The short answer: No. The Fair Labor Standards Act (FLSA) does not require paid time off (PTO) to be counted toward weekly overtime. Here’s why.

Does PTO Accrue on Overtime?

No. PTO does not count toward overtime! Why? Overtime is calculated based on hours worked. PTO is just that: time off that’s paid.

The Fair Labor Standards Act (FLSA) does not require PTO hours (like vacations, sick time, or holidays) to count toward weekly overtime calculations for nonexempt employees. Only hours actually worked must be counted for overtime purposes.

Employers can choose to include PTO in overtime calculations as part of their company policies. Counting PTO toward overtime may also be a condition of collective bargaining; however, in the U.S., no state or federal law requires PTO to count toward overtime hours.

What is Overtime?

The FLSA defines overtime as more than 40 hours worked in a single workweek. Overtime pay is mandated for nonexempt employees when more than 40 hours are worked in a seven-day period. Overtime cannot be averaged over a two-week period.

A workweek is defined as seven consecutive 24-hour periods (or a regularly recurring period of 168 hours). Workweeks can start on any day of the week and may differ for different groups of employees. Overtime laws do not apply to exempt employees.

States with Different Overtime Laws

Some states and U.S. territories have more stringent requirements for overtime pay: Alaska, California, Colorado, Nevada, Puerto Rico, and the U.S. Virgin Islands.

Overtime Laws in Alaska

In Alaska, overtime pay at a rate of time and a half is mandated after eight hours of work in a single day or 40 hours per week.

Overtime Laws in California

In California, overtime pay at a rate of time and a half is mandated after eight hours are worked in a single day or 40 hours per week. Double pay is required after 12 hours are worked in a single day.

Overtime in California is also mandated when seven consecutive days are worked. On the seventh consecutive day, overtime pay at a rate of time and a half is required for the first eight hours of a shift, and double pay is required after eight hours are worked.

Overtime Laws in Colorado

In Colorado, overtime pay at a rate of time and a half is mandated after 12 hours are worked in a single day or 40 hours per week.

Overtime Laws in Nevada

In Nevada, overtime pay at a rate of time and a half is mandated after eight hours are worked in a single day or 40 hours per week.

Overtime Laws in Puerto Rico

In Puetro Rico, overtime pay at a rate of time and a half is mandated after eight hours are worked in a single day or 40 hours per week.

Overtime Laws in the Virgin Islands

In the U.S. Virgin Islands, overtime pay at a rate of time and a half is mandated after eight hours are worked in a single day or 40 hours per week.

Overtime pay is also mandated when six or seven consecutive days are worked. However, for workers in the tourism and restaurant industries, overtime pay is only required on these days if an excess of 40 hours are worked in a single week.

What is PTO?

PTO, as previously mentioned, stands for “paid time off” (and, in some cases, “planned time off” or “personal time off”). PTO may apply to vacations, sick leave, holidays, jury duty, and bereavement.

In many cases, PTO is determined by company policies. Unlike overtime, the FLSA does not require PTO; however, many states enforce regulations around PTO. For example, 30 states mandate time off to vote on election days.

Additionally, the following states have mandatory paid sick leave:

How Much PTO Should Your Company Offer?

The first step in determining your PTO policy should be to check your local labor laws. While PTO is not mandated at the federal level, many states have specific rules and regulations regarding time off for illness, holidays, jury duty, or time to vote. Consult with a lawyer or HR expert to ensure your PTO policy complies with the law.

Beyond that, as an employer, how many hours of PTO you grant employees is largely up to you. In many cases, two to four weeks each year is standard. If attracting a high-quality pool of job applicants is a top priority, check the job listings from competitors in your industry for insight into their PTO policies. Then, write a policy that’s more favorable than your competition’s.

There are two ways to grant PTO to your employees: a lump sum or accrual. With accrual, PTO accumulates as hours are worked throughout the year. Lump sums grant a bulk amount of PTO at the start of the year or on work anniversaries.

PTO Lump Sums

Lump sums of PTO grant employees an annual allotment of time off. With lump sums, employees get a set number of days (or hours) off per year. There are three ways to determine when to grant a lump sum of PTO:

• By calendar year (i.e., Jan. 1);
• By fiscal year (i.e., July 1); and
• By hire date.

For example, if an employee was hired on April 10, you may choose to grant him or her a lump sum of PTO on April 10 of each year. No matter how you determine the year’s start date, employees will get a bulk amount of PTO at each year’s start.

PTO Accrual

Another way to grant PTO is by time worked. With this policy, PTO accumulates (or accrues) as your employee works a set amount of time. For example, you may offer an hour of PTO for every 40-hour workweek. You can use our free PTO calculator to quickly calculate accrued time off.

One drawback of PTO accrual is that your employees may need more time off than what they’ve accrued. For example, if a new hire has a family emergency, he or she may need to take a few days off to attend to matters outside of work.

In this case, you could still approve the employee’s request for PTO; however, the employee would then have a negative balance of PTO, requiring him or her to work more hours to accumulate the paid days off that were already used.

Unused PTO

In most cases, you can determine what happens to unused PTO at the end of the year. Common policies include PTO carryover, a use-it-or-lose-it policy, or PTO payouts.

• PTO Carryover: Unused PTO carries over to the next year, allowing employees to bank paid days off.
• Use-It-Or-Lose-It: PTO resets yearly, and unused PTO days expire.
• PTO Payouts: Employees receive payment in exchange for unused PTO.

Some states, such as California, regulate what should happen to unused PTO at the end of the year.

PTO Maximums

If you decide to use accrual as your PTO policy, you may want to set a cap on how many hours of PTO may be accumulated throughout the year. For example, if your policy is to grant one hour of PTO for every 40 hours worked, you could limit PTO accrual to 40 hours per year. Again, some states regulate how and when PTO caps can be set.

An Example of PTO and Overtime

Let’s say an employee worked four days at nine hours per day (or 36 hours), then took eight vacation hours on Friday. This would equate to a total of 44 hours paid for the week.

In this scenario, you do not have to pay for four hours of overtime because the number of hours worked is still 36. Because of this, overtime would not be required by the FSLA. In other words, you can pay all 44 hours at the regular rate of pay.

How OnTheClock Can Help

OnTheClock’s web-based time clock takes the guesswork out of PTO and overtime. Customize your timesheets to match your organization’s policies and adhere to local labor laws. We also make it easy for your employees to request PTO.

The best part? Your first 30 days of OnTheClock are free.