How should we handle overtime and holidays? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

How should we handle overtime and holidays?

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Q. I am wondering about rules relating to overtime during weeks with holidays. We pay a higher rate than normal for employees who work on the day of a holiday. Do we need to include the additional pay rate in calculating any overtime owed during the same week? Also, full-time employees who are not working holidays are paid for eight hours at their regular hourly rate for the day of the holiday. Do we need to include these holiday hours in tracking whether an employee has worked more than 40 hours during a workweek?

A. You don’t need to include the holiday premium in calculating an employee’s regular rate of pay for overtime purposes. Although the regular rate of pay is supposed to include all remuneration paid to an employee, there are several narrow exceptions to this general rule. Premium pay, such as additional pay for holidays, weekend or overtime work, is included among these exceptions.

Similarly, you aren’t obligated to include any of the holiday pay in calculating either number of hours worked or the regular rate of pay for an employee who did not work on a holiday but who received holiday pay.

For example, if an employee is given Memorial Day off with pay for eight hours at $20 per hour, and he ends up working 41 hours over the remaining days of that workweek, he would be entitled to one hour of overtime (not nine hours) at a rate of $30 per overtime hour.

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