{"id":8527,"date":"2023-06-06T07:13:00","date_gmt":"2023-06-06T11:13:00","guid":{"rendered":"https:\/\/www.sage.com\/en-ca\/blog\/?p=8527"},"modified":"2026-01-15T11:31:22","modified_gmt":"2026-01-15T16:31:22","slug":"how-to-pay-overtime-commission-and-bonuses-to-employees","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-ca\/blog\/how-to-pay-overtime-commission-and-bonuses-to-employees\/","title":{"rendered":"How to pay overtime, commission and bonuses to employees"},"content":{"rendered":"
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\n\t\t\t\t\t\tHow to pay overtime, commission and bonuses to employees\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t

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Setting up the payroll structure is a critical task within the payroll function. Aside from regular employee wages, your employees may be entitled to other compensation such as overtime, commission, and bonuses.<\/p>\n\n\n\n

The employment contract will outline exactly how each employee is to be paid, as agreed by you and your employee when they were hired. While most of these compensation terms are under your control, rules for overtime compensation may be mandated by the government.<\/p>\n\n\n\n

The person, team, or service responsible for managing your payroll must have a clear understanding these terms.<\/p>\n\n\n\n

This article will guide you through the key definitions and concepts of overtime, commission, and bonuses, covering:<\/p>\n\n\n\n

How to calculate overtime<\/a><\/p>\n\n\n\n

How to calculate bonuses<\/a><\/p>\n\n\n\n

How to calculate commission<\/a><\/p>\n\n\n\n

How overtime, commission and bonuses impact tax codes<\/a><\/p>\n\n\n\n

Final thoughts<\/a><\/p>\n\n\n\n

How to calculate overtime<\/h2>\n\n\n\n

First, what is overtime pay?<\/p>\n\n\n\n

Overtime pay is money earned beyond regular working hours, or hours outside of the normal shift. In Canada, an employee who works more than 44 hours in a given work week may be entitled to overtime pay at a rate of 1.5 times their regular rate of pay.<\/p>\n\n\n\n

However, there are different criteria between non-exempt and exempt employees when it comes to overtime pay. Non-exempt employees qualify for overtime pay and almost always work in hourly wage situations. Part-time workers may also be eligible for overtime pay if they work beyond the number of regularly scheduled hours in the day. Employees who are exempt from qualifying for overtime pay usually work in salaried roles such as managerial, administrative, executive, and sales jobs.<\/p>\n\n\n\n

In Canada, labour laws differ for each province and territory so be sure to check with your regional government in order to comply with the rules.<\/p>\n\n\n\n

How employees earn overtime pay and the amount must be included in the employee contract, alongside the details for employee salary and wage earnings.<\/p>\n\n\n\n

Overtime pay should be managed and calculated each pay period alongside wage earnings. Overtime hours worked and the amount earned should be itemized on the employee pay stub so it\u2019s easy to identify.<\/p>\n\n\n\n

It\u2019s best practice to pay out overtime pay at the same time that regular employee earnings are paid.<\/p>\n\n\n\n

How to calculate bonuses<\/h2>\n\n\n\n

Not all companies offer bonus pay, but it\u2019s a proven motivator in the workforce.<\/p>\n\n\n\n

Criteria for earning a bonus must be set in advance as part of the employee contract. For example, achieving a certain milestone might earn your employee a $500 bonus at the end of the year, or during a busy holiday period.<\/p>\n\n\n\n

Just like regular pay, you\u2019ll likely need to apply the standard employee source deductions for income tax, Canada Pension Plan, and Employment Insurance to the employee\u2019s bonus. Your payroll software<\/a> will calculate those amounts for you and include it in your regular remittance to the Canada Revenue Agency.<\/p>\n\n\n\n

Bonuses should be tied to specific and measurable performance objectives and work achievements. Keep bonuses separate from regular pay and cost-of-living increases so there\u2019s no confusion between the categories.<\/p>\n\n\n\n

You can offer different types of bonuses to both motivate and reward your employees:<\/p>\n\n\n\n