The Payroll Poobah: Avoid Payment Errors When Adjusting to Minimum Wage Hikes

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By: Alan R. McEwen

As they do every fall, minimum wage increases took effect in many provinces this month. And as happens every time a minimum wage increase takes effect, transitioning to the new rate can create subtle and tricky challenges for payroll and HR.

Minimum Wage Transitioning, 101

Adjusting to new minimum wage rates is fairly straightforward:

Hours Worked Minimum Wage Rate Payable
Before increase date Previous minimum wage
On increase date At least new minimum wage
After increase date At least new minimum wage

Example: On Oct. 1, 2017, Alberta’s minimum wage increased from $12.20 to $13.60 per hour. Marty, a mail clerk earning minimum wage, works for a company that’s subject to Alberta employment standards. Marty’s bi-weekly pay period runs from Sunday, September 24 to Saturday, October 7. Marty’s pay:

  • 24 to 30: $12.20 per hour; and
  • 1 and thereafter: $13.60 per hour.

 

Pay Period Compliance Adjustments

The same principles apply in situations where compliance with the minimum wage is on a pay period basis, i.e., where the total earnings in the pay period, divided by the hours worked in the pay period, must be at least equal to the minimum wage. In these situations, minimum wage changes that take effect between the first and last days of the pay period, must be calculated in separate calculations:

  • Earnings in the pay period before the minimum wage changed, divided by the corresponding hours, must be at least equal the old minimum wage; AND
  • Earnings in the pay period from the effective date of the minimum wage increase, divided by the corresponding hours, must be at least equal to the new minimum wage.

Scenario: On Oct. 1, 2017, Ontario raised its minimum wage from $11.40 to $11.60 per hour. Jane sells electronics in a big box store subject to Ontario ESA law. She earns both an hourly wage and commissions on her sales. In the bi-weekly pay period from September 24 to October 7, Jane makes a total of $800 in hourly wages and commissions for 70 hours work.

Question: Has Jane’s employer met the Ontario minimum wage requirements?

There are 2 things we need to know to answer that question:

  • Her earnings and hours of work from Sept. 24 to 30; AND
  • Her earnings and hours of work from Oct. 1 to 7.

 

Let’s assume Jane worked 35 hours in both periods but earned $350 in the former period and $450 in the latter period. Result:

  • From Sept. 24 to 30, her wage rate was $10 per hour ($350/35), which is below the required $11.40.
  • From Oct. 1 to 7, her wage rate was $12.86 per hour ($450/35), which is above the required $11.60.

Bottom Line

If you’re in one of the provinces that just raised its minimum wage—BC, Alberta, Saskatchewan, Manitoba, Ontario and Newfoundland and Labrador—make sure you get your pay calculations right for the pay period in which the rate increase took effect.

 

About the author:

Alan R. McEwenhttps://www.linkedin.com/in/alanrmcewen/detail/photo/

Alan McEwen is a Vancouver Island-based HRIS/Payroll consultant and freelance writer with over 25 years’ experience in all aspects of payroll. He can be reached at armcewen@shaw.ca or (250) 228-5280.