2 APA's Top Payroll Questions & Answers for 2020 Federal and State Wage-Hour Laws A. Texas has no specific provisions requiring the payment of overtime pay, so you would look to the federal Fair Labor Standards Act (FLSA) for guidance (see Tables 1.1 and 1.2 of APA's Guide to State Payroll Laws). The FLSA requires overtime pay only for hours in excess of 40 in a workweek that the employee physically works. (Things like paid holidays and vacation pay are not mandated by the FLSA.) In the situation you describe, your company will pay time and one-half to employees who physically work on a holiday. Overtime premiums paid (they can be more or less than 1½ times the regular rate) for hours worked over 8 in a day or in excess of the employee's normal working hours (40 or less) for the workweek or because the employer has a policy of including paid hours for time not worked (e.g., vacation or sick time) in calculating overtime need not be included in the employee's regular rate of pay. They also may be offset against any overtime due the employee for the workweek, so long as the premiums are paid during the same workweek. (Note that a company making payments for hours not worked, such as holiday or vacation pay, cannot use those payments to offset any overtime pay due for hours actually worked over 40 during the same workweek.) See The Payroll Source®, §2.6-3. Here is how this applies to the example you raised. Employee John worked 49 hours in that workweek (10 + 12.5 + 12.5 + 14 = 49 hours) and is therefore entitled to overtime premium pay for 9 hours that workweek. For simplicity, let's say that John's hourly rate of pay and his regular rate of pay are the same - $10 (no other additions to the overtime computation like a nondiscretionary bonus or a shift differential). The FLSA requires pay to be computed as follows: 49 hours @ $10 per hour = $490 $45 9 hours @ $5 per hour = Total pay owed employee = $535 Under the employer's policy the employee receives: 10 hours x $15 per hour = $150 $390 39 hours x $10 per hour = Total pay from employer = $540 The employer-paid holiday overtime pay can be used to offset overtime pay owed to the employee. Here, the holiday overtime paid 18https://bookshelf.americanpayroll.org/state_payroll/ https://bookshelf.americanpayroll.org/state_payroll/ https://bookshelf.americanpayroll.org/payroll_source/ https://bookshelf.americanpayroll.org/payroll_source/