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Overtime in Canada: How It's Taxed and What You Actually Keep
4 min read · March 22, 2026
A common misconception: many Canadians believe overtime is taxed at a special high rate. It isn't. Overtime pay is taxed at exactly the same rates as your regular pay — your marginal rate — which means the tax on overtime is only higher if the extra income pushes you into a higher bracket.
How overtime pay works in Canada
Under federal and most provincial employment standards, you are entitled to at least 1.5× your regular hourly wage (called "time-and-a-half") for hours worked beyond the provincial threshold.
Provincial overtime thresholds for 2026:
| Province | Daily threshold | Weekly threshold |
|---|---|---|
| Ontario (ON) | No daily limit | 44 hours/week |
| British Columbia (BC) | 8 hours/day | 40 hours/week |
| Alberta (AB) | 8 hours/day | 44 hours/week |
| Quebec (QC) | No daily limit | 40 hours/week |
| All others | Varies | 40–44 hours/week |
Real example: Ontario, $22/hour, 45 hours/week
Regular pay: 44 hours × $22.00 = $968.00/week Overtime pay: 1 hour × $33.00 (1.5×) = $33.00/week Total weekly gross: $1,001.00
Annual gross without overtime: 44 hrs × $22 × 52 = $50,336 Annual gross with overtime: $1,001 × 52 = $52,052
The extra $1,716/year in overtime gross is taxed at your marginal rate. At $50k–$52k Ontario income, the combined federal + provincial marginal rate is approximately 27.5%.
Tax on the overtime portion: $1,716 × 27.5% ≈ $472 Overtime you actually keep: $1,716 − $472 = $1,244/year (or ~$104/month)
Why overtime isn't "taxed too heavily"
Your employer withholds payroll tax on your total paycheck each period. A week with overtime looks like higher income to the payroll system, which may withhold slightly more. But when you file your return, CRA calculates your actual annual tax — so any over-withholding comes back as a refund.
The only scenario where overtime genuinely increases your average tax rate is when it pushes you into a higher bracket. Even then, only the income above the bracket threshold is taxed at the higher rate.
CPP and EI on overtime
Yes — CPP and EI are deducted on overtime pay, just like regular pay, until your annual caps are reached ($4,230.45 CPP1 and $1,123.07 EI for 2026). Once those caps are hit, no further CPP or EI is deducted — on overtime or regular pay. Read more about what happens when CPP and EI max out.
Try it in the Earneli calculator
Enter your hourly wage and hours per week in the Paycheck Calculator. If your hours exceed your province's threshold, the calculator automatically splits your pay into regular and overtime, shows the 1.5× calculation, and gives you your full annual take-home including the overtime premium.
💡 The takeaway: Overtime is taxed at your marginal rate — the same as your last dollar of regular income. There's no "overtime tax penalty." Working extra hours always increases your take-home, just at a slightly lower net rate than your base pay.