An hourly rate on its own establishes nothing about annual income, because it says nothing about how many hours are actually worked. Two borrowers earning $28 an hour can have annual incomes $30,000 apart depending on whether their hours are guaranteed at 40 a week or fluctuate between 15 and 35. This is the first thing to sort out on any hourly file, before doing any math at all.
Guaranteed hours means the employer has committed, in writing — in an offer letter, employment contract, or collective agreement — to a minimum number of hours per week, regardless of business conditions. When that guarantee is documented, hourly rate multiplied by guaranteed hours behaves very much like a salary: it's a stated, ongoing commitment rather than a variable result, and it's generally treated with the same confidence as Module 01's salaried baseline once the employment letter confirms it clearly.
Without a guarantee, hours move with demand — common in retail, hospitality, and many trades. This is where averaging becomes necessary: rather than relying on the most recent pay period (which could be an unusually busy or unusually quiet stretch), a longer look-back — commonly the last two years of T4/NOA history alongside recent pay stubs — establishes a realistic ongoing pattern.
The averaging convention exists precisely because a single strong month tells you nothing about the other eleven, and a single slow month tells you nothing about the borrower's actual earning capacity either. Two years smooths both distortions out.
The set here is heavier than a guaranteed-hours file: two years of T1/NOA (or T4s), a current pay stub, and an employer letter confirming the hourly rate and the ongoing nature of the role — including, ideally, a statement about typical scheduled hours, even without a formal guarantee. Cross-checking the T4's total employment income against the hourly rate and a reasonable estimate of annual hours is a useful sanity check before submitting.
A borrower in their first hourly role — under a year, no prior T4 at this rate — has no two-year average to draw from, which is exactly the tenure problem the intro module raised. In that situation, the safer path is usually to rely only on any guaranteed portion of the hours that is actually documented, and treat anything beyond that as unproven until a longer history exists.
A borrower works retail at $22/hour with no guaranteed minimum hours. Their pay stub from the last two weeks shows unusually high hours because of a holiday rush. What income figure should the file be built on?
Averaging over a real history is correct because variable-hour income, by definition, doesn't have a single representative period — a holiday rush overstates it just as badly as a slow month understates it. The tempting wrong answer is using the recent busy stub: it's real data and it's current, which makes it feel more reliable than an average, but 'current' and 'representative' are not the same thing when hours genuinely fluctuate. The lowest-period approach isn't conservative so much as arbitrary — it throws away real information the same way the high-period approach does.
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