Happy Holidays: Do We Have to Pay?

holidays employee pay

Is your company closing for Christmas? Or maybe for the whole week from the 25th through New Year’s? Holiday closures give everyone a much-needed (and appreciated!) break, but can also raise questions about required pay. Federal law is pretty quiet when it comes to holiday pay and time off for private employers. So what should you do when it comes to paying employees for your holiday closures?

Exempt Employees

When it comes to exempt employees (paid on a salaried or fee basis), federal law requires businesses to pay employees their regular salary if the business closure is for less than a full workweek. (Failure to provide continued compensation will likely jeopardize the employee’s exempt status!) So what’s a workweek, you ask? This is the pre-selected seven-day period your business uses for payroll purposes. Employers can require exempt employees to use accrued vacation time or PTO time to cover office closures. However, if the exempt employee doesn’t have enough PTO to cover the holiday closure, the employer must ensure they experience no interruption in salary.

Non-Exempt Employees

Businesses are generally not required to pay non-exempt (overtime eligible) employees for days they don’t work. (Just be sure to notify all non-exempt employees of the closure prior to reporting to work that day!) If the employee has accrued vacation time or PTO, they may request to use it to cover the closure.

As a benefit to workers, many companies offer several “paid holidays” throughout the year. In fact, according to a Society for Human Resource Management Benefits Survey, 97% of responding employers provided some type of holiday pay to employees. Ultimately, each company has control over its own policies for paid holidays, and there is a good deal of flexibility in the payment and calculation of this holiday pay.

For example, some employers may choose to “shift” the days of the recognized holiday. This can help to reduce the amount of employee time off during the holiday closure. Whatever you choose, we just recommend creating a written policy for your holiday pay and applying it consistently among employees.

It’s also important to note that the law only requires employers to consider actual hours worked versus hours paid when calculating overtime pay. Meaning, if you provide paid holidays, you’re not required to count those unworked paid holiday hours in your non-exempt employee overtime calculations.

What do you think?

Do you already have a policy in place for holiday closures? Or are you thinking about putting one together for the first time this year? If you need any help, we have a Holiday Closure policy in our HR Support Center under the “Policy Library” section to get you started! Want more ways to keep your business compliant? Check us out on FacebookTwitter, and LinkedIn to make sure you never miss a beat!

Photo by Nicole Michalou from Pexels

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