What’s an Averaging Agreement, Anyways?


More and more workplaces are embracing flexible work arrangements to enable their employees to better balance work and life, and to address ever-shifting business demands.

Providing that kind of flexibility can be a big tick in the plus column for both the employer and the employee, but employment standards overtime requirements can make flexible schedules unsustainable for the bottom line. So, what’s an employer to do if employees regularly work more than the 8 hours a day or 40 hours a week, and the arrangement works well but is resulting in regular overtime? One possible solution is an averaging agreement.

Before you go putting an averaging agreement in place, there are some important facts to get straight.

“Buy in is important here – an averaging agreement is intended to be mutually agreed upon.”

What is an averaging agreement?

In a nutshell, an averaging agreement is an agreement between an employer and employee that allows an employer and employee to average the number of hours worked over one, two, three or four weeks, and eliminates the need to pay overtime for the hours covered by the agreement.

An averaging agreement can be useful tool in establishing and maintaining work schedules that are predictable and fair to all parties involved, while keeping overtime costs in check.

What are the rules?

Though averaging agreements can minimize how much overtime an employee is entitled to be paid for, an averaging agreement doesn’t do away with the requirement to pay overtime entirely.

An employee working under an averaging agreement is still eligible for overtime pay at the rate of:

  • Double time for hours worked after 12 hours in a day.
  • Time-and-a-half for hours worked in excess of an average of 40 hours per week over a four-week period.
  • Time-and-a-half for hours worked outside of the schedule after an 8-hour day.

There’s also a pretty strict set of rules governing averaging agreements. To be valid, the averaging agreement must tick several boxes. The agreement must:

  • Be in writing
  • Specify the number of weeks (1-4) over which hours will be averaged
  • Specify the work schedule for each day covered by the agreement
  • Specify the number of times the agreement may be repeated
  • Specify start and end dates for the agreement
  • Be signed by the employer and the employee before the start date.

Finally, the hours scheduled can’t average more than 40 per week over the period the agreement covers.

What happens if my employee won’t sign?

Buy in is important here – an averaging agreement is intended to be mutually agreed upon, and it isn’t meant to be contentious. As it is an individual agreement rather than a group agreement, each individual employee must agree to the terms and sign.

If an employee doesn’t sign an averaging agreement, the employer could choose to end their employment. However, just like any other termination without cause, you would have to provide the employee with appropriate notice, or payment in lieu of notice, which could prove costly!

Your Engaged Assignment: Have an averaging agreement in place already or considering rolling one out? Take the time to make sure you’re ticking all the right boxes by reviewing carefully the rules laid out above.

Putting an averaging agreement in place can be a tricky balancing act with lots of moving parts to keep in mind. If you’re not sure if you’re on the right track with your overtime management or averaging agreement, we’re here to help!