This question came in from a client who subscribes to my HR HelpLine service. Here’s the question and my advice:
Client Question: When calculating overtime pay, do we have to factor in holiday and vacation time into the overtime?
Answer: No. Overtime payment is based on hours worked. Under the federal Fair Labor Standards Act, employers must pay time and one half for all hours worked that exceed 40 in the pay period. Holiday and vacation pay is not considered work time.
As an example, in a hypothetical work week with Monday as a paid holiday under your benefit plan, if the employee received 8 hours holiday pay on Monday, worked Tuesday through Friday, 8 hours each day, and 4 hours on Saturday, the pay would be calculated as:
8 hrs. holiday pay
+ 36 hours regular pay (32 hrs., Tues –Friday plus 4 hrs. on Saturday)
44 hours total at straight time
There is no overtime requirement since the regular hours worked (36) did not exceed 40. You should pay the employee 44 hours at the straight time rate.
Note: Employers should note in their policies that overtime is based on hours worked and that holidays, vacation, sick and personal time are not included in the calculation of overtime. Finally, if you have a union contract (this client did not), check how the contract addresses this issue.
If you need expert advice on employee issues, call the HR HelpLine. I provide operational advice, not legal advice, on how to address difficult employee and organizational issues