Paydays - Act Part 3, Section 17
This section outlines when an employer must pay an employee and the exceptions to these requirements.
17. (1) At least semimonthly and within 8 days after the end of the pay period, an employer must pay to an employee all wages earned by the employee in a pay period.
(2) Subsection (1) does not apply to
(a) overtime wages credited to an employee's time bank, or
(b) vacation pay.
Employers must pay employees all wages earned each pay period based on the two following requirements:
- payment of wages must be made at least twice a month. A pay period can be no more than 16 calendar days (See s.1, “pay period”); and
- payment of wages must be made no later than eight calendar days after the last working day for which payment is being calculated.
Both requirements must be met, and an employer cannot use compliance with one requirement as a reason for not complying with the other.
Some employers use a monthly payroll to calculate remittances to Canada Revenue Agency. These employers must still comply with the requirements of the Employment Standards Act.
Commission sales people are employees who are paid on a commission. “Commission” means a type of incentive based pay in the form of an amount or percentage paid to a salesperson for a transaction involving the selling or leasing of goods.
Although the date commissions become payable depends on the terms of each employment contract, employers must still pay these employees their wages at least twice every month.
See Regulation s.37.14 for specific provisions governing commission sales.
Minimum Wage Requirements
Minimum wage requirements apply whenever paid commissions are less than the employee would have earned based on hours worked at minimum wage.
Shelly makes two sales during a pay period and receives commission for them during the same pay period. The commission exceeds what Shelly would have received based on minimum wage for hours worked. This meets the requirements of the Act.
An employee makes a sale on May 29th, but their commission of $150 is not payable until June 15 when the goods arrive and the customer pays for them. It is the only sale the employee makes during the pay period May 16 to May 31. The employee is entitled to minimum wage for all hours worked during this pay period. In the pay period June 1 to June 15, they are entitled to be paid the $150. If this and other commissions earned in this pay period amount to less than minimum wage, the employer must make an additional payment sufficient to ensure the employee earns at least minimum wage for all hours worked.
No Offsets Allowed
Commissions earned in one pay period cannot be used to offset earnings during another pay period when no commission is earned or when the commission earned is less than minimum wage. For example, if an employee is paid minimum wage for all hours worked during the first pay period of the month, the employer cannot treat these wages as a “draw” on commissions. The employer cannot deduct any of these wages from commissions earned in the second pay period of the month, no matter how large the commission payment is. Any deduction of this type would be a contravention of the minimum wage provisions of the Act set out in s. 16.
The Employment Standards Act does not define how a commission is earned or when it becomes payable. Entitlement to a commission depends on the terms of the employment contract. Even if work to earn a commission has been done, the commission may not become payable until other events occur. Commissions are payable within a reasonable period after sales are completed.
Commissions may be split between two or more employees providing the split reflects the work done by each employee.
The director may review methods of paying commission to ensure that:
- employees are paid their commissions within a reasonable time of completion of the sale (employees must still be paid at least semi-monthly);
- wages paid in each pay period meet or exceed minimum wage;
- elements of the commission structure meet or exceed the requirements of the Act.
In some cases there may be an employment contract allowing a deduction from wages under certain circumstances, (for example, in the event a sale is cancelled after the commission has been paid to the employee). This is commonly called a “claw back”.
Sometimes, commission salespeople receive an advance on wages in excess of the minimum wage. It is understood that if commissions are less than the advance amount, the employee is in a deficit position.
Where a commission structure allows for these types of deductions, an adjustment cannot result in the employee receiving less than minimum wage for any pay period.
In order to comply with s. 21 of the Act, employers should ensure that these commission arrangements are clearly set out in writing and that the employee has provided written authorization for adjustments to be made on their pay cheques.
The requirements in s.17(1) do not apply to vacation pay or to overtime wages credited to an employee's time bank.
Section 42 of the Act contains provisions regarding paying out banked overtime hours.
Section 58(2) contains provisions regarding payment of vacation pay.
Employees covered by a collective agreement
Section 3 provides that parties to a collective agreement may not negotiate terms and conditions that do not meet or exceed the standards set out in section 17. Where there is a collective agreement, the enforcement of matters relating to section 17 is through the grievance procedure, not through the enforcement provisions of the Act.
Related sections of the Act or Regulation
- s.1, Definitions “pay period”
- s.3, Scope of the Act
- s.16, Minimum Wage
- s.21, Deductions
- s.27, Wage statements
- s.28, Payroll records
- s.42, Banking of overtime wages
- s.58, Vacation pay