If you don’t want your company investigated, if you don’t want to face a lawsuit, and if you don’t want to cause your employees to distrust you, you had better get on top of your overtime pay responsibility. Unpaid overtime wages can come back to kick you in the butt even years later—you could be forced to pay back millions if you violate laws while calculating overtime. Keeping track of overtime pay is your responsibility. Trust us, if you don’t keep track properly, your workers and the Canada Revenue Agency will notice, and they won’t be happy.
Off-the-clock hours aren’t uncommon. Canadian workers are no strangers to hard work and long hours. But business owners must understand how to properly handle and report overtime hours. To make sure you’re processing your payroll accurately every pay period, use this helpful advice to stay on top of overtime pay.
Know the Overtime Laws
When employees work overtime, they’re due time and a half of their usual compensation or 50% more. Overtime pay is either earned based on a weekly basis or over a longer period if an agreement states otherwise. You could have a contract or collection agreement in place that states differently. For example, you may get into an averaging agreement with an employee who needs to sometimes take time off for other responsibilities but doesn’t want to miss a day’s pay. In this agreement, you would allow the employee to work extra the week before, but average out the hours so no overtime is paid out. However, overtime is not paid on a daily basis, such as if a part-time employee works a few extra hours than his usual shift but still hasn’t exceeded the weekly overtime limit. You can also have “in lieu” agreements in place where employees get time off instead of extra pay.
Under the Employment Standards Act, some jobs are exempt from overtime pay, while some jobs pay overtime after 40 hours and others pay after 44 hours. Managerial and supervisory positions are not paid overtime if they’re irregularly working extra hours.
To stay on top of overtime pay, make sure you know the overtime laws for your industry, the jobs your employees work, and the area where you do business.
Know What Qualifies as Work
If you don’t know what constitutes working, you’re going to have a hard time keeping up during your payroll processing of overtime. When an employee is working extra hours performing his typical job duties, it’s easier to understand that you have to pay overtime. However, travel time, rest periods, and even just being on call can constitute working.
Use Time-Clock Software
When you use the latest technology, you can better keep track of overtime wages. Having the right tools like time-clock software instead of tracking hours manually can be extremely helpful. You can choose software that notifies you when someone is nearing overtime work and it will automatically calculate the extra time if you configure it to your company’s specific overtime regulations.
If keeping track of overtime wages seems unnerving to you, if you simply don’t have the time to make sure it’s being processed correctly, or if learning the current Canadian payroll legislature is too overwhelming or confusing to you, consider outsourcing your payroll processing needs to a back office service provider. You won’t have to worry about getting the numbers exactly right—leave the calculations and compliance issues to the experts. You’ll have the peace of mind knowing that your employees are always paid correctly.