Payroll

# Understanding Canada’s Three-Hour Rule for Employee Payment

When business is slow, it’s common practice to let an employee go home early. However, if that employee has on the clock for less than three hours, you may have to pay them more than their usual rate. Understanding the Three-Hour Rule ensures your business stays compliant with labour regulations.

## Three-Hour Rule Definition

The Government of Canada states that the Three-Hour Rule requires you to pay an employee for a minimum of three hours of labour, even if they get sent home early. To calculate the correct pay, you should figure out the pay for three hours of minimum wage labour as well as your employee’s regular rate for the time they worked. Then, you need to pay your employee the greater of these two amounts.

Note that the logistics of this rule may vary slightly from province to province, so it’s important to check with your provincial government for exact standards. For example, the Ministry of Labour in Ontario doesn’t extend this rule to students regardless of their age. Conversely, the government in Manitoba does not mention this exemption on its site.

## Calculating the Three-Hour Rule With Minimum Wage Pay

As of 2022, the general minimum wage is \$15.55 per hour. When you multiply this amount by three, the result is \$46.65. If your employee works a very short shift and earns less than this amount, you should bump their pay up to \$46.65. However, if your employee’s earnings exceed this amount, you should pay them what they earned.

To illustrate, imagine you have an employee who earns \$15 per hour. After they’ve worked for 1.5 hours, you decide to send them home early. Their regular earnings for the time worked are \$22.50. In this case, you should pay them the alternative amount of \$34.05.

## When Does the Three-Hour Rule Apply?

The Three-Hour Rule only applies to your employees who normally work shifts that are longer than three hours. This rule doesn’t apply to any of your employees who regularly work three-hour or shorter shifts.

The Three-Hour Rule also applies if you call your employee and cancel their shift before it starts. In these cases, as your employee does not log any hours, you should always pay minimum wage multiplied by three hours.

## Are There Exceptions to the Three-Hour Rule?

The key exception to the three-hour rule is if your employee has to leave for reasons outside of your control. For example, if your employee feels ill and needs to go home early, you do not have to follow the three-hour rule.

It’s critical to note that you cannot avoid this requirement by asking for volunteers to leave early. To explain, imagine you own a restaurant and only a few customers have come in to eat. You don’t need all your servers, so you ask who wants to be cut. Even though a worker has volunteered to go home, you still have to take the three-hour rule into account. Here is where properly tracking your employee’s hours with efficient accounting software plays a big part in optimizing expenses. A quick check of who has already worked more than three hours that day can narrow down the choices of whom you ask to leave, and you can avoid having to increase pay to remain in compliance.

There are many laws as well as provisions available to support the needs of both the employer and employee. Did you know you can pay employees in QuickBooks? Add Payroll today.