Practical Analysis

What Payroll Codes Don't Tell You: Overtime, Holidays and Vacation Pay

A salary doesn't always eliminate overtime, and vacation pay isn't vacation time. Canadian employers need to check classification, eligibility and the rules where each employee works.

An employer can have a functioning payroll system and still be miscalculating statutory entitlements. The issue isn't always a mathematical mistake. Often the system is applying a rule chosen for the wrong employee, province or category of earnings. An HR department might be told that salaried employees don't receive overtime, that a manager can require anyone to stay late, or that vacation is settled because the employee has used all their days. Each statement can conceal a different legal problem. Overtime is a legal classification before it is a payroll calculation. The normal working hours, exemptions and permissible averaging arrangements depend on the governing legislation. Alberta ordinarily uses the greater of hours worked over 8 in a day or 44 in a week, subject to particular rules and exclusions. Federal labour standards generally use 8 hours per day and 40 hours per week as standard hours, subject to sector specific regulations and exclusions for managers and some professions. The actual test isn't what the payroll field says.

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