Holiday Pay and Overtime

  
It’s a regular issue which comes up during a holiday week. Employees feel if they work three ten hour days (30 hours total) and get two days off (8 hours per day) they would be entitled to 24 hours of overtime pay. Think again, this is not the case. Overtime hours are only computed based on the hours “actually worked.” You have to physically work the hours in order to receive overtime pay. In other words, if you physically worked 40.5 hours Monday through Wednesday, you would be entitled to .50 hours of overtime, and 56 hours of regular pay (this includes 16 hours for Thursday and Friday).

Another factor which comes into play would be if the employee works during the same pay period and if it would count as overtime. Lets say the company’s pay period was Monday through Sunday. For a lone example, lets say an employee worked 24 hours total Monday through Wednesday, received 16 hours of holiday pay and worked 16 hours total Saturday and Sunday. This would mean the employee would receive 56 hours of straight time pay and no overtime pay. 

Some other factors which come into play and also cost an employer more money is if they offer time and a half to work during the holiday or if they pay a premium on top of the hourly base for those working on the holiday. If the employee is receiving two different hourly rates, it most certainly affects the employees overtime calculation. Bill Shaefer submitted a great article to SHRM back in 2008 regarding this type of scenario (however it was for two different jobs), but I like to think this is still a good comparison. Here is a link to the article as I think he provides a great scenario based calculation for weighted average computation. http://www.shrm.org/templatestools/hrqa/pages/cms_023246.aspx.

Let’s provide an example for an employee who receives premium pay on top of their hourly rate if they work the holiday. Let’s say Sally Employee makes $10.00 an hour and is offered to work the Thanksgiving and Black Friday shifts (two-ten hour days) and receive a 20% premium on top of her hourly rate. 

How to calculate her overtime rate:

Monday-Wednesday: $10/hour * 24=$240.00

Thursday-Friday: $10/hour*.20 shift premiums=$12.00/hour*20 hours=$240.00

$240+$240=$480.00/44 hours= $10.91 straight time hourly rate

$10.91*1.5=$16.37 per hour for overtime.

$16.37*4 hours of overtime=$65.48 total compensation for overtime.

Total Wages= $480+ $65.48=$545.48

Just remember, it is not mandatory to pay a shift premium for working weekends and holidays. You just have to pay time and one-half for every hour of overtime worked by the employee. Of course, most companies do something like a bonus, shift premium or time-and-one-half to provide an incentive to employees who want to work the less sought out shifts. 

Let’s look at the other two examples of which an employer can pay an employee to work a shift:

1) I’m going to pay you a nondiscretionary bonus of $500.00 to work Thursday and Friday (20 hours total between the two days). Because you’re going to work this shift, the bonus will be included in your overtime calculation.

Sally Employees hourly rate is $10.00 per hour.

Sally worked 24 hours Monday-Wednesday and 20 hours Thursday-Friday which equals 44 total hours.

Straight time Computation: $10/hour*44 hours=$440.00

Add in the Bonus: $500+$440.00=$940.00

Find the Straight time hourly rate: $940/44 hours=$21.36

Find the overtime hourly rate: $21.36*1.5=$32.04 per hour

Find the overtime compensation: $32.04/hour*4 hours=$128.16 

Total Compensation=$940+$128.16=$1068.16.

2) I’m going to pay you time and one half for the hours you work on Thursday and Friday (20 hours total).

Sally Employees hourly rate is still $10.00 per hour.

Sally worked 24 hours Monday-Wednesday and 20 hours Thursday-Friday which equals 44 total hours.

Straight time computation: $10/hour*24= $240  Plus $15/hour*20=$300 

Total Straight time compensation: $540.00

Straight time hourly rate: $540/44 hours=$12.27/hour

Overtime hourly rate: $12.27/hour*1.5=$18.41/hour

Overtime compensation: $18.41*4 hours of overtime= $73.64

Total Compensation: $540+$73.64=$613.64

So after looking at the three different types of scenarios, it is safe to say Sally Employee benefits the most when a bonus is given to her. She also fares better when the employer says they will pay her time and one half for working Thursday and Friday (common sense tells you 50% on top of the hourly rate for overtime is higher than the 20% offered in the very first scenario). Best of luck to everyone when scheduling your employees for this holiday season.

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