Salaried employees who recieve an all-inclusive salary (i.e. no over-time pay) may be problematic for employers, from a legal standpoint. The labor laws are very specific and with the changes in regulation over the past few years it is important for employers to ensure that they comply, not just to avoid unnecessary fines, but also to avoid possible labor court verdicts in favor of employees.

The law

The work and rest hours law (1951) states that for the first 2 overtime hours, payment is 125% of the regular hourly rate, and for each additional hour payment is 150% of the regular hourly rate.

The overtime hours are calculated on an hourly basis and not on a monthly basis !

An employee can only work over-time hours if they have been approved by the employer, whether by way of contract, notification of terms of employment. It is very important to address this issue specifically to avoid future problems.

There is also a ceiling on the amount of allowed over-time hours per employee – 15 hours per week or 60 per month.

Tips for employees

1. Check your contract/terms of employment regarding over-time payment.
2. Make sure you keep track of your work hours, if there is a electronic/magnetic/computer time-clock at your place of work, you should receive a copy of your monthly hours each month for your records. If not, keep track in a notebook, clearly note the date, day of the week and your start and end times.
3. If you are allowed or required to work over-time, make sure you are being paid for them – they should be separately itemized on the payslip, listing the total monthly number of each type of over-time hours.

Tips for employers

1. Before deciding on a global salary, make sure the “work and rest hours” law does not apply to the employee in question. If it does, this may be problematic. Even if you have determined that the employee’s position requires a special amount of trust, this does not necessary mean it is. If there is no way the employer can supervise the employee’s work hours (an employee who is on the road between client sites for example) This may be o.k.

2. It is the employer’s responsibility to have a time-clock system at the place of employment and it needs to be mandatory for all employees to clock in and out. Employer’s who do not have such a system, the burden of proof is on them in case of dispute that reaches the labor court. Today, with advanced technology, it is possible to track almost any employee’s work hours (cash register, internet, cell phone, sms, biometric clock or even old-school punch clocks that use cardboard time-sheets)
Note that hand written or excel sheet time tracking is only valid if each entry/exit is signed by both the employer and the employee each day – not one monthly signature.

3. If you have a contract with an employee for global (all inclusive) salary, make sure the contract states specifically the realistic number of over-time hours that reflect actuality and are included in the global pay. Note that stating the maximum number allowed by the law can also be problematic, as labor court tends to rule that it is not reflective of the truth, but fabricated. the burden of proof as to whether an employee worked over-time hours, or not, is upon the employer. There are many consequences that may occur do to not having a time-clock, both civil and criminal.

The criminal element is more severe and can result in administrative fines, indictment, conviction, criminal record and even imprisonment ! The civil element, according to sectrion 24 of “the protection of salary” law states that burden of proof, in cases of disagreement is the employer’s responsibility. Without a proper time tracking system, it will be very difficult for an employer to prove that an employee did not work over-time hours.

It is also recommended to quarterly review the actual number of over-time hours the employee worked and update both the contract and payslip accordingly.

4. It is also highly recommended to separately itemize global over-time hours on the payslip. Do not use one line “salary”. This will, most likely, end up costing you if you are spot checked by the regulation dept. of the Ministry of Labor” or if contested by an employee in labor court. The number of hours for which global payment is made, according to the employee’s work contract, should also be specified on the payslip. It is not enough to simply state the employee’s total number of hours worked, this will actually work in favor of the employee.