Vacation
Pay — Case Study
If an employee takes a vacation for an entire week,
processing payroll is simple. However, if the employee is on
vacation during part of a workweek, and works more than the
statutory straighttime workweek during the balance of the week,
vacation pay becomes more of an issue.
In this event, for purposes of determining minimum wage and
overtime requirements, the vacation pay may be omitted from the regularrate
computation, provided it is approximately equivalent to the
employee's normal earnings for a similar period of time. But the
vacation pay does not qualify as a credit against overtime pay
required by the FLSA. The general formula for figuring wages in
split weeks is to ignore the vacation pay, figure the pay due
for time worked, and then to that figure add the vacation pay.
Check the case study below to see this principle in action.
JimBob's workweek runs from Tuesday through the following
Monday. He takes a twoweek paid vacation, which starts on
Monday. He ordinarily works a 40hour week at the rate of $6.00
an hour. His vacation pay is figured at this rate for five
eighthour days per week. His straighttime workweek under the
statute is 40 hours. The record for the three weeks covering the
vacation period is:

Week 1 
Week 2 
Week 3 
Tuesday 
10 
Vacation 
Vacation 
Wednesday 
10 
Vacation 
Vacation 
Thursday 
10 
Vacation 
Vacation 
Friday 
10 
Vacation 
Vacation 
Saturday 
4 
Vacation 
Vacation 
Sunday 
 
 
 
Monday 
Vacation 
 
8 
Total Hours 
44 
0 
8 
For the first week, the employee should be paid $324.00,
computed as follows: (40 x $6.00) + (4 x $9.00) + $48.00. The
$48.00 paid for the day's vacation occurring during this week is
excludable from the regularrate calculation but may not be
credited against the $36.00 owed for overtime.
The second week, being a fulltime vacation week, calls for
$240.00 pay. Pay for the third week is also $240.00, figured
thus: (4 days' vacation pay x $48.00) + (8 hours worked x
$6.00).

Save Money
Suppose your employee makes $12 per hour. The
employee works 45 hours from Monday through
Thursday and takes a vacation day on Friday.
You should not calculate the employees
pay like this:
40 hours straight time ($12/hr) + 13 hours of
overtime ($18/hr) = $714
Calculate it like this:
40 hours straight time ($12/hr) + 5 hours of
overtime ($18/hr) + 8 hours' vacation time
($12/hr) = $666
By not counting vacation time toward straight
time, you'd save $48!


