Paying out overtime is a costly but necessary means to immediately addressing staffing issues or unexpected increases in the volume of work. Staffing is often the largest expense for many organizations and having to pay employees one and a half or even two times their regular wages can drastically increase labour costs. Employers can anticipate overtime and it has become such a common practice, you’d be hard pressed to find many organizations that don’t end up paying overtime wages on occasion. So, if overtime is so common then why do many employers and employees not know more about when overtime is due and how it’s calculated?
The basics are fairly straightforward. If an employee works over eight hours in a day or forty hours in a week, they are owed overtime, right? This is usually the case, but every workplace and employment relationship are different, and many factors must be considered when calculating how much, if any, overtime is due. Some of these factors include, but are certainly not limited to: When does the workday actually start, are breaks paid or unpaid, and what about travel? Getting the basics down is key but building a better understanding of what an employer owes or what an employee is owed is incredibly important from a legal and financial standpoint, not to mention ethical.
“But my employees are salaried so I don’t have to pay them overtime!” is a common misconception that can lead to years of owed retroactive or back pay. The idea that an employee is salaried because an employer says so is really just an agreement in good faith. If an employee is considered management, or is not covered by BC’s ESA, only then does a working relationship exist where no overtime pay is due. When an employee is entitled to overtime an employer can offer time off rather than overtime pay, or other incentives, it is ultimately the employee’s choice whether or not they receive overtime pay.
So, what can an employer do in a situation where they know they will require employees to work overtime, but cannot afford to be paying such high labour costs? There are a few options in BC to solve this dilemma that ensures employees are compensated fairly. The first option is an Averaging Agreement, which allows employers to average out an employee’s hours worked in a week to satisfy the 40 hours per week requirement. The second option is time banking, which allows an employee to “bank” overtime hours worked to be paid out at a more opportune time by the request of the employee. The third option, which is our personal favorite, is agreements in good faith. Although not technically enforceable, an agreement in good faith allows employers and employees work together to find the appropriate compensation for the hours worked by the employee. Typically, these agreements offer time off in lieu of overtime pay, and should always be in writing and signed by both parties.
Want to know more? Check out the link below to view the BC “Hours of Work and Overtime” Overview: