Working Wise: Overtime agreements can include time in lieu

Business has picked up a bit and as a result I’m paying my staff a lot of overtime.

Dear Working Wise: Business has picked up a bit and as a result I’m paying my staff a lot of overtime. Can I give my staff “time in lieu” instead of paying them for their overtime? Can I limit how much or how long can my staff keep their banked time? Signed, Overwhelmed by Overtime.

Dear Overwhelmed:

Yes, employers can replace overtime pay wholly or partially with paid time off through an overtime agreement. An overtime agreement allows overtime hours to be banked and later taken off with pay at the normal wage rate during regular work hours.

Overtime Agreements:

l Alberta’s Employment Standards Code requires overtime agreements to be in writing. Employers must give employees who are covered by an overtime agreement a copy of the agreement.

l Amendments to, or termination of, the agreement are not valid without at least one month’s written notice of the change from one party to the other.

l The agreement can be between an employer and a single employee, with a group of employees, or the agreement can be part of a collective agreement.

l For every hour of overtime worked, at least one hour must be banked.

l Time off must be taken within three months of the end of the pay period in which the overtime was earned.

l If banked time off is not taken off within three months, then it must be paid out at time-and-a-half.

Employers cannot create a “use it or loose it” type rule for banked overtime. Overtime can not be lost or taken away, even if your overtime agreement says that it can. Employers must keep track of the banked overtime and how long it has been in the bank. However, the employer can tell the employee when to take their banked time off.

Employers with special circumstances, e.g., seasonal industries, may apply to Employment Standards for a permit to extend the period of time that overtime can be banked by an additional three months.

For most employees, overtime is all hours worked in excess of eight hours a day or 44 hours a week. Overtime is calculated both on a daily and weekly basis. The higher of the two numbers is overtime hours worked in the week.

Some types of employees are exempt from the hours of work and overtime standards. Farm workers, domestic employees, salespeople, professionals, police, and managers are a few examples. For all other employees, overtime must be paid at the rate of at least 1.5 times their regular wage rate or covered through an overtime agreement.

To learn more, and to see samples of overtime agreements that you can use to write your own agreements, visit

For more information on Alberta Employment Standards or how to apply for an exemption permit:

Call: 1-877-427-3731


Learn: take the free online Employment Standards webinars, which are available under Courses &training at

Do you have a work-related question? Send your questions to Working Wise, at Charles Strachey is a manager with Alberta Human Services. This column is provided for general information.

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