MSP payroll: on-call rules, overtime averaging, and subcontracted technicians

On-call time and the ESA's three-hour rule

Ontario's Employment Standards Act generally does not require pay for the hours a technician spends simply carrying a pager and being reachable, as long as they are free to go about their evening away from the client site. The moment a call actually comes in and the technician logs on or drives out, that is working time, and if the job runs short the minimum three-hour rule in the regulations usually applies: an employee called in to work is generally entitled to at least three hours' pay at their regular rate, even if the fix takes twenty minutes.

The distinction matters for how you structure a rotation. A flat monthly stipend for carrying the phone, on top of paid callback time when it is actually used, keeps the two obligations separate and auditable — blending them into one number makes it hard to prove either piece was paid correctly if a technician disputes a pay period.

Overtime averaging for a schedule that is never the same two weeks running

A help desk technician might work a quiet 34-hour week followed by a 52-hour week covering a colleague's on-call rotation, and calculating overtime week by week punishes that pattern unfairly on both sides. The ESA permits an averaging agreement — in writing, signed before the period it covers begins, and generally capped at four weeks — that lets overtime be calculated on the average hours across the block instead of each single week. It has to be renewed before it expires; an averaging agreement that has quietly lapsed is a common finding when we review a growing MSP's payroll for the first time.

Subcontracted overflow technicians and the line CRA actually watches

Most MSPs lean on subcontracted technicians at some point: a specialist for a niche platform, overflow coverage during a big rollout, or a technician who prefers invoicing over a T4. That arrangement holds up when the facts support it — the subcontractor uses their own tools and ticketing login where practical, sets their own hours around the work, can decline a job, and ideally serves other clients too. It breaks down when a subcontractor works exclusively for you, on your schedule, inside your PSA, indistinguishable from an employee except for the invoice. See how the CRA actually decides employee versus contractor status for the full test. A reclassification years later means retroactive CPP and EI, with penalties, on every payment made in the meantime.

Paying for growth: commission on net-new MRR

Account managers and fractional vCIOs are often paid a base salary plus commission tied to new monthly recurring revenue they bring in, a structure that rewards the right thing only if the plan matches how MRR actually behaves. A clawback clause covering the first three to six months of a new contract is standard practice, because a client who churns in month two should not have already paid out a full year's commission. We set commission accruals up so the payroll expense lands in the same period as the revenue it is tied to, not the month the ink dried. A separate incentive worth structuring on its own terms is a technician retention or certification bonus tied to a specific vendor accreditation — these are usually one-time payments rather than ongoing commission, and mixing the two plans together makes both harder to evaluate at review time.

The payroll rails that keep pace with headcount

Once an MSP crosses a handful of employees, an RP payroll account, a cloud platform such as Wagepoint or QuickBooks Online Payroll, and remittances on the standard CRA schedule replace whatever manual process got the business through its first two hires. Ontario's Employer Health Tax exemption covers payroll up to $1,000,000 for an eligible employer, which most independent MSPs stay under, but a franchise or multi-location group under common control should confirm how the exemption is shared before assuming it applies in full. We run this alongside the deferred-revenue and hardware-margin bookkeeping covered in our MSP bookkeeping guide.