If We Offer Hourly Employees a Paid Holiday on Monday, Do I Need to Pay Overtime to Employees if They Work Extra Hours Tuesday-Friday?

No, not under federal law unless they actually “work” more than 40 hours per week (48 for MN employers if your company is not covered by federal law – most employers in MN are covered by federal law though). 

It’s a common mistake companies make believing that paid time off (PTO) – e.g. paid vacations or holidays – count the same toward overtime as actual work when calculating overtime pay.  They don’t.  Under federal law non-exempt employees are entitled primarily to two things – (1) pay of at least minimum wage for each hour worked, and (2) 1.5x their regular rate of pay for all hours “worked” over 40 in a workweek.  PTO is not “work,” so paid holidays or vacation days don’t count toward this 40 hour threshold.      


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