How do I calculate overtime pay for employees? What is an averaging agreement? CFIB is here to help ensure that you have correctly calculated overtime pay for employees that are and are not working under an averaging agreement.
In British Columbia, the standard work day is 8 hours and the standard work week is 40 hours. When these hours are exceeded, overtime is generally payable. Both the number of hours worked in a day and the number of hours worked in a week must be looked at when calculating overtime. For the purpose of calculating overtime, BC Employment Standards refers to a week as running from Sunday through Saturday.
Daily overtime
After working eight hours in a day an employee must be paid day 1.5 times their regular rate of pay for any time worked over 8 hours up to 12 hours in a day. An employee must be paid 2 times their regular rate of pay for all hours worked in excess of 12 hours in a day. This applies even if the employee works less than 40 hours in a week.
For example, if an employee worked the following 36 hours in a week, he/she would be entitled to 5 hours paid at time-and-a-half and 1 hour paid double time.
Weekly overtime
An employee who works more than 40 hours in a week must be paid 1.5 times their regular rate of pay for the excess hours. This applies even if an employee never works more than 8 hours in a day. If an employee does work more than 8 hours in a day, only the first 8 hours worked each day are used to calculate total hours for weekly overtime.
For example, if an employee worked the following 44 hours in a week, he/she would be entitled to 40 hours of regular pay, and 4 hours paid at time-and-a-half.
For more details and examples on calculating overtime pay, please visit the Interpretation Guidelines Manual on Overtime Wages for Employees not working under an Averaging Agreement by the BC Employment Standards Act and Regulations.
Averaging Agreements
An employer and employee may agree to average the employee's hours of work over a period of one, two, three or four weeks for the purpose of determining the employee's entitlement, if any, to overtime wages and wages payable. For example, an employee may agree to work up to 12 hours in a day, averaging 40 hours in a week, without being paid overtime.
In order to be valid, an averaging agreement must:
- Be in writing;
- Specify the number of weeks (one to four) over which hours will be averaged;
- Specify the work schedule for each day covered by the agreement;
- Specify the number of times the agreement may be repeated;
- Specify a start date and an end date for the agreement;
- Be signed by the employer and the employee before the start date; and
- Be received by the employee before the agreement takes effect.
Please note that the averaging agreement does not have to be filed with the Employment Standards Branch.
Overtime under an Averaging Agreement
An employee working under an averaging agreement must be paid 1.5 times their regular rate of pay for hours worked outside of the schedule after 8 hours in a day.
For example, if an employee, whose work schedule calls for a 10 hour shift, works 12 hours, he/she must be paid 1.5 times their regular rate of pay for the extra two hours added to the work schedule for that day.
An employee working under an averaging agreement must be paid 2 times their regular rate of pay if he/she works more than 12 hours in a given day. The employee is entitled to 1.5 times their regular rate of pay for all hours worked in excess of an average of 40 hours per week over the period covered by the agreement.
For example, if an employee works a schedule of four 10-hour days per week over a four-week period is asked to come in on another day for 8 hours, the employee must be paid 1.5 times their regular rate of pay for the extra hours worked.
For more details and examples of averaging agreements, please visit the Interpretation Guidelines Manual on Agreements to Average Hours of Work by the Employment Standards Act and Regulations.
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