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Calculating Overtime Pay When Holiday Pay is Included

by The Human Equation, Inc. on 4/15/2008
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During a recent pay period, a non-exempt employee, because she worked on a paid holiday within that workweek, became entitled to 40 hours of regular pay plus eight hours of holiday pay. Since she is technically being compensated for 48 hours in a single workweek, am I required to pay her time and one-half for the additional eight hours?

No. The Fair Labor Standards Act (FLSA) is the federal law requiring that covered, non-exempt workers be paid not less than time and one-half the employee's regular rate for time worked over 40 hours in a workweek. The FLSA does not, however, require employers to give their employees time off for holidays, either with or without pay. If an employer allows an employee to take paid time off for a holiday, the time off is not considered "hours worked" and need not be included in the "hours worked" total used to calculate overtime pay. This is because, under the regulations interpreting the FLSA, certain payments made to an employee for periods during which he or she performs no work because of a holiday are not regarded as compensation for working.

Under this framework, an employer, when determining whether or not overtime compensation is due, need only consider the hours actually worked by an employee. In this situation, although the employee is being paid for the eight hours of holiday time, she did not actually work those hours; she actually worked only a total of 40 hours during the workweek. Accordingly, she is not entitled to any compensation at the overtime rate.

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Categories: 2008

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