The Fair Workplaces Better Jobs Act has significant consequences for public holiday pay… what do employers need to know?

Bill 148, also known as the Fair Workplaces, Better Jobs Act, was introduced in Ontario in November 2017, but the section of the bill that deals with employees’ public holiday pay only came into effect on 1 January 2018. Specifically, this part of the bill changes the way public holiday is calculated (as previously set out in the Employment Standards Act, 2000): the complexity of the new methodology has proved challenging for employers across the province, and prompted a certain amount of criticism.

If you’re an employer struggling to get to grips with Ontario’s Fair Workplaces, Better Jobs Act, check out this guide to the public holiday pay regulations…

Public Holiday Calculation Changes

Old Calculation: Prior to 1 January 2018, the Employment Standards Act dictated that public holiday pay should be calculated by taking the total regular wages an employee earned in the 4 weeks prior to a public holiday, and dividing that amount by 20. So, as an example of the previous regulations:

  • An employee earning $60/day, working 5 days a week in the 4 weeks prior to a public holiday, would accrue $1,200 in regular wages and $60.00 holiday pay.
  • An employee earning $20/hour across 4x 8-hour shifts in the 4 weeks prior to a public holiday would accrue $640 in regular wages and $32.00 holiday pay.

New Calculation: Under Bill 148, public holiday pay is now calculated by dividing the total regular wages an employee earns in the 2-week pay period immediately prior to a public holiday by the number of days the employee works within that period. Under the new regulations:

  • An employee earning $60/day in regular wages, working 5 days a week, in the pay period prior to a public holiday would accrue $600 in regular wages and $60 holiday pay.
  • An employee earning $20/hour across 4x 8-hour shifts in the pay period prior to a public holiday would accrue $640 in regular wages and $160.00 holiday pay.

Criticism Of The Bill

The new holiday pay calculation method has positive and negative consequences for both sides of the employer-employee relationship:

From employers...

The amendment to holiday pay has impacted many employers significantly. The source of the problem lies in the ‘days worked’ dividing-factor, which favours part-time workers more than full-time. While the old system would offer an 8-hour-a-week shift-worker 20% of a full-day’s pay for a public holiday, the new system offers a full-day - the same amount as a full-time worker.

Employers with a predominantly full-time staff have only seen a minor change in their holiday-pay obligations, but those with many part-time employees or shift workers have seen a significant increase in labour costs. The impact has led many employers to consider scaling back, or even axing their part-time positions completely - although the Ontario government has created a list of exempted industries for those businesses facing an unreasonable cost-hike. Under the new holiday-pay regime, observers are suggesting certain demographics, including student workers and senior citizens, will be hardest hit as casual employment opportunities disappear.

From employees...

Although almost all part-time and shift-work employees will see their holiday pay rise (often significantly) under the new rules - many are also seeing a downside. Once again, the source of the issue lies with the calculation itself which often delivers higher levels of holiday pay to part-time employees who work less than their colleagues.

In a specific example, an employee who works only one 8 hour shift in the pay period prior to a public holiday receives a full day’s holiday pay. By contrast, an employee who works one 8 hour shift, and one 4 hour shift in that same period receives only 6 hours’ worth of holiday pay - because the calculation divides their 12-hour wage by the 2 separate days they worked.

While industry observers have criticised Bill 148 for essentially creating a system which pays less for more work, the government has pointed out that the holiday-pay mechanism targets and supports the most vulnerable employees - who are more likely to be in a precarious financial situation than full-time workers or those receiving more regular work hours.

Implementing the New Rules

Incorrect holiday pay is a classic payroll mistake - and a common breach of Ontario’s Employment Standards Act - so employers should consider compliance a top priority. Practically, this means studying the details of Bill 148, ensuring payroll staff receive adequate training, and carefully considering how to implement the new rules within existing payroll systems. Beyond those practical payroll changes, employers must also consider the financial cost of the new rules. Deployments of part-time and full-time staff may need to be altered - in order to minimise the financial impact of holiday-pay, it may be necessary to spread shorter shifts across a greater number of days, than to have a smaller number of ‘long’ shifts.

The amended public holiday pay regulations shouldn’t be considered in isolation. The Fair Workplaces, Better Jobs Act also introduces a variety of changes to minimum wage levels, overtime rates, employee classification, and personal leave - all of which carry a range of potential practical and financial consequences for employers. As an employer, it’s important to be aware of the extent to which Bill 148 will affect your workplace - and take the necessary steps to make your business compliant.

For advice and information payroll and tax legislation in Canada, contact activpayroll today, or explore activpayroll’s dedicated Global Insight Guide...

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