No pyramiding: Overview, definition, and example
What is no pyramiding?
The no pyramiding rule is a contractual provision that prevents employees from receiving multiple forms of compensation or benefits for the same work or time period. This clause ensures that an employee cannot stack or duplicate benefits, such as overtime pay, bonuses, or leave accrual, in a way that results in double payment.
For example, if an employee is already receiving overtime pay, the no pyramiding rule may prevent them from also receiving holiday pay for the same hours unless specifically allowed by company policy.
Why is no pyramiding important?
The no pyramiding rule is important because it helps employers maintain fair and predictable compensation policies while preventing unintended financial liabilities. Key benefits include:
- Avoiding duplicate payments – Ensures that employees do not receive overlapping pay for the same hours worked.
- Clarifying pay structures – Defines how different types of compensation interact, such as overtime, holiday pay, or premium pay.
- Ensuring compliance with labor laws – Aligns with wage and hour regulations while preventing disputes over pay calculations.
This clause is commonly found in union contracts, collective bargaining agreements, and employment policies to clarify how pay structures are applied.
Understanding no pyramiding through an example
Imagine a manufacturing company has a unionized workforce with negotiated overtime and holiday pay policies. Under the contract, employees receive:
- Overtime pay at 1.5x the regular rate for hours worked beyond 40 hours per week.
- Holiday pay at double the regular rate for work performed on a company-recognized holiday.
Without a no pyramiding clause, an employee working overtime on a holiday might argue that they should receive both overtime (1.5x) and holiday pay (2x), resulting in 3.5x pay for the same hours. The no pyramiding clause prevents this by specifying that only the highest applicable rate applies—in this case, 2x holiday pay.
In another scenario, a healthcare worker receives night shift differential pay and overtime pay. A no pyramiding clause in their employment agreement ensures that only one premium rate applies per shift, preventing double payment.
An example of a no pyramiding clause
Here’s how a no pyramiding clause might appear in an employment agreement:
“Premium pay, including but not limited to overtime, holiday pay, and shift differentials, shall not be pyramided or duplicated for the same hours worked. Employees shall receive the highest applicable premium rate for the period worked, but no combination of premium payments shall exceed the maximum allowable rate.”
Conclusion
The no pyramiding clause prevents employees from receiving duplicate compensation for the same work period, ensuring fair pay practices and financial predictability for employers.
By including a clear no pyramiding policy in employment agreements or collective bargaining contracts, businesses can avoid payroll disputes, ensure compliance with wage laws, and maintain structured compensation policies.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.