Controlling overtime obligations
The best way to control overtime costs is not to require your employees to work overtime. If your employees must work overtime, you can either:
- Pay them at overtime rates on their next pay cheque;
- Enter an averaging agreement; or
- Establish a time bank.
Overtime rates, averaging agreements, and time banks are subject to the requirements of the British Columbia Employment Standards Act.
Under Section 37 of the Act, you and your employees may agree to “average” overtime worked. This is often done where employees are required to work longer but fewer days, for example, in rotations of four 10-hour days. Each averaging agreement must meet certain rules set in Section 37. The following is a non-exhaustive list representative of the sorts of requirements set out in Section 37:
- The averaging agreement must be in writing;
- It must be signed by the employer and each employee before the start of the averaging period;
- It must set a specific schedule for each day in the averaging period;
- It must be for a period of one, two, three, or four weeks;
- It must set out how many times the averaging period may be repeated (if any).
There are other requirements set out in Section 37. Agreements that do not meet these strict rules are not valid, meaning the employee is entitled to be paid according to the overtime requirements set out in Section 40 of the Act.
Under Section 42 of the Act employees may request in writing that you establish a time bank – it is not something the employer can impose on its own initiative.
When a time bank is in place, the employee’s overtime pay is credited to a “bank” and not paid to them in the following pay period. Instead, they may take time off in lieu of overtime or else request payment of the time bank at a later date. The time bank must be paid out or taken in lieu at the same rate of pay as it is earned. The entire time bank must be paid out on the employee’s request, or upon termination of the employment. The employer is responsible to keep a record of all the hours in the time bank.
The information provided on this page is a general overview of the averaging agreement and time bank rules set out in the BC Employment Standards Act. It should not be taken as legal advice. For answers to specific questions about your workplace obligations, contact EmployRight and speak with one of our employment lawyers.