multiply it by 1.5 to get the overtime rate: $17.81 times 1.5 equals $26.71
- Apply that to the overtime hours: $26.71 times 4 overtime hours, assuming a 44-hour threshold, equals $106. 84
How to calculate overtime pay for salaried employees
Even if an employee is paid a fixed salary, they may still be entitled to overtime pay unless they fall under an exempt category. To calculate overtime, start by determining the employee’s regular hourly rate. Divide their weekly salary by the number of hours in their standard workweek, which could be between 40 and 44 hours, depending on the province and territory. Multiply the hourly rate by 1.5 to find the overtime rate. Apply the overtime rate to any hours worked beyond the threshold. This helps ensure that salaried employees are compensated for extra time spent on the job.
Calculating overtime pay for nonhourly compensation
Overtime isn’t strictly based on an hourly or salary basis of pay. Certain types of other compensation must be included in overtime calculations.
Piece-rate work
It’s not uncommon for manufacturing and other industries to pay employees based on the number of pieces they produce or tasks they complete. Even if employees are paid by piece rate, the total earnings divided by the hours worked must equal at least minimum wage to meet legal requirements. Piece-rate workers are entitled to overtime pay after working a certain number of hours, which differs according to province and territory. The method of calculating overtime for piece-rate workers depends on the province or territory, as employment standards may vary across jurisdictions.
In Ontario, piece-rate workers are entitled to overtime pay under the Employment Standards Act. It is calculated weekly and applies when an employee works more than 44 hours. The overtime pay rate is 1.5 times the employee’s regular pay rate for each hour worked beyond 44 hours.
To calculate overtime for piece-rate workers in Ontario:
- Calculate total weekly earnings: $1,000
- Calculate total hours worked: 50 hours
- Determine the regular hourly rate: $1000 divided by 50 hours equals $20 an hour
- Identify overtime hours: 50 hours minus 44 hours equals 6 hours
- Calculate overtime pay: 6 hours times $30 equals $180
- Calculate total pay: $1,000 plus $180 equals $1,180
Keeping proper records for overtime pay
As the Canada Revenue Agency requires, overtime payments made to non\exempt employees are a type of payroll record and must be retained for at least six years from the end of the last tax year to which they relate. Keeping accurate overtime pay records is essential for employers to comply with federal and provincial labour laws.
FAQS
How do you calculate overtime per day?
Daily overtime is calculated based on provincial rules. For example, in British Columbia, employees earn 1.5 times their pay after 8 hours and 2 times their pay after 12 hours. In most provinces, such as Ontario and Saskatchewan, overtime is only calculated weekly. Only Alberta, British Columbia and Manitoba have daily and weekly overtime rules.
Is overtime calculated by day or week?
Overtime in Canada is typically calculated weekly or biweekly. However, some provinces, such as British Columbia, Alberta and Manitoba, also have daily overtime rules.
What is the formula to calculate overtime pay?
To calculate overtime pay, first determine the employee’s regular hourly rate by dividing their weekly earnings by the total non-overtime hours worked. Then, multiply the overtime hours worked by 1.5 times the regular hourly rate. Add that to the regular earnings to get the total pay.
Who are exempt and non-exempt employees in Canada?
Exempt employees are those who are not entitled to overtime pay. This may include managers, supervisors, doctors, lawyers and certain high-level sales roles. Nonexempt employees are entitled to overtime pay for hours beyond the standard workweek. This group consists of hourly workers, general labourers and administrative staff. The specific criteria for exemptions may vary by province.
Can salaried employees get overtime?
Salaried employees can receive overtime if they are nonexempt under the employment laws in their province or territory.
Can hourly employees be exempt?
Yes, hourly employees can be exempt from overtime if their job falls under specific exemptions outlined in provincial or territorial employment standards.
Can an hourly employee be scheduled for overtime?
Yes, an hourly employee can be scheduled for overtime if they work beyond the standard hours set by their employer.
Can an employer require overtime?
An employer can require overtime if it complies with provincial labour laws and applicable employment contracts. The employee must be compensated according to the extra hours worked.
Can a salaried employee be forced to work overtime?
Yes, a salaried employee can be required to work overtime if their job is not exempt from overtime laws, but the terms of overtime compensation may vary based on the employment contract and labour laws.
Can exempt employees get overtime?
Exempt employees are not entitled to overtime pay, as they fall under specific categories defined by labour laws.
Can overtime be banked as future vacation?
Sometimes, overtime can be banked as future vacation or time off, depending on employer policy, labour laws and the employee's agreement.
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This guide is intended to be used as a starting point in analyzing overtime pay and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and provides the understanding that ADP does not render legal or tax advice or other professional services
