Paid Holidays and Overtime

The summer months are peppered with one-off holidays. For many organizations, these are typically paid days off. That in and of itself is pretty straightforward, however adding overtime into the mix can make things a little more complicated. There’s a difference between getting paid for a holiday that counts toward a 40-hour work week and, well, actually working 40 hours in a week. 

How are paid holidays factored into employee pay?

There’s a lot to break down and understand here, but knowing how to count holiday hours and communicate them to your employees could help prevent wage disputes in the future. Let’s use Labor Day as an example. In this instance, Labor Day is a paid holiday that’s observed by everybody in the company. No one is working, so we don’t run into the issue of holiday pay, the day off simply counts toward an employee’s 40 hours of work for the week. 

Now, let’s say one of your employees worked an additional 8 hours later that week. Maybe they’re catching up on what was missed for the holiday. Technically speaking, this would bring their total hours for the week to 48, meaning they’re owed 8 hours of time and a half pay, right? Wrong. 

While it’s true that those 8 Labor Day hours would still put an employee at 40 total hours for the week, overtime pay is only required for actual worked hours. That means any non-essential employee could still work 40 actual hours and not be eligible for any overtime. In other words, in a week with a paid holiday, an employee would have to log 48 (including those from the holiday) before any overtime pay is awarded. 

This math follows this basic formula. So, if your organization gives people off for both Christmas Eve and Christmas Day, that’s a total of 16 hours of holiday pay. That means an employee would have to log a grand total of 56 hours before their overtime would kick in. 

That goes for vacation, leave and sick days, too

Even if the entire organization is still working, employees cannot count paid time off or paid sick days toward hitting the overtime threshold. Again, it’s important that holidays, PTO and sick day hours are all documented separately on pay stubs. 

There are a number of statutory exclusions affecting employee pay. You can learn more about them from the FLSA here

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Tracking and communicating actual hours worked doesn’t have to turn into an argument between you and an employee. With CTR’s isolved software, you can give your employees real time access to their hours worked. We’d love to show you how. Contact CTR to learn more.