Employment standards drive what employees must be paid for statutory holidays – either for entitlement to the holiday itself or for actual work on the holiday. Every employment standards jurisdiction in Canada requires that statutory holiday pay, the entitlement to the holiday itself, be calculated on a daily basis. For example, in BC this daily basis is calculated as the wages earned within the 30 calendar days prior, divided by the number of days actually worked. In Ontario, this is the regular wages earned in the 4 prior workweeks, divided by a fixed 20.
However statutory holiday pay is required, all such amounts paid are EI insurable earnings. By contrast, the insurable hours recognized are the greater of:
- the hours that would otherwise have normally been worked on that day; and
- any hours actually worked.
Let’s use an example to see how these differences between insurable earnings and hours sort out.
Under the Ontario employment standards, Nicole is entitled to statutory holiday pay for Good Friday, March 29, 2013. Nicole works in a Kingston call centre and is paid a combination of hourly wages and two forms of incentive pay, commissions and bonuses, both based on exceeding performance objectives. Nicole’s hours of work are scheduled by the employer from week by week, for workweeks that run from Saturday to the following Friday.
For this Good Friday holiday, Nicole’s 4 workweeks prior run from Saturday, February 23 to Friday, March 22, 2013. During these 4 workweeks, Nicole’s earnings were as follows:
- regular wages, 115 hours at $12 an hour, $1,380;
- sales commission, $450; and
- bonus, $300.
Based on these earnings, Nicole must be paid $106.50 for this Good Friday ([$1,380 + 450 + 300] / 20).
However, the insurable hours are based on the hours that Nicole would otherwise have worked on the statutory holiday. On Fridays, Nicole is normally scheduled to work 4 hours.
Based on the above, Nicole’s insurable earnings for Good Friday are $106.50 and her insurable hours are 4. Notice, there is no apparent connection between the insurable earnings, what Nicole is actually paid, and the insurable hours, the hours Nicole would otherwise have worked.
This disconnect means that Nicole’s employer can’t process her statutory holiday entitlement by entering 8.875 hours at $12 (8.875 * 12 = 106.50), since that would inflate the EI insurable hours Nicole is entitled to. Similarly, the payroll entry can’t be 4 hours at $12, since the resulting pay, $48, would not meet the required minimum, $106.50. If a single payroll transaction is used to capture both the insurable hours and earnings, this entry must be 4 hours at $26.625 (4 * 26.625 = 106.50).
So what are the conditions under which Nicole’s hourly rate could be used to process her statutory holiday pay? Four such conditions would have to be met, before Nicole could be paid this entitlement, using her regular hourly rate:
- Nicole must have worked the same number of hours each day.
- Nicole must have worked the same number of days each workweek. This condition applies in jurisdictions, such as Ontario, where the divisor is a fixed 20. In jurisdictions, such as BC, where the divisor is the number of days actually worked, the pattern of days worked doesn’t matter.
- All of her compensation, during the period concerned, would have to have been either a flat salary or an hourly wage.
- There could have been no change in any of the 3 points above, during the period used to calculate her statutory holiday entitlements.
For example, if Nicole was paid on strictly an hourly basis, if she normally worked the same number of hours each work day, and the same number of days in a workweek and her hourly rate had not changed in the 4 prior workweeks, then her statutory holiday entitlement for Good Friday could be paid using both her regular hours per day and her regular hourly rate. It’s not that there are different rules in this situation. It’s just that in these circumstances the math works out. For example, if Nicole normally worked Monday to Friday, 7.5 hours per day, at a constant $12 an hour, without any commissions or bonus, then her Good Friday entitlement would be $90 ($12 for 4 workweeks, at 7.5 hours per day for 5 days, divided by 20). This could be entered in payroll as 7.5 hours at $12 per hour. The result, $90, would correctly reflect both her statutory holiday entitlement and the ROE reportable insured hours.
However, determining the correct EI insurable hours becomes a little more complicated, if Nicole had actually worked on Good Friday. If she had worked 3 hours that day and, for that work earned $45 in total gross pay, all of her earnings, $45 plus $106.50, would be insurable. By contrast the insurable hours are not 4, what she normally works, plus the 3 she actually worked. As noted above, the insurable hours are the greater of the hours either normally worked or the hours actually worked.
Alan McEwen is a payroll consultant and freelance writer with over 20 years’ experience in all aspects of the industry. He can be reached at email@example.com, (905) 401-4052 or visit www.alanrmcewen.com for more information. This article first appeared on Canadian HR Reporter and Canadian Payroll Reporter on April 1, 2013.