An Averaging Agreement for overtime is a contractual agreement between an employee and your company that allows you to bypass overtime rates by averaging the employee’s hours of work over a period of 1, 2, 3, or 4 weeks, depending on the Province of employment.
Companies with employees working outside a standard work week will benefit from an Averaging Agreement. With an averaging agreement, costly overtime pay can be avoided while providing employees with more flexibility and a better work life balance. The request for more flexibility can be triggered by changes in an employee's personal circumstances requiring more work hours in a day which under a "normal" employment contract may trigger payment of overtime pay.
The Averaging Agreement captures important elements such as duration of the Agreement and start and end date of the work schedule. The work schedule states clearly the number of work hours in a day and in which day of the week.
There is strict employment law governing the implementation of Averaging Agreements. If making major changes to the Agreement, it is highly recommended that you seek legal review before implementing it.
Once customized for your company, the Overtime Averaging Agreement is intended to be used:
It is less expensive than paying standard overtime rates. Where applicable, an averaging agreement decreases overtime costs by having an employee sign off that they’ve acknowledged that they have read, understand, and agree to give up paid or banked overtime by averaging their hours during a period where overtime is not calculated on hours that normally would be subject to overtime rules.
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The template referenced on this page can be used on its own as a stand-alone tool, or in conjunction with other HR templates in the Contracts & Agreement Kit that includes the following documents:
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