Can an Employee Earn Holiday Pay and Overtime in the Same Week?
Many small business owners have questions about holiday pay and overtime for their employees. When a federal holiday, such as July 4, falls on a Saturday, for example, you may consider giving your employees a holiday day the week before or after. It’s your choice whether you pay employees for a holiday or even give them a day off. Federal employees will observe the holiday on July 3 but there is no requirement for employers to provide a day off or holiday pay.
If you do pay holiday pay, how do you handle overtime for eligible employees? Federal wage and hour law requires that overtime is paid to non-exempt employees for all hours worked over 40 in a workweek. The key word here is “worked.” Holiday pay is not considered hours worked so it does not go into an overtime calculation.
If an employee works 36 hours from Monday through Thursday and you give everyone Friday (July 3) off, you are not required by federal law to pay overtime. Your state (for example, California) may require overtime to be paid for employees who work more than 8 hours in one work day. When local and state laws get too confusing, a call to the Department of Labor can be helpful.
An employer recently asked me if they could include holiday pay when calculating overtime during one holiday week and not another. They had problems getting employees to work during one specific week. I recommended that they adopt a consistent policy and not pick and choose premium payments. There ust be another incentive to get employees to work on one particular holiday—call it something else, not overtime for the week.
Other kinds of pay for non-work time are also left out of total hours for overtime purposes, sick days, vacation, bereavement, etc. Don’t wait until July 1 to announce your policy. Clear, consistent communication will avoid the fireworks of upset employees who think they were paid incorrectly.
FAQs about holiday pay and overtime
Below we have summarized the most important questions and answers on the subject.
What is holiday pay vs overtime pay?
Federal wage and hour law requires businesses to pay overtime to non-exempt employees for all hours worked over 40 in a workweek. Since holiday pay is not considered hours worked, it does not go into an overtime calculation.
Can you use PTO to go into overtime?
Pay for non-work time such as sick days, vacation, bereavement, etc., are left out of total hours when calculating overtime because this type of paid time is not considered "hours worked."
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