Two employees are standing at a high-top table, one is looking at a tablet, the other is using a paper, pencil, and calculator. They are goin over how to calculate overtime.

How to Calculate Overtime: Three Things to Consider

Confused about how to calculate overtime? We’re here to help! There will likely be a time when every company needs a little extra manpower to meet various work demands. When this happens, employers often look to their staff to help out by working overtime hours. Overtime may be worked for any number of reasons, including meeting specified deadlines, accommodating labour shortages, ensuring the timely completion of projects, or even meeting client needs and demands. Regardless of the reason, employers have an obligation, by law, to ensure that employees are fairly compensated for the work they perform.

Overtime works on the basic principle of compensating employees for any time worked either in addition to their standard hours of work, or in excess of the legislated cut-off for overtime. It’s a common misconception that all employees are entitled to an overtime rate of one and a half times their regular wages once they’ve worked longer than the threshold number of hours per week. Unfortunately, calculating overtime is not that simple; eligibility, rates, and thresholds under employment standards legislation differ depending on the employee’s occupation, industry, and jurisdiction. If the employee’s employment contract or a collective agreement offers more generous terms, those will apply. It falls on the shoulders of employers and HR professionals to ensure overtime rules are accurately followed.

If you’re confused about your overtime obligations, you will be relieved to hear you’re not alone. To ensure that employees are appropriately compensated for any overtime worked, Canada has implemented strict labour laws to govern how employers handle overtime. Since many HR professionals do not enter the industry with an accounting or legal background, it’s easy to see how they can become overwhelmed with their legal obligations regarding an employee’s rights and entitlements to overtime.

Mismanaging overtime can easily get an employer in hot water, so it’s important that employers understand the proper application of overtime in both their jurisdiction and industry. Developing your knowledge of overtime legislation will help you better serve your employees, while also protecting your company from liability. Each jurisdiction has different rules when determining who is exempt, how overtime pay is calculated, and what counts towards time worked. It is important to learn the rules that apply to your business to ensure legal compensation. Make it a priority to then communicate this information with your staff so as to reduce confusion.

For information on how statutory and non statutory holiday pay differs from over time, check out these following guides for employers.

Or for more help with how to calculate overtime pay:

Download our free Overtime Pay Guide for a quick overview of the steps you should take when determining overtime eligibility and requirements, and then communicating how overtime pay will be administered to your staff.

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