Yes — those hours still have to be compensated, but they do not necessarily have to be paid in wages if you and the employee agree to bank them as time off in lieu.

Employment standards legislation in Ontario, Manitoba, and Quebec requires employees to be paid for all hours worked, but it does not require that compensation be in cash if there is a lawful time-banking arrangement. The statutory rules around overtime banking (e.g., written agreement and 1.5× credit) apply specifically to hours that qualify as overtime under the legislation. For hours below the overtime threshold (such as 36–44 hours in Ontario when overtime starts at 44), the legislation generally treats them as regular hours, so employers have more flexibility in how they structure compensation, provided the employee ultimately receives equivalent paid time off or wages.

In practice, this means you could implement a policy where hours worked beyond your standard 35-hour work week but below the provincial overtime threshold are banked as time off at a 1:1 rate, provided employees agree to the arrangement. Many employers structure this as “flex time” or “time-in-lieu of extra hours” rather than overtime banking. The important distinction is that once statutory overtime thresholds are reached, the stricter rules apply (including 1.5× credit and written agreement requirements, as well as provincial timelines for using the banked overtime).

From a policy perspective, it is best to clearly separate the two categories:

1. Extra hours (36–OT threshold) → may be banked at 1:1 or paid as regular hours according to policy.

2. Statutory overtime hours → must follow provincial overtime rules, including 1.5× compensation and legislated timelines for taking lieu time.

-HRInsider Staff