Managing payroll is a big part of running a business, as well as one of a business' biggest legal challenges. Labor laws are strict, and violating them will only cause you trouble. This is why it's important to understand when you must pay your employees and how much.
With President's Day (aka Washington's birthday) coming up, many business owners are wondering if they must pay overtime on federal holidays. The short answer is no. But there are a few exceptions.
Overtime pay is subject to the Fair Labor Standards Act (FLSA). The basic provisions of the FLSA require that employers pay overtime, at a rate of time and a half, only when an employee works over 40 hours in a week. This, of course, is subject to any state laws that limit how many hours per day an employee may work.
On federal holidays, overtime is often paid by the government because it chooses to do so. Every year, the Federal Government approves a list of paid federal holidays, overtime being paid to anyone who must work. States, though not mandated to do so, have also chosen to do the same. You, as a small business owner, do not have to.
There are, however, two main exceptions to this rule.
Persons who work under a government service contract that exceeds $2,500 are subject to the McNamara O'Hara Service Contract Act, while persons who work under a government labor contract worth over $2,000 are subject to the Davis-Bacon and Related Acts. Both pieces of legislation require that the aforementioned employees receive holiday and vacation benefits. The terms of these benefits vary depending on the contract and the worker classification, but they may require you to pay overtime on federal holidays.