As of January 2018, Ontario is rolling out new rules on how to calculate employee holiday pay. To ensure your business is ready, you need to understand the new regulations and how to implement them. Here’s an overview of the province’s holiday pay rules.
Calculating Holiday Pay
To calculate holiday pay under the new rules, you add up the number of hours your employee has worked in the previous four-week period and you divide that by the number of days they’ve worked. Then, you pay holiday pay based on that number of hours. To illustrate, look at what happens when you crunch the numbers for a few different employees.
Let’s say you have a full-time employee who has worked 160 hours over 20 days during the last four-week time period. When you divide 160 hours by 20, the result is eight. That means you have to pay this employee for eight hours on the next holiday. In contrast, imagine you have an employee who works half days. In the last four-week pay period, they worked 80 hours over 20 days. Again, you divide 80 by 20, and since the result is four, you pay that employee for four hours on the next holiday.
Now, here’s where the process gets surprising. Say you have an employee who works every Saturday and Wednesday. During the last four-week period, they logged 64 hours over eight days. When you divide 64 hours by eight days, the result is eight, and you have to pay this employee for eight hours on the next holiday. Even though they work fewer hours than the other part-time employee, they get a full day of pay.
Working on Public Holidays
The above calculations work perfectly if you’re closed on the holiday or if your employees have the day off. But when your employees work on a public holiday, you have to do a few more calculations, and your employees get to decide how they are compensated.
- Your employees can opt to receive the public holiday pay plus premium pay for every hour worked. With this option, if an employee earns $15 per hour and they work an eight-hour day on a holiday, they receive their holiday pay (calculated as explained above) plus $22.50 per hour for working that day.
- Alternatively, they can receive regular pay for working the holiday and they can take another day off with holiday pay. To continue with the above example, the worker could opt to receive $15 per hour for working the holiday. Then the worker could take off another day in the week and receive their holiday pay for that day.
After your employee chooses between these two options, you have to get their agreement in writing, but there are exceptions for the hospitality industry (resorts, restaurants, hotels, etc.), hospitals, and nursing homes. If you are normally open and your employees usually have to work that day, you don’t have to get their agreement to work the holiday in writing. This exception to the rule also applies to businesses in continuous operation such as oil refineries, alarm-monitoring stations, and even casinos.
Qualifying for Holiday Pay
Typically, in Ontario, you have to pay all your employees holiday pay, but there are a few exceptions. Namely, if an employee fails to work their last shift prior to the holiday or their first shift after the holiday, they may not be entitled to holiday pay.
To explain how this works, imagine there is a public holiday on a Friday, and your employee doesn’t show up for work on Thursday. If they don’t have reasonable cause to miss the day of work, they forfeit their right to holiday pay for Friday. However, if your employee scheduled a vacation day, took a personal day, or arranged to have Thursday off for another reason, they are still entitled to holiday pay.
This same rule applies to the employee’s first day back after the holiday.
Similarly, if your employee is supposed to work on a holiday and they skip their shift without reasonable cause, they also forfeit their holiday pay. To give you an example, say your employee agreed to work on a public holiday. They work two hours, but then, they leave for no reason. In this case, you still have to pay them premium pay (time and a half) for the two hours worked, but you don’t have to pay them the rest of their holiday pay.
Ontario’s Public Holidays
After all this talk about the rules, you might be wondering when these situations apply. Well, in Ontario, there are nine public holidays:
- New Year’s Day
- Family Day
- Good Friday
- Victoria Day
- Canada Day
- Labour Day
- Thanksgiving Day
- Christmas Day
- Boxing Day
Whether your business is open or closed, you have to pay your employees something for these days. And if your employees come in for the day, you have to offer premium pay or an extra day off with holiday pay.
It’s critical to ensure that you understand these rules or have a financial professional in your corner to help. The new rules are likely to increase holiday pay for many part-time employees, and you may want to take steps to ensure you’re ready for those extra expenses before the next holiday rolls around.
Also, keep in mind that every province handles holiday pay differently. If your business is not in Ontario, you need to investigate the rules for your own province.