Minimum Wage Ontario 2020: What Employers Need to Know

While minimum wage is always a hot topic, the issues of minimum wage Ontario 2020 is especially important to employers. That’s because Ontario’s minimum wage rates actually increased in October of 2020.

For industries that employ large numbers of minimum wage workers, such as leisure and hospitality, these changes could make a major impact on the bottom line. As a result, employers need to know Ontario’s minimum wage rates inside and out so they can set their budgets accordingly, prepare for payroll changes, and ensure they’re not in violation of any Ontario labour laws.

To keep you and your employees in the loop, this article will cover everything you need to know about minimum wage Ontario 2020, including:

• Changes to the minimum wage rates in 2020
• The minimum wage rates for different types of workers
• How to calculate minimum wage for employees who earn commission
• Paying employees sent home after less than three hours of work

While this guide provides an overview of Ontario minimum wage in 2020, you can use the province’s Employment Standards Self-Service Tool to ensure your business is in compliance with the current minimum wage rules and employment standards.

Minimum Wage Rates

Before diving into Ontario’s minimum wage rates, it’s important to clarify what minimum wage actually means.

What is Minimum Wage?

Minimum wage is the lowest wage rate that an employer can legally pay an employee. In Canada, each province and territory sets its own minimum wage.

In Ontario, the minimum wage is outlined in the Employment Standards Act, 2000 (ESA), which provides the minimum standards for most employees working in Ontario. The ESA also covers other employee rights and employer responsibilities, such as the standard of hours of work, sick days, vacation pay, and more.

While most employees in Ontario are eligible for what’s known as the “general minimum wage,” some categories of employees may be subject to a different rate than others (ie. wilderness guides). Additionally, some workers may be exempt from the minimum wage provisions based on their class of work (ie. students working in a cooperative program authorized by their school).

In Ontario, minimum wage rates generally fall into the following categories:

• General Minimum Wage: This rate applies to most employees.
• Student Minimum Wage: The rate that applies to students under the age of 18 who work 28 hours a week or less when school is in session. It also applies to students who work during school breaks or summer holidays.
• Liquor Servers Minimum Wage: This is the hourly rate that applies to employees who serve liquor to customers in licensed premises as part of their regular employment, and who regularly receive tips or other gratuities.
• Homeworkers Minimum Wage: This rate applies to employees who do paid work in their own home (ie. sewing clothes for a clothing manufacturer). The homeworkers minimum wage also applies to students who are employed as homeworkers.
• Hunting and Fishing Guides/Wilderness Guides Minimum Wage: This rate is based on blocks of time instead of by the hour. Guides are guaranteed a minimum amount for working less than five consecutive hours in a day, and a different amount for working five hours or more in a day—hours that don’t need to be consecutive. Employees who qualify for this rate include those who guide, teach or assist others while engaged in activities (ie. hiking, horseback riding, etc.) in a wilderness environment. Hunting and fishing guides are not included in this category.

Changes to Ontario Minimum Wage

While the minimum wage rate differs across certain job categories, all minimum wage rates in Ontario are set to increase on October 1, 2020. The increase is tied to the Ontario Consumer Price Index and is intended to provide more predictability for businesses, while also providing employees with a more fair wage. Employers should prepare for these rates to increase annually, with the new rate published on or before April 1 of each year.

If the change to the minimum wage rate occurs partway through an employee’s pay period, employers should treat the pay period as if it were two separate pay periods. This means the employee is entitled to at least the minimum wage for each of those periods.

Minimum Wage Ontario 2020 Rates:

The minimum wage Ontario 2020 rates breaks down as follows:

Minimum Wage Calculations – Commission

If you have an employee whose pay is based entirely or partially on commission, you may think that the minimum wage rules don’t apply. However, it’s not that simple.

Even if an employee’s pay is based on commission, their total pay must still amount to at least the general minimum wage for each hour the employee has worked. In other words, the employee’s pay can’t work out to less than minimum wage.

To illustrate, let’s take the example of Antoni, who works on commission and is paid weekly.

One week Antoni works 27 hours and is paid $200.00 in commission. However, if Antoni was paid the general minimum wage for 27 hours of work, he would have earned $384.75 (27 x $14.25).

To ensure that Antoni earns at least the general minimum wage for each hour he worked, he must be paid the difference between his commission ($200) and the required minimum wage ($384.75). This means that Antoni’s employer owes him $184.75.

Keep in mind that this calculation is more complicated if you need to account for overtime pay, or any industry-specific or job-specific rules.

The “Three Hour Rule”

Another important scenario to keep in mind when calculating minimum wage pay is the “three hour rule.” This rule applies to employees who regularly work more than three hours and are required to report to work, but are then sent home after working less than three hours.

In cases such as these, the employee must be paid for three hours at their regular rate of pay, or for the amount the employee earned for the time worked and wages equal to the employee’s regular wage for the remainder of the three hours (whichever amount is higher). The reason for the rule is the recognition that many minimum wage employees have very little control over their schedules and the uncertainty of short shifts can make their wages less predictable.

To illustrate, we’ll use the example of Amy, who is a server paid the liquor servers minimum wage of $12.45 an hour. Amy reports to work for a five hour shift, but she is sent home after just two hours. In this scenario, Amy is entitled to her regular rate of $12.45/hour for the time worked ($12.45 x 2 = $24.90) and another hour at her regular rate ($12.45). As a result, Amy must be paid: $37.35 ($24.90 for the time worked + $12.45 for the three-hour rule).

It’s important to note that this rule does not apply to employees whose regular shift is three hours or less, or cases where the cause of the employee not being able to work at least three hours was beyond the employer’s control (ie. power outage, a fire, etc.).

Across Canada, more than 10% of the population works for minimum wage, and the vast majority of those workers reside in Ontario. With such a significant amount of Ontario’s population working for minimum wage, it’s important that employers are aware of the changing rates for minimum wage Ontario 2020. By preparing for the minimum wage increase in advance, employers from across industries can ensure they’re in compliance with Ontario labour laws and the ESA.