18 Jun How to Calculate Overtime in Ontario
Figuring out how to calculate overtime in Ontario actually isn’t all that bad. In fact, if done right, it’s one of the easiest provinces in all of Canada! But of course, it is a bit time consuming as it requires you to add up every single shift for every single employee to determine whether they qualify for it or not. If you’re ever ready to ditch the paper and pencil though, consider giving Payroll Connected a go by signing up for our Free 30 Day Trial, and let the software do all the work for you automatically! For those of you not ready to make the leap to the 21st century though, here’s how to calculate overtime in Ontario.
The Rule
Any hours worked in a one week period in excess of 44 hours is considered to be Overtime Pay and should be paid at 1.5 times the employee’s regular hourly rate for those overtime hours.
A simple example is if an employee works 50 hours at $20.00 per hour, they will receive 50 – 44 = 6 Overtime hours. Their overtime wage is $20 * 1.5 = $30 per hour. So their total overtime pay will be 6 * $30 = $180.00 (plus of course their regular wage of 44 hrs * $20 = $880.00)
The figuring of overtime is completely linear though. So if in the above example, the employee works the first 46 hours at a wage of $20 per hour, but then the last four hours they were performing a different task, where they get paid at a different rate such as $15 per hours, then the converted hours to overtime will be:
2 hours * ($20 * 1.5) = $60 overtime pay
4 hours * ($15 * 1.5) = $90 overtime pay
$60 + $90 = $150.00 Overtime Pay Total
Like this, they’re still getting six hours of overtime pay, but just calculated based on the hourly rate of the work being performed at the time that the overtime was earned.
Overtime in a Statutory Holiday Week
If a work week contains a Statutory Holiday, then the calculation for overtime changes depending if they received Stat Worked or Stat Pay.
Stat Pay means that the employee received an average day’s pay for the Statutory Holiday, but they were not present at work. If so, then that Statutory Holiday contributes 8 hours to the 44 hour work week total. In other words, the employee works 36 hours in the week with a Stat Day at regular pay, then anything above that is to be paid at the Overtime rate of 1.5x their regular wage.
Stat Worked means that the employee worked on the Statutory Holiday and received 1.5x their regular wage for that Stat Worked. Though not considered to be the same as Overtime Pay, the labour standards recognize it to be a premium pay and therefore the hours paid as Stat Worked do not contribute to the 44 hour work week total. In that case, the employee would have to still work in excess of 44 regular (non-Stat Worked) hours to qualify for any Overtime Pay.
As an example:
– Billy gets paid $20.00 per hour, worked on a Statutory Holiday for 5 hours, and then worked an additional 47 hours during a single work week.
– To find out how many regular hours they worked in the week, take the Stat Pay hours 8 + the 47 additional hours = 55 regular hours. And lastly, subtract the Stat Worked hours paid at the premium 1.5x rate from that total like 55 – 5 = 50.
– Now, just apply the 44 hours week rule to the total to see if there’s any Overtime Pay owed: 50 – 44 = 6 overtime hours owed
Average Out the Overtime Hours
For employees that work a varying schedule, an averaging agreement might be just the ticket to regulate their overtime hours. An averaging agreement is a document signed by the employee and the employer where the employee agrees to allow their work week hours to be averaged across a two, three or four week period. Like this, the employee would only receive Overtime Pay if they work hours in excess of 88 hrs, 132 hrs, or 176 hrs respectively.
In other words, if an employee is on a two-week averaging agreement and they work 39 hours one week and 49 hours the next week, they would receive no overtime because 39 + 49 = 88 hours in a two week period. If they worked 45 and 46 hours respectively though, then they would receive some overtime because 45 hrs + 46 hrs = 91 hrs and 91 hrs – 88 Avg Hrs = 3 Overtime hours
For more information on how to calculate overtime in Ontario, please check out the Ontario labour standards website at https://www.ontario.ca/document/your-guide-employment-standards-act-0/overtime-pay
And if you don’t want to bother with any of this nonsense, then signup for a free trial of Payroll Connected and let the software do the work.
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