The question of whether paid holiday hours contribute to an employee’s overtime calculation is a common source of confusion. This complexity arises because holiday pay and overtime pay are governed by different rules. Understanding the distinction between time worked and time paid is necessary to correctly calculate compensation when a workweek includes a recognized holiday. The rules hinge on federal law, which sets the baseline, but can be modified by state regulations or specific company policies.
Understanding the Federal Overtime Standard
Overtime pay is required for most non-exempt employees under the Fair Labor Standards Act (FLSA). The FLSA is the federal law establishing minimum wage, overtime pay, recordkeeping, and youth employment standards. This law mandates that non-exempt employees must be paid overtime for all hours worked over 40 in a defined workweek. The overtime rate must be at least one and one-half times the employee’s regular rate of pay, often called “time and a half.”
The FLSA defines the workweek as a fixed period of 168 hours (seven consecutive 24-hour periods). The employer must clearly define when this workweek begins. A fundamental aspect of the federal standard is that overtime is calculated based solely on “hours actually worked” within that period. The FLSA does not limit the total hours an employee aged 16 or older can work, only that time over 40 must be compensated at the premium rate.
Do Paid Holiday Hours Count Toward the 40-Hour Overtime Threshold?
Under federal law, paid time off, including paid holiday hours, does not count as “hours worked” toward the 40-hour overtime threshold. The FLSA’s overtime requirement is strictly tied to the time an employee is engaged in their principal activities for the benefit of the employer. Since an employee is not actually working during a paid holiday, those hours are not factored into the overtime calculation.
Federal statute 29 U.S.C. § 207(e) defines payments excluded from the regular rate of pay, including payments for periods when no work is performed due to holidays, vacations, or illness. Holiday pay is considered a contractual benefit or a voluntary payment provided by the employer, not a required wage under the FLSA. For example, an employee who works 32 hours and receives 8 hours of paid holiday leave has only 32 hours of work for federal overtime purposes, and no overtime is due, even though the employee is paid for 40 hours in total.
Calculating Overtime When Working on a Holiday
When an employee physically works on a recognized holiday, those hours are treated as “hours worked” and contribute toward the 40-hour overtime threshold. The FLSA does not distinguish between hours worked on a Monday or a holiday; it only considers the total number of hours worked in the defined workweek. The law does not require extra pay simply for working on a holiday.
For example, if an employee works 32 hours Monday through Thursday and an 8-hour shift on the holiday (Friday), they have worked 40 hours total. In this scenario, no FLSA overtime pay is due, as the 40-hour threshold was not exceeded. If the employee works 40 regular hours Monday through Friday and an 8-hour shift on a holiday (Saturday), the total hours worked is 48. This employee is entitled to 8 hours of FLSA overtime pay at time and a half.
The Difference Between Holiday Premium Pay and Overtime Pay
It is important to differentiate between FLSA overtime pay and holiday premium pay, as they serve different purposes. FLSA overtime is a legally mandated requirement for all hours worked over 40 in a workweek, calculated at 1.5 times the regular rate. This compensation is a floor set by federal law and cannot be waived.
Holiday premium pay is the extra compensation a company voluntarily provides for working a recognized holiday. This compensation is typically a matter of company policy, a collective bargaining agreement, or an employment contract, and is not required by the FLSA. This premium pay might be an additional half-time, full-time, or even double-time pay for the hours worked.
Receiving holiday premium pay does not automatically mean the employee is receiving FLSA overtime pay. The premium is extra money paid for working on an inconvenient day. If the premium is high enough (e.g., time and a half or double time), the employer may credit the extra amount paid against any FLSA overtime owed for exceeding 40 hours. The federal government only mandates the time-and-a-half rate for hours over 40, not for working on the holiday itself.
How State Laws and Employer Policies Can Change the Rules
While the FLSA establishes the national minimum standard, state or local laws, or employer policies, can offer more generous provisions. For instance, some states have daily overtime requirements, meaning employees must receive time and a half for hours worked over a certain number in a single workday. These state laws supersede the federal standard when they offer greater employee protection.
State or local regulations might also introduce specific rules regarding paid time off. Although less common, some jurisdictions may require certain types of paid leave to count toward the weekly overtime calculation. Employees should check their state’s labor laws and their employer’s specific handbook or union contract. Employer policies can voluntarily include holiday pay in the 40-hour calculation or offer a higher holiday premium pay.
Overtime Rules for Exempt Employees
The discussion regarding the 40-hour threshold and FLSA overtime is irrelevant for employees classified as exempt from the FLSA’s overtime requirements. Exempt employees are typically executive, administrative, or professional staff who meet specific duties tests and are paid on a salary basis above a certain threshold. These employees are compensated for the job they perform, not the number of hours they work.
Since their compensation is not based on an hourly wage calculation, exempt employees are not entitled to FLSA overtime, regardless of how many hours they work, including work performed on a holiday. Compensation for holidays, whether paid time off or extra pay for working, is determined entirely by the employer’s internal policy. Providing paid holidays to exempt staff is a benefit and not a requirement of federal wage law.