British Columbia’s Employment Standards Act requires employers to pay employees for all overtime hours worked. However, if an averaging agreement is established, the rules for calculating overtime pay change.
An averaging agreement is an agreement between an employee and employer that allows the employee to work a modified schedule. It also benefits the employer by averaging out an employee’s hours across multiple weeks, which may exempt the employer from having to pay for overtime. Agreements can apply to one employee or a group.
Types of Averaging Agreements
The two types of agreements are:
- Hours of work averaging agreements (HWAAs)
- Flexible averaging agreements (FAAs)*
*Note that, effective September 1, 2019, changes to overtime banking under Bill 2 mean these agreements will no longer be needed and will be repealed.
How do averaging agreements work?
A HWAA can be requested by the employee or employer, while a FAA can only be requested by the employee. The agreement must specify only one schedule for the employee to follow and it must be provided to them ahead of time. An averaging period must also be established. Its length will be determined by the type of averaging agreement.
Typically, HWAAs vary from 1-12 weeks in duration. For longer periods, a variance issued by the Director of Employment Standards is required. FAAs can be up to two weeks long. At the end of each period, the employee will receive their overtime pay.
Compressed Work Week Arrangements
Previously, compressed work week arrangements were available as an averaging agreement option. This arrangement allowed employees to work fewer days during the week and over 8 hours on their work days without it being considered overtime. As of January 1, 2019, compressed work week arrangements have been eliminated in non-unionized workplaces.
Do you need advice on overtime pay and averaging agreements?
We help employers comply with the law by understanding how to pay employees correctly for overtime. If you have questions about the types of averaging agreements, averaging periods or daily overtime, speak with one of our advisors today: 1-833-200-5103.