The federal starting point
Covered, nonexempt employees earn federal overtime after more than 40 hours worked in one workweek. The calculation looks at work performed, not every paid hour shown on a pay statement.
Vacation, sick leave, holiday pay and other paid leave compensate an employee for time away from work. Those leave hours do not move the federal weekly total toward 40. Federal regular-rate guidance also permits qualifying payments for vacation, holidays, illness and other paid leave to be left out of the regular-rate calculation.
Two examples
State law and better benefits
A state can require more protection than the federal floor. A union contract, employment agreement or employer policy can also promise a more favorable way to count leave.
Check the State Overtime law directory for the state where the work occurred, then confirm the current rule through the U.S. Department of Labor state labor office directory.
Common questions
Does holiday pay count toward 40 hours?
Federal overtime uses hours actually worked. Holiday pay for time away from work does not add hours to that total. A state rule, union agreement or employer policy can provide a better benefit.
What if the employee actually worked on the holiday?
The hours spent working count. A separate holiday payment can still be excluded from the federal regular rate when it meets the federal rule for that exclusion.
Can an employer choose to count PTO toward overtime?
Yes. An employer policy or employment agreement can provide more favorable pay than the federal minimum. The policy should be checked for its exact terms.
Does paid sick leave count as hours worked?
Sick leave used while no work is performed does not add hours to the federal overtime threshold. Time spent working while also receiving sick-leave pay is a different issue because the worked hours must be counted.
Can state law provide a different rule?
Yes. State wage laws can add protections or use different overtime rules. Check the official agency for the state where the work was performed.
Sources & Review
Last reviewed: August 2026
This page is based on information from the U.S. Department of Labor and the applicable state labor agency.
- U.S. Department of Labor Fact Sheet #23, Overtime Pay Requirements
- U.S. Department of Labor Fact Sheet #56A, Regular Rate of Pay
- U.S. Department of Labor, State Labor Offices
State Overtime is an independent educational calculator and is not a law firm or government agency.