Overtime averaging agreement

An overtime averaging agreement lets you average hours over several weeks, so overtime is owed only when the average passes the weekly limit.

Also called: averaging agreement, hours averaging, averaging of hours, compressed work week agreement

What overtime averaging agreement means

An overtime averaging agreement is a written arrangement that lets you count an employee's hours over a period of several weeks, instead of week by week, when working out overtime. Overtime is then owed only for hours above the weekly threshold on average across that period.

It suits businesses with uneven schedules: a 50-hour week during a rush followed by a 38-hour week, or rotating shifts that are long one week and short the next. Without averaging, the long week triggers overtime even though the total over two weeks is normal.

Averaging is not available everywhere, and where it is, there are conditions. Put any arrangement in writing and check it against your province's rules before you rely on it.

How it works

First, check whether your province allows averaging and under what conditions. Depending on where you are, it may require a written agreement signed by the employee, a permit or approval from the employment standards office, or a collective agreement. There is usually a maximum number of weeks you can average over and a set start and end date.

Second, put it in writing before the averaging period starts. A typical agreement names the employee, the number of weeks in the averaging period, the start date, and how long the agreement lasts. Give the employee a copy.

Third, run payroll on the averaging period. Add up the hours for the whole period, divide by the number of weeks, and pay overtime on the hours above the weekly threshold times the number of weeks. Daily overtime rules, in provinces that have them, may still apply separately.

Common mistakes: applying averaging without a valid agreement, averaging over longer than your province allows, and forgetting to pay out overtime owed at the end of each averaging period or when the employee leaves partway through.

Overtime averaging agreement by province

Whether averaging is allowed, and how, differs by province. We did not confirm the averaging rules for any province in this update, so only the weekly thresholds averaging is measured against are shown.

Where the work is done	The rule
Federal	Overtime threshold: over 8 hours a day or 40 a week.
British Columbia	Overtime threshold: over 8 hours a day and over 40 a week, with double time over 12 hours a day.
Alberta	Overtime threshold: over 8 hours a day or 44 a week, whichever is greater.
Ontario	Weekly overtime threshold: 44 hours.

The averaging rules themselves (written agreement, permit, maximum number of weeks) were not confirmed. Check with your provincial employment standards office before using an averaging agreement.

Example: Averaging a busy and a quiet week

Suppose an employer in a province that allows two-week averaging with a 44-hour weekly threshold has a valid written agreement with an employee, Dana. Dana works 50 hours in week one and 38 hours in week two: 88 hours in total.

The averaging threshold for two weeks is 88 hours (44 times 2), so no overtime is owed for that period. Without the agreement, the 6 hours over 44 in week one would have been paid at the overtime rate.

Hollis drafts the letter

Hollis in the Staffkin HR Suite drafts province-specific letters for your approval, and never sends them on its own; check the draft against your province's averaging rules before anyone signs.

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Employment standards: overtime, holidays and vacation by province

Questions about overtime averaging agreement

What is an averaging agreement for overtime?

A written arrangement that lets you average an employee's hours over a set number of weeks, so overtime is paid only on hours above the weekly threshold on average.

Do I need the employee's agreement to average hours?

Where averaging is allowed, it generally needs a written agreement or official approval set up before the period starts. Check your province's requirements.

Does averaging remove daily overtime?

Not necessarily. In provinces with daily overtime, daily rules may still apply. Check how your province treats them under an averaging arrangement.

Official sources

General information for Canadian employers, not legal advice. Rules differ by province and territory and change over time, so check with your provincial employment standards office (or the federal Labour Program if you are federally regulated) before you rely on it. See employment standards by province.

Checked against official sources on 4 November 2026.