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In the Employment Standards Act (ESA) Section 22 it tells us how we administer the overtime through the Averaging Calculation.
Up until April 1st, the rule was that if you wanted to average overtime you needed to receive approval from the Ministry Of Labour’s Director as well as approval from the employee. As of April 1st the MOL Director no longer needs to give you approval however you must still get approval from the employee in writing.
The problem with averaging the overtime is that it does end up paying the employee less. I was concerned about this when I was reviewing the legislation and I placed subsequent calls to ESA, and after confirming that my calculations are correct, the answer I was given as to WHY would anybody choose to have less gross pay, the answer was because the high gross pay (calculation of full overtime hours) means the tax paid at source is higher and some people want to actually see more money in the bank account RIGHT NOW. This policy IS BETTER for the employer, absolutely, but it is NOT better for the employee because at the end of the year they are most likely going to receive a refund on overpaid amounts anyhow.
You can average over a 2 week, 3 week or 4 week period. If you average over the 3 or 4 week period it becomes more complicated because you still need to pay regular hrs worked in each pay period and then at the end of the 3 or 4 weeks, determine the average and either increase or decrease depending on how the averaging works out. Obviously a 2 week period is easier for administrative functions. And that would be my professional advice to any employer thinking of offering this option to their employees. It makes the administration of payroll straight forward. BCD has designed a standardized letter that can be given to staff IF an employer is desiring to use "overtime averaging".
All new employees need to receive this letter as well as everything else in an employer's standard "new employee package". And of course, once it is signed the signed copy will be included in all employees corporate payroll file along with the other documentation signed by employees.
You should have a "package" you give to all new employees on their first day of work :
TD 1 forms (fed and prov),
the ESA poster
and the averaging letter IF you are choosing to "opt in" to that process. If you are just going to pay overtime as it occurs then the averaging letter is not required at all.
You also need to have posted in a prominent place the WSIB poster (often called the 1,2,3,4 poster) and you need to have a copy of the Green Book which is the actual Ministry of Labour's Health and Safety legislation. The Green Book can be purchased online OR through any Service Ontario kiosk. Prominence is key here. For most of our construction trades who use trucks to carry the tools/materials, I suggest that the WSIB poster and the Green Book be posted IN THE TRUCK because then staff will see them all the time. You need to make sure employees know where those two pieces of information are. The only change on "posting" requirements is that the ESA poster itself no longer needs to be posted but every employee must have their own copy of the poster. I strongly recommend that employers have 1 copy for the employee and a second copy they get the staff to sign off on so that we can say "yes we gave them their copy". This is because what ever you give the staff...well you know it is just going to end up in a pile somewhere and they will come back to you if there is an issue and say "you never gave me a copy".