OneSource News

Understanding Overtime Rules: How OT Interacts With Vacation & PTO

With recent discussions around changes in the taxability of overtime pay, we thought this would be a great time to share a simple overview of how overtime (OT) works—especially when it comes to vacation time and PTO.

➡️ While OneSource Staffing does not provide tax or legal services, we’re committed to sharing helpful workplace knowledge so employees and employers can stay informed.

🔍 How Overtime Works

Under federal law, most employees must be paid time and a half (1.5× their regular rate) for all hours worked over 40 in a workweek.

🕒 Does PTO or Vacation Count Toward Overtime?

Here’s where many workers have questions:

• PTO, vacation days, holidays, or sick time do not count as hours worked when calculating overtime under the Fair Labor Standards Act (FLSA).

• This means if an employee takes a day off during the week and works 40 hours total—including paid time off—they typically are not owed overtime.

• Overtime is calculated based on hours physically worked.

📅 Example

If an employee:

• Takes 8 hours of PTO

• Works 36 hours the rest of the week
  Even though the total paid hours = 44, only 36 are “hours worked,” so no overtime applies.

🗒️ Why This Matters

With ongoing conversations around overtime taxability, it’s a good moment for employees and employers to review how OT is calculated—and what does or doesn’t count toward those thresholds.

At OneSource Staffing, we’re always here to help guide you through workplace topics that matter, even when they fall outside our direct services. Staying informed leads to a stronger, more empowered workforce.