Does Holiday Pay Count Toward Overtime? A Comprehensive Guide

For many employees, the holidays come with additional perks like holiday pay—extra compensation for working on designated holidays. But a common question arises: Does holiday pay count toward overtime?

The answer depends on federal and state labor laws, as well as the employer’s specific policies. In this article, we’ll break down the relationship between holiday pay and overtime, explain how it’s calculated, and clarify what employees and employers need to know.

What Is Holiday Pay?

Holiday pay is additional compensation provided to employees who work on holidays or as a benefit for taking the day off during designated holidays.

Key Types of Holiday Pay:

Extra Pay for Working Holidays: Often referred to as “time-and-a-half” or double-time pay.
Paid Time Off (PTO) for Holidays: Regular pay provided for holidays when employees don’t work.

What Is Overtime Pay?

Overtime pay is extra compensation for hours worked beyond the standard 40-hour workweek. Under the Fair Labor Standards Act (FLSA) in the United States, eligible employees must be paid 1.5 times their regular rate of pay for overtime hours.

Example: An employee earning $20/hour would receive $30/hour for overtime.

Does Holiday Pay Count Toward Overtime?

Short Answer:

No, holiday pay typically does not count toward the calculation of overtime hours under the FLSA.

Explanation:

The FLSA requires overtime pay only for hours actually worked beyond 40 in a workweek. Holiday pay—whether for working on a holiday or receiving paid time off—does not count as hours worked, and therefore, it is excluded from overtime calculations.

Example Scenario:

An employee works 32 hours in a week and receives 8 hours of holiday pay (totaling 40 hours).
Since the employee only worked 32 hours, they are not entitled to overtime pay.

When Holiday Pay May Count Toward Overtime

While the FLSA excludes holiday pay from overtime calculations, certain scenarios may differ:

Employer Policies

Some employers choose to include holiday pay when calculating overtime as a part of their internal policies.

Example: An employer offers overtime pay for hours exceeding 40, including holiday pay.

State Labor Laws

Certain states may have specific labor laws requiring holiday pay to count toward overtime. Employers must comply with both federal and state regulations, whichever provides greater benefits to employees.

Tip: Check your state’s labor laws or consult a labor attorney for clarity.

How Is Holiday Pay Calculated with Overtime?

Here’s how to calculate pay when holiday hours and overtime hours are involved:

Scenario 1: Holiday Pay Without Overtime

Employees work 32 hours in the week and receive 8 hours of holiday pay.
Total pay includes:
- Regular pay for 32 hours.
- Holiday pay for 8 hours.

No overtime is owed because the total worked hours do not exceed 40.

Scenario 2: Holiday Pay and Overtime

Employees work 45 hours in a week and receive 8 hours of holiday pay.
Total hours worked: 45 (5 hours of overtime).
Pay breakdown:
- Regular pay for 40 hours.
- Overtime pay (1.5x regular rate) for 5 hours.
- Holiday pay for 8 hours (does not affect overtime rate).

Important: Overtime is only calculated based on the 45 hours worked, not the holiday hours.

Employer Best Practices for Holiday and Overtime Pay

Clearly Define Policies: Ensure your company’s holiday and overtime policies are clear, detailed, and compliant with labor laws.
Communicate with Employees: Provide employees with clear explanations about how holiday and overtime pay are calculated.
Stay Compliant with Labor Laws: Regularly review federal and state labor laws to ensure compliance.
Consider Employee Morale: Offering inclusive overtime policies that count holiday pay can boost employee satisfaction and retention.

Conclusion

So, does holiday pay count toward overtime? Under federal law, holiday pay is typically excluded from overtime calculations since it doesn’t represent actual hours worked. However, employer policies and state labor laws can sometimes make exceptions, so it’s important to understand the specific rules that apply to your situation.

For employees, knowing your rights ensures you’re properly compensated. For employers, clear and fair policies help avoid misunderstandings and foster positive workplace relationships.

Need more clarity about holiday or overtime pay? Consult your HR department or a labor law expert for guidance!

FAQs

1. Does holiday pay count toward overtime under the FLSA?

No, the FLSA excludes holiday pay from overtime calculations because it is not considered hours worked.

2. Are employers required to offer holiday pay?

The FLSA does not mandate holiday pay. It is typically offered as a benefit by employers.

3. Can employers count holiday pay toward overtime voluntarily?

Yes, employers can choose to include holiday pay in overtime calculations as part of their internal policies.

4. What happens if I work overtime on a holiday?

If you work overtime on a holiday, you may receive overtime pay for hours worked beyond 40 in addition to your holiday pay, depending on your employer’s policies.