Overtime and holiday pay: Two different animals

March 6, 2013

During the recent holiday season, many employers have had employees in their offices asking “Where’s my overtime pay?”

This may be the first time an employee scrutinized the columns on their paystub and realized they did not understand the differences between productive, nonproductive, and holiday pay.

For example, let’s consider a week where an employee works a 40 hour week and also receives 8 hours of holiday pay. The holiday hours paid are counted as straight time, unless the company has a different policy in place, either via the Company handbook or a union contract.

The underlying reason for the handling of pay in this matter is that the Fair Labor Standards Act (FLSA) distinguishes between “productive” and “non-productive” hours in its overtime rules.

Productive time

An employer who requires or permits a non-exempt employee to work overtime (for FLSA purposes, hours worked over 40 during the Company’s standard work week) is generally required to pay the employee premium pay for such overtime work. Employees covered by the FLSA must receive overtime pay of at least one and one-half times their regular rates of pay. The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime hours are worked on such days.

The FLSA, with some exceptions, requires bonus payments to be included as part of an employee’s regular rate of pay in computing overtime. Calculating actual base rate and overtime rate in situations that include bonuses, commissions, and/or multiple base hourly rates is an explanation for another time, given that it nearly requires a math degree!

Extra pay for working weekends or nights is a matter of agreement between the employer and the employee (or the employee’s representative/union). Contrary to what employees may believe, the FLSA does not require extra pay for weekend or night work or double time pay.

Nonproductive time

The FLSA does not require payment for time not worked, such as vacations or holidays (federal or otherwise). These benefits are generally a matter of agreement between an employer and the employees, via the Company’s handbook or a union contract/collective bargaining agreement.

Exceptions to legal requirements to pay vacation and/or sick pay (non-productive pay) may arise when dealing with government contracts to which the McNamara O’Hara Service Contract Act (SCA) apply and/or projects during which the Davis-Bacon Act applies.

Need Help?

EctoHR, Inc. can assist your company with creating and implementing overtime and holiday pay practices that conform to legal requirements and match with best practices in your industry. Contact EctoHR team members at 810.534.0170 or email them at hr@ectohr.com.

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