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Working Wise: Overtime Agreements Explained

Dear Working Wise,

Business has picked up a bit and as a result I’m paying my staff a lot of overtime. Can I give my staff “time in lieu” instead of paying them for their overtime? Can I limit how much or how long can my staff keep their banked time?
Signed, Overwhelmed by Overtime

February 1, 2017

Dear Overwhelmed,

Yes, employers can replace overtime pay wholly or partially with paid time off through an overtime agreement. An overtime agreement allows overtime hours to be banked and later taken off with pay at the normal wage rate during regular work hours.

Overtime Agreements:

  • Alberta’s Employment Standards Code requires overtime agreements to be in writing. Employers must give employees who are covered by an overtime agreement a copy of the agreement.
  • Amendments to, or termination of, the agreement are not valid without at least 1 month’s written notice of the change from one party to the other.
  • The agreement can be between an employer and a single employee, with a group of employees, or the agreement can be part of a collective agreement.
  • For every hour of overtime worked, at least 1 hour must be banked.
  • Time off must be taken within 3 months of the end of the pay period in which the overtime was earned.
  • If banked time off is not taken off within 3 months, then it must be paid out at time-and-a-half.

Employers cannot create a “use it or loose it” type rule for banked overtime. Overtime can not be lost or taken away, even if your overtime agreement says that it can. Employers must keep track of the banked overtime and how long it has been in the bank. However, the employer can tell the employee when to take their banked time off.

Employers with special circumstances, for example, seasonal industries, may apply to Employment Standards for a permit to extend the period of time that overtime can be banked by an additional 3 months.

For most employees, overtime is all hours worked in excess of 8 hours a day or 44 hours a week. Overtime is calculated both on a daily and weekly basis. The higher of the 2 numbers is overtime hours worked in the week.

Some types of employees are exempt from the hours of work and overtime standards. Farm workers, domestic employees, salespeople, professionals, police, and managers are a few examples. For all other employees, overtime must be paid at the rate of at least 1.5 times their regular wage rate or covered through an overtime agreement.

To learn more, and to see samples of overtime agreements that you can use to write your own agreements, visit the Employment Standards website.

For more information on Alberta Employment Standards or how to apply for an exemption permit:

Photo Credit: © iStockphoto/pidjoe

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