If we offer hourly employees a paid holiday on Monday, do I need to pay overtime to employees if they work extra hours Tuesday-Friday?
No, not under federal law unless they actually “work” more than 40 hours per week (48 for MN employers if your company is not covered by federal law – most employers in MN are covered by federal law though).
It’s a common mistake companies make believing that paid time off (PTO) – e.g. paid vacations or holidays – count the same toward overtime as actual work when calculating overtime pay. They don’t. Under federal law non-exempt employees are entitled primarily to two things – (1) pay of at least minimum wage for each hour worked, and (2) 1.5x their regular rate of pay for all hours “worked” over 40 in a workweek. PTO is not “work,” so paid holidays or vacation days don’t count toward this 40 hour threshold.
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