UPDATED: How Bill 148 affects your organization

There have been a number of changes to employment standards in Ontario since the passing of Bill 148, the Fair Workplaces, Better Jobs Act, 2017. As there are more changes becoming effective as of next month, it is a good time for organizations to review what’s already changed and what changes are still to come. We have highlighted some significant changes as of November 2017, December 2017, January 2018, April 2018, and upcoming in 2019.

November 2017

As of November 27, 2017, your organization should have already reviewed its classification of employee vs. contractor. We have noticed an uptick in the number of payroll audits among nonprofits. With stricter enforcement around classifications of who is an employee vs. who is an independent contractor (aka freelancer) now in effect with Bill 148, it is important that organizations thoughtfully review their decision-making process around defining an individual as an employee or as a contractor. Organizations should be prepared to  implement necessary changes. 

Factors to consider include:

• Control. An employee is directed by an employer; a contractor has a measure of control over what and how work is done (although they don’t have to exercise that control).
• Tools & Equipment. Employees who use tools and equipment do not own those items. Their employer should provide, maintain, and insure most of those tools. Employers can also reimburse employees for tools and equipment they have acquired for the job. 
• Subcontracting / hiring assistants. An employee cannot subcontract tasks or hire an assistant to do their work. A contractor can subcontract or hire help without approval of the payer.
• Financial risk. An employee’s expenses are reimbursed and generally has no financial risk. A contractor is self-employed and takes on financial risk with each engagement, should the contract go incomplete/unpaid.
• Responsibility for investment and management. An employee does not have a capital investment in the employer’s business. A self employed person generally has an established business, or a capital investment in the payor's business. 
• Opportunity for profit. An employee doesn’t gain profit or incur loss while doing their work, whereas self-employed individuals can take a loss or a profit in the course of a contract. 

Also as of November 2017, your organization should have updated its crime-related child death or disappearance leave. A child is defined as under 18 and can be a step-child or foster child. Employees qualify for this leave after 6 months of employment. It is an unpaid but protected leave of up to 104 weeks.

Employers should note that as of November 2017 the EI waiting period has been reduced from 2 weeks to 1 week, for those who have a reduced EI rate due to an STD (short-term disability) program. The government has provided employers 4 years from January 1, 2017 to have plans to accommodate the reduced wait period or the organization will risk losing the reduced EI rate. 

December 2017

As of December 3, 2017 employers need to have begun preparing to accommodate the following family-related job leaves: employees can now opt to take an extended parental leave (increased by an additional 26 weeks (61 weeks total). This could prove to be a popular option for parents in Ontario, where childcare availability and affordability are a huge challenge, especially for children under 18 months of age. It is important to note that once an employee chooses the parental benefit path (extended or non-extended) they cannot change paths at a later date. Also note that the EI coverage for parental leave is for the same amount, no matter the path chosen. In other words, the recipient will receive the same overall dollar amount whether the leave is 35 weeks or 61 weeks, but their biweekly payments will be more or less respectively. 

Also as of December 1, 2017, women can now take maternity leave up to 12 weeks prior to the birth of a child, and employees who are family caregivers are now able to take up to 15 weeks of unpaid, job protected leave.

January 2018

As of January 1, 2018, several changes related to wages and paid time off have come into effect, as well overtime, job leaves, and holiday pay, and record-keeping obligations. 

Your organization should now be accomodating the following changes related to wages and PTO:

• Minimum wage. Employees have a minimum wage of $14/hour. Student employees have a minimum wage of $13.15 (but if school is in session, they must work less than 28 hours / week to be eligible for this wage). So, if a student is working full time hours while school is in session, they are considered an employee, not a student employee, and are entitled to the full $14/hour minimum wage. The 28 hour per week limit does not apply on school holidays or during summer break.
• Vacation pay. New legislation means that every employee in Ontario is now entitled to 3 weeks (6%) vacation after 5 years of consecutive employment with a single employer.
• Overtime. Overtime pay must be paid out at the rate at which an employee was being paid at the time the overtime occurred. For employers, this means that overtime can no longer be calculated at a blended pay rate, and overtime pay cannot be paid out at, for example, the lower of an employee’s two pay rates. 
• Public holiday pay calculation. To determine the amount of stat holiday pay to pay out to an employee, an employer should now use the single pay period directly prior to the stat holiday to calculate the average daily wage (total gross earnings/number of days worked in that period). Some scenarios require employers to consider some additional factors:
  • For new hires, employers should use the current period to to determine the average daily wage, and pay that. UPDATE: The Ministry of Labour has announced that effective July 1, 2018, the ESA will be reverting back to the former statutory holiday calculation of 1/20 of the prior 4 weeks earnings as an interim measure while the public holiday changes to the ESA continue to be reviewed. This change is due to concerns arising from the Changing Workplaces Review, which found that "public holiday rules were the source of the most complaints under the ESA and needed to be simplified."  More info.
  • For anyone on approved leave in the pay period  prior to the stat, employers should use the pay period in which the individual last worked to determine the average daily wage.
  • When determining average daily wage use the gross earnings before statutory deductions. Do not include overtime pay, termination pay, severance and premium pay, vacation pay, personal emergency leave pay, domestic or sexual violence leave pay or pay for other public holidays.
  • The Statutory Holiday Calculator can be found here.

Employers also, as of January 2018, need to be prepared to provide to eligible employees 10 days of Personal Emergency Leave, the first two of which are paid. Employees are eligible after 1 week of consecutive employment. Employers are no longer allowed to to ask the employee for a physician’s note to validate the leave.

As well, employers should be prepared to accommodate Domestic and Sexual Violence leave to eligible employees. Employees are eligible after 13 weeks of employment. This is a job protected leave of up to 10 individual days, the first 5 of which are paid, and up to 15 weeks per calendar year for employees, or children of employees, who have experienced or been threatened with domestic or sexual violence.

As of January 2017, all organizations are now obliged to follow several new employee-related record-keeping measures. They should record:

• Dates and times employees are scheduled to work and changes to on call schedules
• Dates and times employees worked
• If an employee has two or more pay rates for worked performed in a pay week
• Any cancellations of scheduled days or work or on call periods and dates and times of those cancellations
• Vacation records for 5 years (instead of 3 years)

April 1, 2018

Upcoming as of April 1, 2018, organizations need to be prepared to issue equal pay for equal work. Part-time, casual, temporary, and seasonal employees must be paid the same as full-time permanent employees if they are doing essentially the same job. All organizations, including nonprofits, often with stretched budgets, will need to think carefully about how they rely on these types of workers and what they budget to pay them. A permanent, full-time employee cannot be paid more for the same task or set of tasks. Exceptions exist jobs paying by quantity or quality of work, or for merit or seniority systems, but these systems must be applied consistently. 

Possible changes coming in 2019

Although not yet confirmed by the government, organizations in Ontario should be prepared for the following in 2019:

WSIB review, which is proposed to 

• Update the 34 industry classifications
• Establish premium rates based on the collective experience of employers in the industry classification
• Set an employer’s actual premium based on individual employer experience based on individual company level of risk 

CPP Enhancements

• Starting in 2019 CPP contribution rate will increase each year until 2023 when it reaches 5.95%
• There will also be an additional enhanced earnings percentage of 4% for earnings between the yearly maximum and the new upper earnings beginning in 2024

Scheduling requirements

• Employees can request a location or schedule change after three months of employment, without penalization
• Employees can refuse shifts that an employer requests they take with less than 96 hours notice, without fear of retaliation
  • exceptions are made for dealing with an emergency, remedy, or reducing a threat to public safety, or continued delivery of an essential public service
• Employers must pay 3 hours wages to anyone who
  • regularly works more than 3 hours but has their shift is cut short
  • whose shift is cancelled without 48 hours notice from scheduled start time
  • is scheduled on call and is available to work but does not work at least 3 hours

An exception will be made when any of these situations arises from an event that is out of the employer’s control (eg. power failure, fire,) or if the employee works in a weather-related industry (eg. snow removal).

This tip sheet was created by Alicia McGuire of Young Associates. Founded in 1993, Young Associates delivers technical expertise and advisory services to support operational effectiveness of nonprofit and creative organizations. We invest in transformative technology and expert human capital to provide our customers progressive solutions in financial, data and information management, human resources, and strategic planning.

Disclaimer
 

What’s the difference between holiday pay and time in lieu?

‘Holiday pay’ and ‘Time in lieu’ are actually very different. Holiday pay is pay for ‘standard’ holidays, either public or at least consistently recognized by the employer. Time in lieu is paid time off in exchange for overtime work.

Holiday pay is pay for days that an employee doesn’t have to work, because they are public holidays. In Ontario, these days are: New Year’s Day, Family Day, Good Friday, Victoria Day, Canada Day, Labour Day, Thanksgiving Day, Christmas Day, and Boxing Day. Public holidays vary in different jurisdictions. Also, some employers choose to provide holiday pay for days which are not official public holidays, but are frequently observed. For example, in Ontario, employers often acknowledge Civic Holiday the first Monday in August. Public holiday pay is based on the previous four weeks of work, and can be calculated here. The calculation i:s (regular wages from 4 weeks previous + vacation pay from 4 weeks previous) / 20. You add up the last month of earnings and divide by 20 because there are 20 working days in a normal month.

In the entertainment field — and others — it’s not uncommon for employers to ask their staff to work on a public holiday. Employees have the option to agree in writing to work the day and receive either public holiday pay plus premium pay for the hours worked on the holiday OR their regular rate plus holiday pay on a ‘substitute’ day off. In this case, the holiday rate would be calculated on the four weeks previous to the substitute holiday, not the original holiday. Some jobs do not entitle employees to take public holidays off. More details on public holiday pay in Ontario can be found here.

‘Time in lieu’ is paid time instead of overtime pay. The Employment Standards Act sets out rules on overtime pay; in most cases it is time-and-a-half (1 ½ times regular pay) for hours worked beyond 44 in a week. An employee and employer can agree in writing to time in lieu, also sometimes called ‘banked time’. In Ontario, if an employee has agreed to bank overtime hours, the employer must provide 1 ½ hours of paid time off for each hour of overtime worked. The time off must be taken within 3 months or, if an agreement is made in writing, within 12 months. If employment ends before the employee takes the paid time off, the employer must pay him or her overtime pay instead.

Find more information on paid time off in Ontario here.

What are my vacation pay obligations when an employee departs?

When a staff member leaves, you must review their vacation pay entitlement. This is done by calculating vacation pay earned and subtracting vacation time used. If the employee has not used their vacation time, you must pay out the amount owing in cash.

What are the repercussions of not taking time off?

First, a reminder of how and when vacation time is earned: Employees earn their vacation time upon completion of a year of work (the Ontario Ministry of Labour calls it a “12-month vacation entitlement year”), and each subsequent 12-month period. If the employer deviates from the standard entitlement year, the employee is entitled to their minimum vacation time as well as a pro-rated amount of vacation time for the ‘stub period’ which precedes the start of the first alternative vacation entitlement year.

The Ontario Ministry of Labour dictates that vacation time earned (whether based on a completed entitlement year or stub period) must be taken within 10 months. The employer has the right to schedule the employee’s vacation time and/or ensure vacation is scheduled and taken.

Upon obtaining written agreement from their employer and the approval of the Director of Employment, an employee can give up some or all earned vacation time. The employer is still obliged to issue the employee vacation pay. You can give up vacation time, but you do not give up your right to the remuneration associated with that time.

You can learn more about vacation time from the Ontario Ministry of Labour website or by visiting the labour website applicable to your region.

What is vacation pay versus regular pay?

Vacation pay is remuneration for time off! The Ministry of Labour, through the Employment Standards Act, allows for 2 weeks of paid vacation per year worked. This is the legal minimum — and many employers offer their employees more than the standard 2 weeks, often to reward long service with the company.

The 2-week amount is often expressed as 4% of your regular pay. (Out of 52 weeks in the year, you work 50 and go on holiday for 2; the 2 weeks is 4% of the 50.) If you’ve worked less than a full year, the amount of paid vacation you receive is pro-rated accordingly. So, summer students, for instance, would receive vacation pay amounting to 4% of their summer earnings.

Visit this Q & A for methods on calculating vacation pay. Vacation pay is treated in the same manner as regular pay in terms of tax, EI, and CPP deductions.

Visit the Ministry of Labour website for more information on vacation pay in Ontario, or find a comparable government resource for your location.

How do I calculate vacation pay for my staff?

Updated January 2018

There are 2 methods to calculate vacation pay: you can include vacation pay in each paycheque, or your can pay it out in a lump sum when employees take their holiday (or when their contract ends). For our examples, let’s assume an employee receiving the Employment Standards Act minimum of 2 paid weeks per year worked, or 4% of earnings. (Update as of January 2018: Under the ESA employees who have seniority of 5 years or more are entitled to 3 paid weeks per year worked or 6% of earnings).

Method 1 – Pay with each cheque:

Vacation pay can be rolled into regular pay, so the employee receives it as they earn it. This means that the employee has to do their own saving-up for time off. This method is often used for part-timers, temporary and hourly-paid staff.

Example: An employee earns $1,000.00 per pay cheque. The employee has vacation paid on each cheque, therefore they receive $1,000.00 in pay + 4% ($40.00) for a total of $1,040.00 of gross pay each pay period. If they have seniority of 5 years or more, they would receive $1,000,00 in pay + 6% ($60.00) for a total of $1,060.00 of gross pay each pay period).

Method 2A – Pay with holiday – Salary:

Salaried employees get “paid vacation”, which means they receive their normal salary without interruption even when on vacation. There is no change in the rate or frequency of their pay; they just get paid time off. In the payroll records, 4% vacation pay is accrued each week. (For employees with 5 years or more of seniority, it would be 6%). That is, the employer sets aside the vacation pay amount as money owing to the employee for their holiday. Since the process is seamless for both the employer and the employee, the accrual process may be omitted: if the employee gets their regular pay, the requirements have been fulfilled!

Method 2B – Pay with holiday – Non-Salary:

Part-time, casual and hourly-paid staff often have an irregular stream of earnings. From the employer’s viewpoint, the accounting is the same: you accrue 4% of each week’s earnings, setting it aside as an amount owed to the employee. (Again, this would be 6% for employees with 5 years or more in seniority). However, when the employee takes time off, their vacation payout will not correspond to a normal paycheque — so from their point of view vacation pay is a lump sum.

Example: The employee is about to take her/his annual vacation, and no vacation pay has yet been paid. Therefore, the employer bases vacation pay on the employee’s total gross pay since the last time they took vacation. In this case, the employee has earned $13,978.65 in gross earnings since his or her last vacation. 4% of those gross earnings warrants vacation pay of $559.15.

Visit the Ontario Ministry of Labour website (or a comparable website for your area) for more information on vacation pay.