The primary payroll task is to pay employees accurately and on time. This always involves calculations related to specific time periods. For example, it may be necessary to calculate an hourly rate when salaried employees work overtime.
One of these time periods used in payroll calculations is the week. There are 3 major employment standards requirements that are most often calculated on a weekly basis: overtime, statutory holiday pay and wages in lieu of notice. For example, in Ontario statutory holiday pay is the wages earned, plus any applicable vacation pay, in the 4 workweeks prior, divided by 20. There is also one Employment Insurance requirement that must be met on a weekly basis: completing the Request for Payroll Information form.
Meeting these weekly calculation requirements impacts how time data must be entered, how employer workweeks and pay period schedules are defined. This article explains these requirements and the related best practices.
For time entry purposes, hours worked must be tracked at least on a weekly basis. However, the best practice, for employers with any kind of time and attendance, time clock or scheduling system, is to track hours worked on a daily basis. Any such time and attendance system should be able to provide payroll with daily timecard records. Such daily hours are important for ensuring that, where applicable, daily overtime, daily maximums on hours worked and daily hours worked recordkeeping requirements are met.
The week used to record time entry must be same weekly basis required for overtime, statutory holiday and wages in lieu of notice purposes. In other words, the week used in time entry becomes the employer’s workweek for these employment standards purposes.
Most jurisdictions allow employers to define their own workweeks, as 7 consecutive days starting on any particular day of the week. For example, some workweeks are defined as starting on Saturday. This simplifies processing exception pay for weekend work, because those exceptions happen at the start of a week, not its end. This means there is more time to process such exceptions prior to the cut-off for payroll processing.
However, not all jurisdictions permit employer-defined workweeks. Where these are not permitted overtime, statutory holiday pay and wages in lieu of notice must be calculated based on work and earnings tracked on a calendar week basis. Some jurisdictions (federal and BC) use calendar weeks for overtime purposes, but permit employers to define workweeks for all other employment standards purposes. Saskatchewan requires that calendar weeks be used for all employment standards purposes. All other jurisdictions do not restrict the use of employer-defined workweeks.
For EI reporting purposes, although employers are allowed to report insurable hours and earnings on a pay period basis on the ROE, on the Request for Payroll Information, this information must be supplied on a calendar week basis.
Taking all of the above into consideration, the best practice is to define workweeks by calendar weeks. This ensures compliance with Request for Payroll Information reporting and ensures the same workweek can be used in every employment standards jurisdiction across the country.
The same logic means that semi-monthly and monthly payrolls are not a best practice. One advantage of weekly or bi-weekly payrolls is that there is a direct correspondence between workweeks and pay periods. By contrast, with semi-monthly and monthly pay periods, there will always be at least one workweek that splits across two pay periods. It’s usually more difficult for a payroll system to accurately calculate overtime in semi-monthly or monthly pay periods, unless hours worked are entered by day, since the payroll system may only be able to access time records within the current pay period.
Monthly payrolls should in particular be discouraged because they are not permitted in most employment standards jurisdictions. For example, monthly pay periods are not permitted under the BC, Saskatchewan, Manitoba and Quebec employment standards, but are permitted under those for Ontario. Employers often comply with the prohibition on monthly payrolls by combining these with a mid-month advance. However, employers often don’t take or remit CRA source deductions on such mid-month advances, contrary to CRA requirements.
To summarize, the EI Request for Payroll Information requirements, along with those employment standards jurisdictions that require overtime, statutory holiday and wages in lieu of notice calculations on a calendar week basis means that Sunday to Saturday weeks are the best practice for time entry, for defining employer workweeks and as the basis of weekly or bi-weekly payrolls.
Alan McEwen is a Vancouver Island-based HRIS/Payroll consultant and freelance writer with over 20 years’ experience in all aspects of the industry. He can be reached at firstname.lastname@example.org, (250) 228-5280 or visit www.alanrmcewen.com for more information. This article was first posted to Canadian HR Reporter on December 10, 2013.