Paydays, Payroll Records and Deductions

The Employment Standards Act sets out your obligations with respect to paying your employees and maintaining payroll records. One common area of confusion and dispute concerns an employer’s ability to make deductions from wages. To employees, payday is an important event, and it’s something you should get right – every time.

PAYDAYS

The act requires that employees be paid their wages at least twice a month, and within eight days of the end of a pay period. Wages earned during the pay period include overtime and statutory holiday pay, but do not include overtime wages credited to a time bank or vacation pay. A pay period is defined in Section 1 as a period of up to 16 consecutive days of employment.

Section 27 requires an employer to give to each employee a written statement of wages, also known as a pay stub, for the pay period. The wage statement must contain specific information, such as the employer’s name and address, hours worked and wage rate. For a complete list of the information an employer is required to provide on an employee’s wage statement, view Section 27 of the Act.

If an employee’s wage statement is the same from pay period to pay period, the employer is not required to provide a new wage statement until a change occurs. Also, wage statements may be provided electronically to employees, if the employer allows employees confidential access in the workplace to the wage statement and provides a means of making a paper copy of the statement.

For more information, see the Interpretation Manual – Section 17 – Paydays.

HOW WAGES ARE PAID

Wages can be paid in a number of different ways, including by cash, cheque, draft or money order. Wages can also be paid through direct deposit into an employee’s bank account, but only when this method is authorized by the employee or in a collective agreement.

For more information, see the Interpretation Manual – Section 20 – and the How Wages Are Paid and the Paying Wages Factsheet.

PAYROLL RECORDS

Employers must keep payroll records for all employees during their employment and for a period of two years after the employment terminates. The records must be kept in English and maintained at the employer’s principal place of business in BC.
An employer must keep records of each employee’s name, date of birth, occupation, start date, wage rate, hours worked, wages and benefits paid and deductions, etc. For a complete list of the information that an employer must maintain for each employee, view Section 28 of the Act.

It is essential that employers maintain such records of all employees, including managers. Many employers believe that it is not a requirement to keep records of hours worked by managers or salaried employees. This is not true. The act requires that such records be kept by employers for all employees. Furthermore, the Branch or Tribunal will likely accept the evidence of an employee who claims overtime or other entitlement under the act and who has kept his or her own record of hours worked, if there is no documentary evidence kept by the employer.

For more information, see the Interpretation Manual – Section 28 – Payroll Records and Interpretation Manual – Section 27 – Wage Statements and the Keeping Records Factsheet.

DEDUCTIONS

Except as required or permitted by law, it is a violation for an employer to directly or indirectly withhold or deduct any part of an employee’s wages for any purpose. Permitted deductions include income tax, Canada Pension Plan premiums and Employment Insurance premiums.

Deductions that would violate the act may include deductions to cover shortfalls due to theft, employee damage to property or inventory, cash handling mistakes by employees, or any other circumstance in which an employee has caused loss to an employer.
For example, in a “dine-and-dash” situation – where a customer leaves a restaurant without paying – an employer cannot deduct this expense from an employee’s wages. Similarly, where an employee is responsible for a “float” and presents the employer with a cash shortage, the employer cannot deduct the shortage from the employee’s wages.

There are, however, certain circumstances where an employer may make unilateral deductions from an employee’s wages. If an employee has been overpaid wages as a result of a mistake, a number of cases have held that the employer may, in some instances, deduct the overpayments from future pay periods. The premise is that monies paid in error are not wages and therefore the employee was not entitled to them to begin with. In any event, employers should seek legal advice prior to unilaterally recovering overpayments through a deduction of wages.

For more information, see the Interpretation Manual – Section 21 – Deductions and the Deductions from Wages Factsheet.

TIPS AND GRATUITIES

While employees are expected to declare tips as income for income tax purposes, they are not typically considered wages for purposes of the ESA. However, under Section 21(2), an employer may not use an employee’s tips to cover business costs such as dine-and-dash incidents, spillage or breakage. Furthermore, in the event that an employer uses an employee’s tips to pay for such business costs, Section 21(3) automatically deems those tips to be wages and allows for the recovery of those wages.
Also note that an employer is permitted to require employees to pool their tips and to make arrangements for this pool to be shared with those employees who work in positions that otherwise have no access to tips.

ASSIGNMENTS

An assignment is really just a form of formal permission, given by an employee to you, the employer, to deduct a certain amount from his or her wages. An assignment serves as an exception to the rule that prohibits employers from directly or indirectly withholding or deducting any part of an employee’s wages.

Assignments arise most typically in two circumstances. The first is where the employee is required to make regular payments to another person as required by a maintenance order under the Family Maintenance Enforcement Act. The other arises in a unionized setting, where an employee agrees to have a certain percentage of wages submitted to a union in the form of union dues.

An assignment of wages must be in writing, and can only be cancelled by notification in writing to the employer and the person to whom the wages were assigned to.

For more information, see the Interpretation Manual – Section 22 – Assignments.

Information provided by Ryan Anderson, an employment lawyer with Mathews Dinsdale & Clark LLP. The information provided in this article is necessarily of a general nature and must not be regarded as legal advice. For more information about Mathews Dinsdale & Clark LLP, please visit mathewsdinsdale.com.