Does Holiday Pay Count Toward Overtime Under Federal Law?

Under the federal Fair Labor Standards Act (FLSA), paid holiday leave generally does not count toward the hours used to determine overtime. For covered nonexempt employees, federal overtime is generally due when actual hours worked exceed 40 in the employer’s defined workweek. As a result, an employee can receive pay for more than 40 hours in a holiday week without earning federal overtime if the extra paid hours are holiday leave rather than time worked. Hours an employee actually works on a holiday do count toward the weekly total. Holiday-work premium pay is a separate issue: it does not change whether hours count as worked, but it may affect how overtime pay is calculated.

How Holiday Pay Affects the 40-Hour Threshold

The U.S. Department of Labor explains that paid time off for holidays, vacations, or illness is not hours worked for federal overtime purposes. The FLSA Hours Worked Advisor describes this distinction. In short, payroll must distinguish between hours for which an employee receives pay and hours the employee actually worked.

For example, suppose an employee works 40 hours from Tuesday through Friday and receives eight hours of paid holiday leave on Monday. The employee receives pay for 48 hours if the employer’s policy provides holiday pay, but has worked only 40 hours. The holiday leave alone does not create federal overtime.

If the employee instead works 44 hours during the week and also receives eight hours of paid holiday leave, four hours are overtime under the federal weekly rule. The employee has 52 paid hours, but only the 44 hours actually worked count toward the 40-hour threshold. This is why a paycheck or timecard total cannot be used by itself to determine overtime.

What Counts If an Employee Works on a Holiday?

Work performed on a holiday counts toward overtime in the same way as work performed on any other day. For example, an employee who works eight hours on a holiday and another 36 hours that week has worked 44 hours. Four hours are overtime under the federal rule.

An employer may have a policy that pays a premium for holiday work, such as time-and-a-half or double time. That premium is separate from the question of whether the hours count as worked. Whether a holiday premium must be included in the regular rate used to calculate overtime depends on how the premium is structured and whether it qualifies for exclusion under the FLSA.

Federal employees may be subject to holiday scheduling and premium-pay rules that differ from the private-sector framework. The U.S. Office of Personnel Management explains those rules in its guidance on holidays, work schedules, and pay.

How to Keep Paid Time and Work Time Straight

Holiday time may appear in the same payroll system as regular work, vacation, or sick leave. For an accurate overtime calculation, keep two totals distinct: all compensated hours and actual hours worked. The federal overtime threshold is based on the second total, not on every hour that appears on a paycheck.

This is the same basic distinction that applies to other paid leave. For instance, PTO and federal overtime also depend on whether the time was worked rather than simply paid. Clear earning codes for worked hours, paid holiday leave, and any holiday premium make it easier to review a calculation and explain it to employees.

Common Holiday-Week Overtime Errors

• Adding holiday leave to hours worked. Forty hours worked plus eight hours of paid holiday leave does not, by itself, create eight federal overtime hours.
• Checking only the daily schedule. The federal standard generally measures overtime by the workweek. Working more than eight hours on a particular day does not automatically create federal overtime if total hours worked for the week do not exceed 40.
• Combining different kinds of holiday pay. Paid holiday leave, premium pay for working on a holiday, and overtime pay are distinct. Each should be identified correctly in payroll records.
• Using the calendar week automatically. The employer’s designated workweek controls the federal calculation. Count the employee’s actual work hours across that entire workweek, including when a holiday falls near its beginning or end.

What Employers Should Check Before Payroll

Review the written holiday policy to understand who receives paid holiday leave and whether the policy sets conditions for receiving it. Check separately whether work performed on a holiday earns premium pay.

Use timekeeping categories that distinguish work from paid leave. Then total actual hours across the complete workweek and review unusual weeks for extra shifts, schedule changes, or missing punches. Apply the federal rule to the actual hours worked while also checking whether applicable state law sets a different or more protective overtime standard.

*This article is for general informational purposes only and is not legal advice.