23 Aug How to Calculate Overtime in Prince Edward Island (PEI)
Realistically knowing how to calculate overtime in PEI is one of the simplest payroll rules to know, but also one of the most inconvenient to calculate. Why? Because overtime in PEI is based on a 44 hour work week, meaning taking the time to add up every shift the employee worked in that week. Yes, there’s worse things in life, and for a very low price our software could do it for you. But if you want to know the details, here’s how you do it.
The Rule
Any time worked in excess of 44 hours within a week is to be paid at 1.5 times their regular wage as Overtime (OT).
An easy demonstration is an employee that works 52 hours in a week at $22.00 hourly.
They’d get [52 hrs – 44 weekly] = 8 hours of overtime.
Their wage gets bumped up 1.5 times the regular rate for the hours as $22 x 1.5 = $33.00 per hour.
Their overtime pay for this example is therefore 8 hrs OT x $33 wage OT = $264.00
This is on top of their regular full weekly wage of 44 hrs x $22 = $968.00
To sum it up, their Gross Wages for the week are therefore $264.00 OT + $968.00 Regular = $1,232.00 [plus stat pay, stat worked, and vacation pay, if any are applicable]
An important thing to note is that the overtime happens linearly. Meaning that if the hours worked at the end of the week are at a different wage than the start of the week, the overtime happens on that later worked wage.
As an example, let’s say Joe makes $21.00 per hours and worked 46 hours before getting a raise on Friday to $22.00 per hour and picking up a 4 hour Saturday shift. Now in total he’s worked 50 hours in the week, qualifying for six hours of Overtime. But the first 44 hours worked were at $21, then 2 OT hours at $31.50 OT ($21 x 1.5) and the full Saturday 4 hours shift is at the new wage of $33 OT ($22 x 1.5).
Overtime on a Statutory Holiday
If a Stat Day falls on a Friday or Saturday, there could be hours worked resulting in overtime. How to deal with this? The first thing to note is that the 44 hour OT rule only applies to hours worked. So Statutory Holiday hours, vacation, sick or paid time off hours all do not count towards the 44 hours count. If the employee works on the statutory holiday, qualifies for Stat Worked premium pay and the hours are also bumped into Overtime, then they will not only get 1.5x their regular wage for Stat Worked, but on the Overtime portion that wage gets bumped up to x2! To clarify, if they work 8 hours on the Stat Day, and two of those hours are considered Overtime (in other words it puts them at 46 hours that week), then they get 6 hours at 1.5x wage plus two overtime hours at 2x their regular wage.
Employees on Averaging Agreements
Some businesses have employees on Averaging Agreements. This allows them to spread the overtime threshold over multiple weeks. For instance a two week averaging agreement means they have to work 88 hours over two weeks to qualify for Overtime hours. Three week is 132 hours and a four week averaging agreement means they have to work over 176 hours in a four week period. Averaging agreements need to be put in writing between employer and employee however and must be approved by PEI Labour Standards prior to implementation.
The Easiest Way is Automation
For the full details on calculating overtime in Prince Edward Island however, it’s always best to consult the labour standards: https://www.princeedwardisland.ca/en/information/workforce-and-advanced-learning/overtime-and-averaging-agreements
If you really don’t want to mess around with having to calculate all this though, the most simple thing to do is to sign up for a free 30 day trial of Payroll Connected and let our software do all these calculations completely automatically for you! No math, no calculators, just enter in the hours worked and like magic it’s done in seconds.
Photo by Usman Qureshi on Unsplash