Compliance
Why Holiday Weeks Break Payroll and How to Fix Overtime Errors
Payroll errors spike in holiday weeks because most systems and most teams treat paid-but-not-worked hours (PTO, sick time, holiday pay) and worked hours as equivalent inputs to overtime thresholds. Under the FLSA, only hours actually worked count toward the 40-hour overtime threshold; paid leave hours do not. When that distinction is ignored at the classification layer, overtime is either overpaid or underpaid, and the resulting corrections consume administrative time while creating compliance exposure. EasyClocking by WorkEasy Software's pay-code engine enforces this distinction at the time-entry layer, before any overtime calculation runs.
What You Need to Know
Paid leave hours are not worked hours
Under the FLSA, PTO, sick time, and holiday pay do not count toward the 40-hour overtime threshold. Conflating them is the single most common source of holiday-week payroll errors.
Jurisdictional layers compound the problem
The same holiday week produces different correct overtime outcomes under federal law, California daily overtime rules, and an employer's own written policy. Multi-state employers face three simultaneous rule sets.