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Overtime Hours Determination

My new position requires me to do complex payroll that I have never done before. I am unclear on how hours are calculated in the “counts toward overtime” rule. For example, an employee works 40 hours in a week but takes one vacation day. Should she be paid with a pay code that the vacation day “does not” or does count toward overtime? Or if an employee works only 24 hours a week does the one personal day she took require a “does not count” toward overtime? In essence, how many hours does someone have to work for these codes to apply? Thanks for any reply to this question!

The federal Fair Labor Standards Act (FLSA) establishes compensation guidelines for employees. Under the FLSA, employees are either non-exempt or exempt.

Non-exempt employees must be paid for all hours worked and are subject to overtime and minimum wage requirements prescribed by the FLSA. Conversely, exempt employees receive a fixed predetermined salary and are excluded from overtime pay provisions.

Non-exempt employees must be paid for every hour actually worked. Paid time off including holidays, vacation, or sick leave is not considered time worked. Thus, such time need not be counted towards the calculation of overtime.

Let’s say a non-exempt employee worked 38 hours and used 8 hours of vacation time, totaling 46 hours for the week. The employee is not entitled to overtime pay since he only actually worked 38 hours. Thus, you would select that the vacation hours “do not count” toward overtime.

However, an employee who worked 42 hours and used 8 hours of vacation time, totaling 50 hours for the week, would be entitled to 2 hours of overtime pay. You would still select that the vacation hours “do not count” towards overtime since it’s not the vacation hours that make the employee entitled to overtime pay. The 2 hours actually worked over 40 hours are the hours that count towards overtime.

So, just to be clear, since there is no requirement that paid time off be counted towards the calculation of overtime, you should always select that vacation hours “do not count” towards overtime.


This entry was posted on Saturday, July 25th, 2015 at 6:44 pm and is filed under
Compensation, Labor Laws.
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