How to Calculate Overtime Pay in Ontario

  • Equality & Diversity
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Olivia Cicchini

Olivia Cicchini, Employment Law Expert

(Last updated )

Overtime pay is an important aspect of employment in Ontario, where employees are entitled to be paid extra for any hours worked beyond the regular work hours. As an employer, it’s your job to ensure employees’ work times are following the hours of work rules outlined in the Employment Standards Act (ESA).

In this article, we will explore how to calculate overtime pay in Ontario and what rules and regulations govern it.

How do I calculate overtime pay in Ontario?

Ontario’s employment standards legislation stipulates that employees are entitled to receive overtime pay at a rate of 1.5 times their regular wage (often referred to as “time and a half”) for all hours worked beyond 44 hours per workweek. This applies to most employees, including full-time, part-time, and casual employees. Calculating overtime pay in Ontario involves two steps:

Step 1: Determine the Regular Rate of Pay

To calculate overtime pay, you first need to determine the regular rate of pay. The regular rate of pay is the amount an employee is paid for their normal working hours, excluding any overtime hours. It is calculated by dividing the total earnings for the workweek by the total number of hours worked in that workweek.

For example, if an employee works 40 hours in a workweek and earns $800, their regular rate of pay would be $20 per hour ($800 ÷ 40 hours).

Step 2: Calculate Overtime Pay

Once you have determined the regular rate of pay, you can calculate the overtime pay. Overtime pay is calculated as 1.5 times the regular rate of pay for all hours worked beyond 44 hours per workweek.

For example, if an employee works 50 hours in a workweek and their regular rate of pay is $20 per hour, their overtime pay would be calculated as follows:

Regular pay: 40 hours x $20 per hour = $800

Overtime pay: 6 hours x $30 per hour (1.5 x $20) = $180

Total pay: $800 + $180 = $980

How is overtime pay paid out in Ontario?

In Ontario, overtime pay is paid out in the same pay period as the work was performed. It cannot be banked for future use, and employers cannot offer time off in lieu of overtime pay unless it is mutually agreed upon in writing by the employee and employer.

If an employee agrees to time off in lieu of overtime, the employee must take the time off within three months of earning that time off in lieu of overtime, or within 12 months if the employee agrees.

Which type of employees does overtime pay not apply to in Ontario?

It’s also important to note that some employees are exempt from receiving overtime pay under Ontario’s employment standards legislation. This includes employees who hold certain managerial or supervisory positions, some salespeople, and certain professionals, such as lawyers and doctors.

How often should I calculate overtime?

Generally, overtime is not calculated on a daily basis. Overtime is calculated on a weekly basis or under a longer period under an averaging agreement. This means if an employee works more than their set number of hours in a day, but still works the same number of hours a week in total they are not entitled to overtime. However, the Employment Standards Act states that overtime can be calculated daily if an employer and employee have a collective agreement or a signed contract that says so.

Who is entitled to overtime pay?

Not every employee in Ontario is entitled to overtime. If an employee works a job that is exempt from overtime provisions of the ESA they are not entitled to it. Other forms of work may also have an overtime threshold that is more than the standard 44 hours of work in a week. Ontario employers should know that managers and supervisors do not qualify for overtime if the work they do is managerial or supervisory. Even if they perform non-managerial or supervisory tasks, they may not be entitled to overtime pay.

What is the 50% rule?

Ontario employers may have heard about the “50% rule”. Some employees have jobs where they are required to do more than one kind of work. If some of the work is exempt from overtime pay, and other parts are covered, it can be confusing to know whether they qualify for overtime or not. The 50% rule states that if the employee spends at least half of their work hours doing the job that is covered by the ESA overtime legislation, they qualify for overtime pay.

Can employers and employees come to alternative agreements regarding overtime pay?

Employees and employers cannot agree that an employee will give up overtime pay, and any agreements like this would be considered void. However, employees can make an agreement electronically or in writing to receive paid time off in lieu of overtime pay.

This is referred to as “banked” time or “time off in lieu” Ontario employers and employees can also agree on an averaging agreement, which means an employee’s hours of work are calculated over a period of two to four weeks when calculating overtime. For example, if they agree to an averaging of four weeks, employees are only entitled to overtime pay after working 176 hours during that time.

Do you need help calculating overtime pay in Ontario?

In conclusion, calculating overtime pay in Ontario involves determining the regular rate of pay and calculating 1.5 times that rate for all hours worked beyond 44 hours per workweek. Employers must adhere to the rules and regulations outlined in Ontario’s employment standards legislation, and employees should be aware of their rights regarding overtime pay.

Understanding overtime legislation and calculating overtime pay are some of the top issues Ontario employers struggle with. Our experts can help you develop company policies and assist you with any HR, health & safety, and employee management advice you may need. To learn more about how our services can benefit your business, call an expert today at 1 (833) 247-3652

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