ASK MICKEY, CPA
QUESTION I’m a small business owner and was considering paying overtime for Holiday pay to discourage absenteeism. Do you have any tips on how to do this?
ANSWER
First, under federal law, non-exempt employees are entitled to overtime pay (at 1.5 times their regular rate) whenever they work more than 40 hours in a workweek. Some states require overtime in additional circumstances. However, paid time off, such as paid holidays, doesn’t count towards hours worked when determining whether overtime is due, unless you have promised otherwise.
Second, under federal law, there’s generally no requirement to pay non-exempt employees a premium for working on a holiday, unless working on the holiday results in the employee working more than 40 hours in the workweek. Some employers choose to offer premium pay to employees as an incentive to work on a holiday.
Finally, under federal law, an employee’s regular rate of pay for the purposes of calculating overtime includes their hourly rate plus the value of nondiscretionary bonuses, shift differentials, and certain other forms of compensation. Employers may exclude premium pay for work on a holiday when determining an employee’s regular rate but only if it’s at least 1.5 times the employee’s normal base. Check your state law, which may have additional rules.
