Statutory holidays pose headaches for payroll practitioners
Almost everyone welcomes the extra time off a statutory holiday provides. But while staff dream about getting out of town for sun-drenched afternoons at the cottage, payroll practitioners are furiously sweating over the details to ensure pay cheques get out the door correctly.
Statutory holidays add significant complexity to payroll calculations. There are 14 different sets of employment standards across the country for the 10 provinces, three territories and the federal government. But, fortunately, there is a more or less common structure among the 14 different standards which helps smooth out the process somewhat.
The first element of this structure is which employees are affected. The general rule is all employees are affected by statutory holidays unless they fall into one of several types of exceptions. For example, there is a blanket exception in Ontario for employees who work in a profession such as chartered accountants or professional engineers. They are not covered by most aspects of the Ontario employment standards including those related to statutory holidays.
Similarly, most jurisdictions have an exception for recently hired employees. In British Columbia, employees have to have worked at least 15 of the 30 calendar days prior to the statutory holiday before the employment standards provision for statutory holidays apply. Take the recent Labour Day holiday, for example. An employee hired after August 17 would not be eligible for statutory holiday pay in B.C. A similar provision in Ontario applied until September 2001. Now the Ontario employment standards for statutory holidays apply to all employees regardless of the date of hire.
One exception that is often misunderstood is the rule around working before and after the statutory holiday. This is often expressed as a statement that there is an exception for employees, “who do not work either the day before or the day after the statutory holiday.”
This statement is not quite right. The question is not really whether the employee has worked the regularly scheduled day before or after, it is whether the employee has failed, without reasonable cause, to work either of those days.
Take a part-time worker who is scheduled to work Tuesday and Wednesday each week. He would not lose his entitlement to Labour Day, under the Ontario employment standards, just because he didn’t work on the Friday before Labour Day. But a full-time employee who works a Monday to Friday workweek and fails to report to work on the Tuesday after Labour Day — without reasonable cause — is not entitled to statutory holiday pay.
After figuring out whether an employee is entitled to statutory pay, the next step is actually calculating the amount of the pay.
Most jurisdictions now define statutory holiday pay in terms of a daily average wage over a given number of workweeks. In Alberta, this is an employee’s earnings for a normal day’s work (without overtime) averaged over the days worked in the nine weeks before the statutory holiday. A workweek is a seven-day period defined by the employer and would normally be based on the pay period. For example, an employer whose pay period ends on a Friday would count backwards the requisite number of weeks, starting with the last Friday before the holiday.
In Ontario this daily average is based on regular wages plus vacation pay over the four workweeks prior to the holiday. An Ontario employer with a weekly pay period ending on a Friday would sum the earnings related to regular hours worked — using this year’s Labour Day example — from Saturday, Aug. 2 to Friday, Aug. 29. Added to this would be any vacation pay paid or payable during these same dates. The statutory holiday pay due for Labour Day in these circumstances would be these total earnings divided by 20.
This daily average calculation is targeted at employees without a set workweek, such as part-time employees whose hours vary. The Alberta and Ontario examples treat such part-time employees differently. Under the Alberta employment standards, earnings over the nine workweeks are divided by the number of actual employee work days in that period. In Ontario, the four-week earnings are divided by a fixed constant of 20.
The next twist comes in the form of employees who actually work on the statutory holiday. Normally an employee who is entitled to statutory holiday pay, and who works on that day as well, is entitled to be paid time-and-a-half for the actual hours worked. This is in addition to the statutory holiday pay itself.
This adds two more complexities to payroll. Work on a statutory holiday, in most provinces, affects the calculation of overtime. Ontario, like most areas, does not change the threshold for overtime for a week in which there is a statutory holiday. If an employee works eight hours a day, for six days, this is 48 hours.
Since the threshold for overtime in Ontario is 44, pay would normally be 44 hours at straight time and four hours at time-and-a-half. If one of these days were to be paid as a statutory holiday, then pay would be 40 regular hours and eight hours at straight time for the statutory holiday with no hours at time-and-a-half.
Quebec is the one exception to this rule. The hours paid for a statutory holiday count towards the threshold for weekly overtime, which in Quebec is 40 hours per week. Assuming the same six eight-hour days as above, pay in Quebec would be 32 regular hours, eight hours statutory holiday pay and eight hours overtime at time-and-a-half.
The other complexity of work on a statutory holiday is that it affects the reporting of insurable hours on a record of employment. Normally each hour worked by or paid to an employee is insurable. But there is an exception where an employee is both paid statutory holiday pay and works on that day.
If an employee normally works eight hours a day, the insurable hours for any statutory holiday pay would be eight. But if the employee also works five hours on a statutory holiday, the insurable hours are eight, not 13. Similarly, if the employee’s average daily wage used to calculate statutory holiday pay equates to six-and-a-half hours, but the employee actually works nine hours on that day, the insurable hours are nine, not 15.5.
The rule then is that the insurable hours for a statutory holiday are the greater of the hours actually worked and the hourly equivalent of any statutory holiday pay.
All of this makes it a little easier to understand why the payroll professional’s dreams of long weekends and backyard barbecues are a little bit clouded when a statutory holiday is approaching.
Alan McEwen is a payroll consultant living in St. Catharines, Ont. He can be reached at [email protected].
Statutory holidays add significant complexity to payroll calculations. There are 14 different sets of employment standards across the country for the 10 provinces, three territories and the federal government. But, fortunately, there is a more or less common structure among the 14 different standards which helps smooth out the process somewhat.
The first element of this structure is which employees are affected. The general rule is all employees are affected by statutory holidays unless they fall into one of several types of exceptions. For example, there is a blanket exception in Ontario for employees who work in a profession such as chartered accountants or professional engineers. They are not covered by most aspects of the Ontario employment standards including those related to statutory holidays.
Similarly, most jurisdictions have an exception for recently hired employees. In British Columbia, employees have to have worked at least 15 of the 30 calendar days prior to the statutory holiday before the employment standards provision for statutory holidays apply. Take the recent Labour Day holiday, for example. An employee hired after August 17 would not be eligible for statutory holiday pay in B.C. A similar provision in Ontario applied until September 2001. Now the Ontario employment standards for statutory holidays apply to all employees regardless of the date of hire.
One exception that is often misunderstood is the rule around working before and after the statutory holiday. This is often expressed as a statement that there is an exception for employees, “who do not work either the day before or the day after the statutory holiday.”
This statement is not quite right. The question is not really whether the employee has worked the regularly scheduled day before or after, it is whether the employee has failed, without reasonable cause, to work either of those days.
Take a part-time worker who is scheduled to work Tuesday and Wednesday each week. He would not lose his entitlement to Labour Day, under the Ontario employment standards, just because he didn’t work on the Friday before Labour Day. But a full-time employee who works a Monday to Friday workweek and fails to report to work on the Tuesday after Labour Day — without reasonable cause — is not entitled to statutory holiday pay.
After figuring out whether an employee is entitled to statutory pay, the next step is actually calculating the amount of the pay.
Most jurisdictions now define statutory holiday pay in terms of a daily average wage over a given number of workweeks. In Alberta, this is an employee’s earnings for a normal day’s work (without overtime) averaged over the days worked in the nine weeks before the statutory holiday. A workweek is a seven-day period defined by the employer and would normally be based on the pay period. For example, an employer whose pay period ends on a Friday would count backwards the requisite number of weeks, starting with the last Friday before the holiday.
In Ontario this daily average is based on regular wages plus vacation pay over the four workweeks prior to the holiday. An Ontario employer with a weekly pay period ending on a Friday would sum the earnings related to regular hours worked — using this year’s Labour Day example — from Saturday, Aug. 2 to Friday, Aug. 29. Added to this would be any vacation pay paid or payable during these same dates. The statutory holiday pay due for Labour Day in these circumstances would be these total earnings divided by 20.
This daily average calculation is targeted at employees without a set workweek, such as part-time employees whose hours vary. The Alberta and Ontario examples treat such part-time employees differently. Under the Alberta employment standards, earnings over the nine workweeks are divided by the number of actual employee work days in that period. In Ontario, the four-week earnings are divided by a fixed constant of 20.
The next twist comes in the form of employees who actually work on the statutory holiday. Normally an employee who is entitled to statutory holiday pay, and who works on that day as well, is entitled to be paid time-and-a-half for the actual hours worked. This is in addition to the statutory holiday pay itself.
This adds two more complexities to payroll. Work on a statutory holiday, in most provinces, affects the calculation of overtime. Ontario, like most areas, does not change the threshold for overtime for a week in which there is a statutory holiday. If an employee works eight hours a day, for six days, this is 48 hours.
Since the threshold for overtime in Ontario is 44, pay would normally be 44 hours at straight time and four hours at time-and-a-half. If one of these days were to be paid as a statutory holiday, then pay would be 40 regular hours and eight hours at straight time for the statutory holiday with no hours at time-and-a-half.
Quebec is the one exception to this rule. The hours paid for a statutory holiday count towards the threshold for weekly overtime, which in Quebec is 40 hours per week. Assuming the same six eight-hour days as above, pay in Quebec would be 32 regular hours, eight hours statutory holiday pay and eight hours overtime at time-and-a-half.
The other complexity of work on a statutory holiday is that it affects the reporting of insurable hours on a record of employment. Normally each hour worked by or paid to an employee is insurable. But there is an exception where an employee is both paid statutory holiday pay and works on that day.
If an employee normally works eight hours a day, the insurable hours for any statutory holiday pay would be eight. But if the employee also works five hours on a statutory holiday, the insurable hours are eight, not 13. Similarly, if the employee’s average daily wage used to calculate statutory holiday pay equates to six-and-a-half hours, but the employee actually works nine hours on that day, the insurable hours are nine, not 15.5.
The rule then is that the insurable hours for a statutory holiday are the greater of the hours actually worked and the hourly equivalent of any statutory holiday pay.
All of this makes it a little easier to understand why the payroll professional’s dreams of long weekends and backyard barbecues are a little bit clouded when a statutory holiday is approaching.
Alan McEwen is a payroll consultant living in St. Catharines, Ont. He can be reached at [email protected].
