How Do I Calculate Overtime and Holiday Pay For Salaried and Hourly Workers?

How can you prevent holiday and overtime pay problems?

Let’s dive in.

5 Important Things to Know About Paid Holidays and Overtime

1. The Fair Labor Standards Act  (FLSA) doesn’t require U.S. employers to provide paid holidays.
2. The FLSA requires employers to pay workers a rate of 1 1/2 times the normal wage for overtime. When an employee exceeds 40 hours, the overtime rate kicks in. This is commonly referred to as ‘time and a half.’
3. The overtime rules apply regardless of whether or not the work occurred on a holiday.
4. Employers have an obligation to both non-exempt salaried workers as well as hourly employees. The frequency the company runs payroll (bi-weekly, semi-monthly, monthly) has no impact on how overtime is calculated.
5. Overtime is based on a fixed 40-hour workweek as defined by the FLSA. Each workweek stands alone when calculating overtime. The fixed workweek is a seven-day period. Averaging hours worked over two or more workweeks is not allowed.

Daily Overtime vs. Weekly Overtime

Some states, including California, calculate overtime per day, per week, and by number of days worked consecutively.

The employer must pay at least 1 1/2 time the regular rate for hours worked past 8 in a single day. If the employee works more than 12 hours in a day, time worked after 12 hours is calculated at double time, or twice the employee’s regular rate of pay.

On the seventh day the employee works in the week, double time kicks in immediately and applies to all hours worked that day.

California has special overtime rules for agricultural workers. Other exemptions to the overtime laws can be found at the State of California Dept. of Industrial Relations.

What Are ‘Paid Holidays?’

If an employer provides a ‘paid holiday’ it means they pay their employees the regular pay rate and let the employees have the day off. As mentioned previously, this is at the discretion of the employer.

Paid holiday policies should be outlined in the employment contract.

Though the federal government does not require employers to provide paid holidays, employers who choose to offer them should apply the policy consistently.

Employees have rights concerning taking time off for religious observances.

This is from the EEOC:

Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on religion. This includes refusing to accommodate an employee’s sincerely held religious beliefs or practices unless the accommodation would impose an undue hardship (more than a minimal burden on operation of the business). A religious practice may be sincerely held by an individual even if newly adopted, not consistently observed, or different from the commonly followed tenets of the individual’s religion.

The 11 most common paid holidays in the U.S.

1. New Year’s Day
2. Martin Luther King Day
3. President’s Day
4. Memorial Day
5. Independence Day
6. Labor Day
7. Columbus Day
8. Veteran’s Day
9. Thanksgiving Day
10. Day after Thanksgiving
11. Christmas Day

Paid holidays have become an assumed benefit. Companies who don’t provide them are the exception.

Your holiday pay policy is part of your company’s overall PTO program. It should be communicated in your employee handbook. New hires should be notified of the policy during onboarding.

The key to avoiding payroll problems and maintaining FLSA compliance is accurate employee timekeeping. TimeWorksPlus has customizable settings to accommodate your company’s holiday pay policy. It can also manage state-specific overtime regulations.