BPHR’s Director Lisa Salcido, SPHR, SHRM-SCP provides answers to your pressing HR questions.
Question: Does paid time off (holiday, sick, vacation) count toward overtime calculations?
Answer: No, only hours actually worked count toward overtime.
With the new federal overtime rule that will make over a million workers now eligible for overtime, it’s essential that employers manage and calculate overtime correctly.
The Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees time and one half of the employees’ regular rate of pay when hours worked exceed 40 in the workweek. Employers do not have to count paid time off (PTO), paid holidays, vacation, personal and sick hours when determining if employees are owed overtime pay for hours over 40 in a workweek. These hours are not actually “worked” and are therefore not counted toward overtime under the FLSA.
For example, if Monday was a paid holiday observed by your company and no hours were worked, a non-exempt employee could still work a full 40 hours the remainder of this week without being owed any overtime pay. For a paid 8 hour holiday and 40 hours of work an employee would be paid 48 hours of straight time.
As another example, if a non-exempt employee works 34 hours Monday through Thursday and then takes 8 sick hours on Friday, the employee would be paid at their regular rate for the 42 hours. Overtime is calculated only on actual hours worked and not the total hours tracked for the workweek.
California is the exception, where daily overtime may be owed if an employee works more than 8 hours in a day. Employees correctly classified as exempt are not eligible for overtime.
To protect your company from wage theft claims, employee pay statements should show a breakdown of regular pay, paid time off and overtime.
Take a More Balanced Approach to HR
When tricky issues arise, you’ll appreciate having a knowledgeable resource by your side. That’s what you get as a BPHR client. Schedule your free phone consultation today to learn how your organization can benefit from our services.
Have a question for Lisa? Email her directly.
DISCLAIMER: The material presented on this page is for informational purposes only and does not constitute legal advice or legal opinion.