Ontario Overtime Pay: What Employers Need to Know

Aside from a few minor tweaks, the Ontario overtime pay rules and regulations have remained largely unchanged over the past few years. And yet, many employers (and their employees) still struggle to understand the basics of overtime pay in Canada’s most populous province. Even basic questions such as who is entitled to overtime pay continues to be a source of major confusion, leading to issues of non-compliance and unhappy employees.

While there are some exceptions and special rules, Ontario overtime pay is more straightforward than it seems. To help you understand everything from who is entitled to overtime pay to how averaging agreements work, we’ve created an ultimate guide to overtime pay in Ontario.

Ontario Overtime Pay Rate

Like most provinces, the Ontario overtime pay rate is 1½ times the employee’s regular rate of pay, or as most people refer to it, “time and a half.”

In Ontario, the threshold for overtime pay is 44 hours a week, as set out in the Ontario Employment Standards Act (ESA). This means that whenever an employee works more than 44 hours in a week, they are entitled to 1½ times their normal pay for each additional hour worked. 

To better understand the Ontario overtime pay rate and threshold, let’s use an example. If you have an employee who earns $20 per hour, you would need to pay them $30 per hour ($20 x 1.5 = $30) for every hour worked in excess of 44 in a week.

It’s important to note that Ontario’s overtime threshold is a weekly threshold, not a daily one. This means that an employee does not earn overtime pay on a daily basis by working more than a set number of hours in a day. So even if an employee works 10 hours some days of the week, overtime only kicks in if they work more than 44 hours in a week.

Special Rules and Exceptions

Now comes the burning question of “who is entitled to overtime pay in Ontario?”

The short answer is that most workers are entitled to overtime pay in Ontario—even if any employee is salaried or highly paid.

However, there are some exceptions to the ESA’s overtime provisions. For instance, regulated professionals such as physicians, pharmacists, dentists, lawyers, and public accountants are not entitled to overtime pay.

Another common exception is managers and supervisors. Managers and supervisors do not qualify for overtime pay if the work they do is managerial or supervisory.

Moreover, some employees work in jobs where the overtime pay threshold is more than 44 hours a week. For instance, highway transport truck drivers are only entitled to overtime pay for every hour worked in excess of 60 hours per week.

To find out if your employees are exempt from the Ontario overtime pay provisions or subject to special rules, you can use this handy tool from the provincial government. You can also reference the regulation titled O. Reg. 285/01: WHEN WORK DEEMED TO BE PERFORMED, EXEMPTIONS AND SPECIAL RULES.

The “50% Rule”

One of the tricky parts about understanding Ontario overtime pay is the 50% rule. In some cases, employees may have jobs where they are required to carry out different kinds of work. Some of that work may be exempt from overtime pay, while some of the work may be covered. For instance, someone may drive a taxi cab (a job exempt from overtime pay), but they may also work in the office as a dispatcher (a job that is entitled to overtime pay).

In such a scenario, the rule of thumb is that if at least 50% of the hours that an employee works is in a job category that is covered by the overtime provisions then the employee does qualify for overtime pay.

In some cases, employees with more than one role may also receive a different pay rate for each type of work. For example, someone working as a shipping logistics coordinator may earn $22.00/per hour, but they may also work as a punch press operator earning $18.00/hour.

In cases where employees have two regular rates, the overtime rate for each hour of overtime is based on the rate of pay for the work performed in that overtime hour. For instance, if the employee from the example above worked three hours of overtime as a punch press operator, their overtime rate is $18.00 x 1.5 = $27.00 per hour. Therefore, their total overtime pay would be $81.

Agreements for Paid Time Off

Depending on the type of work, some employees may agree to receive paid time off work instead of overtime pay. This agreement, sometimes known as “banked time” or “time off in lieu,” must be made between the employee and employer either in writing or electronically. In this kind of arrangement, the employee must be given 1½ hours of paid time off work, at the applicable overtime rate, for each hour of overtime worked.

This time must be taken within three months of the week in which the overtime was earned. However, an agreement can be made in writing or electronically to allow the employee to take the time within 12 months.

In the case that the employee leaves the job before they have taken their banked overtime hours, they must receive overtime pay no later than seven days after the date the employment ended or on what would have been their next payday.

Calculating Overtime Pay

By this point, you probably have a pretty good idea of whether your employee should receive overtime pay and how much they are entitled to. Now, comes the tricky part of actually calculating that overtime pay. 

How you calculate an employee’s overtime pay will depend on whether the employee is paid on an hourly basis, a fixed salary, a fluctuating salary, or an hourly rate plus commission. Calculating overtime pay can also be impacted by public holidays, so it’s important to take this into account when doing your calculations.

Hourly Employees

Calculating overtime pay for hourly employees is fairly straightforward. To illustrate this, we’ll use the example of Patrick, who is a store manager earning $22.00 per hour.

In one week, Patrick worked 52 hours. Since the overtime threshold is 44 hours, Patrick should receive eight hours of overtime. Since his overtime rate is 1½  times his regular hourly pay, Patrick should receive $33 per overtime hour worked ($22.00 x 1.5 = $33.00).

His weekly pay should be calculated as follows:

• Regular pay: 44 hours x $22.00 = $968
• Overtime pay: 8 hours x $33.00 = $264‍
• Patrick’s total pay: $968 + $264 = $1,232

Salaried Employees

Salaried employees are paid a fixed amount for all non-overtime hours up to 44 hours per week (even if their work hours change from day to day). To calculate overtime pay for a salaried employee, we’ll use the example of Zara, who works as a marketing coordinator earning $825.00 per week.

One week, Zara works 50 hours, which means she is owed six hours of overtime pay. Her overtime pay can be calculated as follows:

• Regular pay: $825 / 44 = $18.75 per hour
• Overtime pay: $18.75 x 1.5 = $28.13 per hour
• Total overtime pay: $28.13 x 6 hours of overtime = $168.78‍
• Zara’s total pay is her regular pay plus her total overtime pay: $825 + $168.78 = $993.78

Employees on Fluctuating Salaries

In some cases, you may need to calculate overtime pay for an employee on a fluctuating salary. These are situations where an employee has set weekly hours and a salary that’s adjusted for variations in the number of hours worked. Therefore, the employee’s salary fluctuates.

To illustrate this scenario, let’s use the example of Mike who works in lawn maintenance. Mike’s employee agrees to pay him $750.00 a week for a regular workweek of 40 hours. However, Mike’s salary is adjusted if he works more or fewer hours each week.

One week, Mike works a total of 50 hours. Since the Ontario overtime pay threshold is 44 hours, Mike has worked a total of six hours of overtime. Therefore, Mike’s overtime pay can be calculated as follows:

• Regular pay: $750 / 40 = $18.75 per hour
• Overtime pay: $18.75 x 1.5 = $28.13 per hour
• Total overtime pay: $28.13 x 6 hours of overtime = $168.78‍
• Mike’s total pay is his regular pay plus her total overtime pay: $825 + $168.78 = $993.78

Employees and Hourly Rate Plus Commission

Finally, there is the common scenario of employees paid an hourly rate plus commision. To calculate the overtime rate for employees paid an hourly rate plus commission, we’ll use the example of Ava.

Ava is in sales and makes an hourly rate of $17.00 an hour plus commissions. One week she worked 50 hours, earning $850.00 in hourly wages plus $200.00 in commissions. Ava’s overtime pay can be calculated as follows:

• Regular rate: $850 + $200 = $1050 in total wages paid
  $1050 / 44 = $23.86 an hour‍
• Overtime pay: $23.86 regular rate x 1.5 = $35.79 an hour‍
• Total overtime pay: 6 hours of overtime x $35.79 an hour = $214.74 in overtime wages
• Ava was already paid $17.00 per hour for all hours she worked, including her six overtime hours ($17.00 x 6 = $102.00), therefore she has already received $102.00 in respect to her overtime entitlement
  $214.74 owed in overtime - $102.00 already paid = Ava is owed $112.74 in overtime pay
  

Calculating Overtime Pay With Public Holidays

As mentioned above, calculating Ontario overtime pay gets even more complicated when you throw public holidays into the mix.

In Ontario, an employee’s public holiday pay is the regular wages earned in the four work weeks before the work week with the public holiday, plus all of the vacation pay payable to the employee with respect to the four work weeks before the work week with the public holiday, divided by 20. To calculate public holiday pay for each of your employees, you can use The Ministry of Labour, Training and Skills Development’s Public Holiday Pay Calculator.

Keep in mind that the amount of vacation pay payable that you include in the calculation of public holiday pay will depend on whether the employee is on vacation at any time during the four work weeks prior to the public holiday, and the manner in which the employee is to be paid vacation pay.

More information about vacation time and vacation pay can be found here. But we’ll use a simple example to show how public holiday pay factors into the calculation of overtime pay.

Employee Does Not Work on a Public Holiday

Let’s take the example of Luis, who makes $17 an hour as an office manager.

One week, Luis worked one hour of overtime in a week with a public holiday. However, he did not work the public holiday. Luis’ public holiday pay for the holiday is $136.00. The rest of his overtime pay can be calculated as follows:

• Regular pay: 44 hours x $17.00 = $748.00
• Overtime pay: 1 hour x $25.50 = $25.50
• Public holiday pay: $136.00‍
• Luis’ total pay: $748.00 + $25.50 + $136.00 = $909.50

Employee Works on a Public Holiday and Receives Premium Pay

Now let’s say that Luis has a colleague named Nadia who also makes $17.00. However, Nadia did work that public holiday with the agreement that she would be paid premium pay for the hours she worked on the holiday.

Nadia also worked one hour of overtime during the week, which can be calculated as follows:

• Regular pay: 44 hours x $17.00 = $748.00
• Overtime pay: 1 hour x $25.50 = $264
• Premium pay: $229.50
• Public holiday pay: $153.00
• Nadia’s total pay: $748.00 + $25.50 + $229.50 + $153.00 = $1156.00

Employee Works on a Public Holiday and Gets a Substitute Day Off

Another of Luis’ and Nadia’s colleagues is Kate, who also makes $17.00 per hour. Kate and her employee agreed that she would work on the public holiday in exchange for a substitute day off work (instead of being paid holiday pay and premium pay for the hours worked during the holiday).

Kate also worked one hour of overtime during the week, which can be calculated as follows:

• Regular pay: 44 hours x $17.00 = $748.00
• Overtime pay: 1 hour X $25.50 = $25.50
• Kate’s total pay: $748.00 + $25.50 = $773.50 (plus one substitute day off work)

Averaging Agreements

While set work schedules have long been the norm, a growing number of workplaces are embracing flexible work arrangements that give employees the ability to flex their hours from one week to the next. This not only helps to promote a better work life balance, but it can also help businesses address shifting business demands.

These more flexible work arrangements are known as averaging agreements. At its most basic, an averaging agreement is a written or electronic agreement between an employer and an employee to average the number of scheduled work hours over one, two, three, or four weeks. This type of arrangement gives employees more flexibility, while helping employers keep overtime costs in check.

However, averaging agreements do not eliminate the requirement to pay overtime. With this type of agreement, overtime pay is still required if the average hours worked per week during the averaging period exceeds 44 hours.

For example, if Jack and his employer agree to an averaging period of two weeks, Jack is entitled to overtime if he works more than 88 hours during the two week period (44 hours × 2 weeks = 88 hours). However, if Jack works 55 hours the first week and then just 30 hours the next week, he is not entitled to overtime pay (55 hours + 30 hours = 85 hours).

Calculating Overtime for Averaging Agreements

Calculating overtime for averaging agreements is more straightforward than it seems. To illustrate this, we’ll use the above example of Jack, who has agreed to an averaging period of two weeks.

Let’s say Jack works 50 hours one week and 46 hours the next week. Jack’s regular pay rate is $25.00 per hour and his overtime rate is $37.50 ($25.00 x 1.5 = $37.50). Jack’s overtime pay can be calculated as follows:

• 50 hours + 46 hours = 96 hours worked during the averaging period
  96 hours ÷ 2 weeks = 48 hours per week (the average number of hours worked in each week of the averaging period)
• 48 hours per week - 44 hours per week = 4 overtime hours per week‍
• Week 1: 4 hours of overtime x $37.50 = $150
  Week 2: 4 hours of overtime x $37.50 = $150‍
• Jack’s overtime pay for the two week averaging period: $150 x 2 = $300

What Not To Do

While averaging agreements offer employers some flexibility when it comes to Ontario overtime pay, the following types of agreements are not allowed under the ESA:

• Employees and employers cannot agree that an employee will give up their right to overtime pay
• An employer cannot lower an employee’s regular pay rate to avoid paying time and a half after 44 hours
  

If you’re an employer in Ontario, it’s important to have a clear understanding of Ontario overtime pay rules and regulations in order to stay legally compliant. Because if you skirt the rules and an employee files a complaint with the ESA, you could find yourself (and your business) in hot water.