How Does Holiday Overtime Pay Work?

vertime laws in the United States can seem complex and, at times, inscrutable. In addition to calculating overtime hours, you need to take into account factors like salaried overtime, overtime-exempt professions and more.

One question that we hear often is whether or not holidays are an additional factor like the ones mentioned above.

If so, what holidays give employees the right to overtime pay? Does the difference between a federal and a paid holiday matter? And are the rules for holidays the same in all states?

How Many Kinds of Holiday Are There, and Do They Grant Holiday Overtime Pay?

This is actually where a number of misconceptions can confuse employers. According to American labor laws, there are no official holidays that require employees to receive overtime pay.

What the law does say, however, is that there are two different types of holiday: federal holidays and paid holidays.

Federal holidays are the major days when government offices are closed — often, many schools, banks, business and more follow suit. There are ten federal holidays in total:

  1. New Year’s Day — Jan 1st
  2. The Birthday of Martin Luther King, Jr. — Third Monday of January
  3. Washington’s Birthday / Presidents Day — Third Monday of February
  4. Memorial Day — Last Monday of May
  5. Independence Day — July 4th
  6. Labor Day — First Monday of September
  7. Columbus Day / Indigenous Peoples’ Day — Second Monday of October
  8. Veterans Day — November 11th
  9. Thanksgiving — Fourth Thursday of November
  10. Christmas Day — December 25th

However, businesses are not required to close on these days, and many (especially grocery stores, restaurants, big-box stores) remain open to capitalize on the larger number of potential shoppers. In this case, employees do not get paid overtime.

Paid holidays, on the other hand, are ones that employees receive compensation for, and often receive either time-and-a-half or double-time for working them. It is not obligatory for employers to provide paid holidays of this sort, but many often do to draw qualified and successful employees.

Paid days off may include the ten federal holidays as well as Christmas Eve, New Year’s Eve, additional days surrounding Thanksgiving, Boxing Day, Easter and other days.

One additional factor to think about are religious exemptions and religious holidays. The Equal Employment Opportunity Commission (EEOC) states that, if a worker belonging to a religious tradition requests a day off in accordance with their practices, the employee must accommodate, with the caveat that not all requests may be honored should it prove to be too large a strain on the business.

If My Business Provides Holiday Pay Overtime, How Do I Calculate It?

The Fair Labor Standards Act (FLSA) of 1937 was passed to guarantee various protections to workers, including the right to overtime for qualifying employees. As mentioned above, the FLSA does not account for holiday pay overtime, but in instances when businesses offer this option to their workers overtime is calculated according to federal law.

The regular overtime pay rate, time and a half, is usually based on a 40-day workweek. This means that any hours worked over 40 are counted as overtime and are paid out at 1.5x the regular pay rate, but during a paid holiday any hours worked on that day automatically get paid out as overtime.

Take for example a worker who makes $20 an hour. If he works a regular week that includes Thanksgiving, his weekly paycheck would look like this:

Note that some businesses offer double-pay instead of pay-and-a-half for time worked on holidays, so if that’s what your company does then you’ll have to adapt the calculation accordingly.

The other main way that holidays can lead to overtime, even for businesses that do not offer paid holidays, is through additional hours worked (especially in retail and hospitality). For companies offering sales-based commissions, which often spike during the December holiday seasons, will have to remember to include commission and bonus rates into their overtime pay strategy.

Are Holiday Pay Overtime Rules the Same in Every State?

While the FLSA provides a federal framework that many states (such as Texas or Arizona) follow to the letter, other states add their own rules.

These rules may impact holiday salaries mainly for the reason just mentioned above: certain stores and other businesses will have longer hours to accommodate periods like Christmas or Black Friday. Some companies will be able to shift their workweeks around to make sure that workers don’t surpass 40 hours total — usually by working more hours on key days like Boxing Day and then working less on the following days.

But other companies, like ones located in states like Nevada or Alaska, will not be able to do so. In states like these, any hours worked more than 8 in one day start counting as overtime. In Colorado, working more than 12 hours a day starts the overtime clock — in California, 8 hours does (with double-time starting after 12 hours).

In Massachusetts, there’s a whole extra set of holiday-related laws known as the Blue Laws. They require that companies not force their workers to be on duty on Sundays and holidays — but when someone does work on these days they get paid out at time-and-a-half. These hours, however, do not count towards the total overtime tally that week (unless this was agreed upon through a prior collective bargaining process.

So while the question of paying out holiday pay overtime seems complicated, it comes down to three simple factors: whether your company provides paid holidays, whether the holiday increased hours worked that week, and what state the business is located in. From there, it’ll be easier to calculate overtime hours, and we at actiTIME have provided a calculator to help you do just that!

Take a look, read up on different state laws and check out all the other great actiTIME resources we’ve designed with you in mind.

Your ultimate guide to productivity and time management