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Is Holiday Pay Mandatory In Your State?
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Employee Experience

Is Holiday Pay Mandatory In Your State?

For many it’s been a stressful year and yet many business report that their employees are not using their full Paid Time Off allowance. To give employees the rest they need, you’ll want to make sure that your business offers sufficient company-wide paid national holidays in 2021. Whether these must be paid, though, depends on your location.

Holiday Pay Laws

Unlike most of the European Union, the United States has no federal law requiring private companies to pay for national holiday time off (by law, all employees in the EU also get a minimum of 28 paid vacation days). The Fair Labor Standards Act (FLSA) requires an employer to pay its employees only for time worked. This means that if an employee takes the day off for Christmas, you don’t have to pay them for time not worked.

Holiday Policy in the Private Sector

In practice, though, most private sector employers in the US give their employees the day off for national holidays, or they pay them time-and-a-half for working on the day. Some companies also offer a floating holiday, which the employee can take at any time. This time off is considered to be an employee benefit, just like health insurance and free soft drinks in the break room. In 2020, many larger employers also decided to offer Juneteenth (June 19) as a paid holiday for their employees. It is likely that this practice will grow in future.

Public Employees Play by Different Rules

Public employees—those folks who work for state and federal government—however, play by an entirely different set of rules. They’re mandated to take off with pay for the following holidays (Note, the specific dates apply to 2021 only):

  • New Year’s Day (Friday, January 1)
  • Martin Luther King, Jr. Day (Monday, January 18)
  • Washington’s Birthday (Monday, February 15)
  • Memorial Day (Monday, May 31)
  • Independence Day (Sunday, July 4)
  • Independence Day (Monday, July 5)\*
  • Labor Day (Monday, September 6)
  • Columbus Day (Monday, October 11)
  • Veterans Day (Thursday, November 11)
  • Thanksgiving Day (Thursday, November 25)
  • Christmas Day (Friday, December 24)\*
  • Christmas Day (Saturday, December 25)
  • New Year’s Day (Friday, December 31)*

*Holiday is observed on these dates

Do You Own a Business in Massachusetts or Rhode Island?

If so, be advised that these states march to their own drumbeat. Massachusetts and Rhode Island are the only two states in the union that require private companies to offer paid time off for national holidays.

Massachusetts State Holidays

In addition to the above federal holidays observed by public entities, Massachusetts also observes the following dates and requires employers to pay their workers:

  • Evacuation Day (March 17 – Suffolk County Only)
  • Patriot’s Day (3rd Monday in April)
  • Bunker Hill Day (June 17 – Suffolk County Only)

Their holiday time off rules fall under Massachusetts’ Blue Laws, and they further break down the paid holidays by retailers, non-retailers and manufacturers.

Retail Rules for Working Holidays

Retail employees can only work on Christmas, Columbus Day (before noon), Thanksgiving and Veteran’s Day (before 1:00 p.m.) if they have a permit from their local police department as well as approval from the state’s Division of Occupational Safety.

They can work without a permit on New Year’s Day, Labor Day, Memorial Day, Columbus Day after noon), Independence Day and Veteran’s Day (after 1:00 p.m.), but they can refuse to work. If they do work, they must be paid time-and-a-half.

They can work on Martin Luther King Day, Patriots’ Day, President’s Day, Bunker Hill Day and Evacuation Day without limitation.

Non-Retail Rules

Non-retail employees, on the other hand, can only work Christmas, Veterans Day (before 1:00 p.m.) Thanksgiving, Columbus Day (before noon), Labor Day, Independence Day and Memorial Day only if they have a permit from the police. If they are working on a holiday, they’re paid their regular rate. They can work without limitation on New Year’s Day, Patriot’s Day, Martin Luther King Day, Bunker Hill Day, President’s Day, Columbus Day (after noon), Evacuation Day and Veterans’ Day (after 1:00 p.m.).

Manufacturing companies generally operate by the same laws as non-retail businesses. They can stay open on holidays with police permits, but their employees can’t be required to work except for under very limited circumstances: The work must be absolutely essential, and the business must require continuous operation (such as a power plant).

Rhode Island State Holidays

Rhode Island’s law is less restrictive than Massachusetts’. It requires private employers to pay employees time-and-a-half for working on Sundays and the following holidays:

  • New Year’s Day
  • Memorial Day
  • Independence Day
  • Victory Day
  • Labor Day
  • Columbus Day
  • Veterans’ Day
  • Thanksgiving Day
  • Christmas Day

In 2021, as Christmas Day falls on a Saturday, Rhode Island will offer a state holiday on Monday, December 27.

The law also permits employees to refuse to work on Sundays and legal holidays. In addition to the holidays above, Rhode Island also recognizes:

  • Rhode Island Independence Day (May 4th)
  • Victory Day (2nd Monday in August)

Sample Content for Employee Handbook

Here’s some sample wording you can use if you’re building an employee handbook and your company offers paid holiday time off.

Regular employees who work 40 hours per week are eligible for holiday pay. Nonexempt employees become eligible after three months of service. Exempt employees are immediately eligible on hire. Temporary or part-time employees are not eligible.

[Company Name] offers the following paid holidays for all of our eligible employees. If a holiday falls on a Saturday, the day off will be taken on Friday. If the holiday falls on a Sunday, the following Monday will be the paid day off.

  • New Year’s Day
  • President’s Day
  • Memorial Day
  • Independence Day
  • Labor Day
  • Thanksgiving Day and Day after Thanksgiving Day
  • Christmas Eve and Christmas Day

How To Manage Holiday Pay At Your Company

When a company decides to close on July 4th, Memorial Day, Thanksgiving Day, or for the entire week between Christmas and New Year’s Day, is the employer required to compensate any of its employees? Well, that depends.

What You Need to Know about Holiday Pay Policies

Per the Department of Labor, the Fair Labor Standards Act does not require payment for vacation or holidays. Employers are responsible for establishing which days are recognized as holidays and communicating them to employees through a company handbook.

Non-Exempt Employees

For non-exempt (overtime-eligible employees), the company is generally not required to pay employees on days in which they do not perform work. As long as all non-exempt employees are notified of the closure prior to reporting to work on the holiday, no pay is required. If the non-exempt employee has accrued vacation or PTO time, the employee may request or the employer may require that the employee use accrued vacation or PTO to cover the days of the holiday closure.

Exempt Employees

For exempt employees who are paid on a salaried or fee basis, federal law requires the company to pay the employee his or her regular salary without interruption for business closures that extend less than one full work week. Failure to provide this continued compensation is likely to jeopardize the employee’s exempt status. A “work week” is the predefined seven-day period that the employer uses for payroll purposes. Unless the closure extends for a full work week, the exempt employee should experience no interruption in salary for the purpose of a holiday closure. The employer may require the exempt employee to use accrued vacation time or PTO time to cover the closure. However, if the exempt employee does not have sufficient accrued time to cover the holiday closure, the employer is required to ensure the exempt employee experiences no interruption in salary.

Added Benefit: Premium Pay for Holidays

As a benefit to workers, many companies opt to pay non-exempt employees a premium for working holidays. A 2017 SHRM Holiday Schedules survey found that 57% of organizations surveyed pay a premium to employees who work on a holiday when the business would normally be closed. And of these organizations, 40% pay double-time, 21% pay time-and-a-half and another 19% said they paid overtime.

Holiday Work Schedules

Holiday schedules vary significantly by industry and even job type. No two organizations are the same, and some may choose to offer more paid holidays than others. Here’s a look at the most common: The same SHRM survey we detailed above found that over 90% of organizations close for New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. No matter which days your organization officially recognizes, it’s critical that you set proper expectations with your workforce. Not only should your company handbook contain a clear and consistent policy and guidelines regarding holiday pay, but be sure to include which days you recognize as paid holidays. It is also important to note that the law only requires employers to consider actual hours worked as opposed to hours paid when calculating overtime pay. If an employer provides paid holidays, it is not required to count the unworked paid holiday hours towards the overtime calculation for a non-exempt employee.

If you’re looking for more information on how employees can clock in and out on holidays or during their regular work schedule, explore Paycor’s Time & Attendance Software.

How Paycor Helps

Paying employees can be a tricky business, especially when holidays, vacation days and overtime pay are in the picture (e.g., do you have to pay time-and-a-half or double time?). Paycor can help. Unlike many of our competitors, we don’t sell off-the-shelf technology. Instead, we tailor technology, including payroll and employee time and attendance, to your business.

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