How to Manage Holiday Pay at Your Company
paid-time-off

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.

medical staff meeting

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.

medical staff meeting

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 creating holiday policies, Paycor's HR Support Center offers several resources to help you communicate properly with employees and prevent compliance mistakes. Click here to speak to a Paycor Solutions Consultant about the ways we can help you mitigate compliance risk.

This content is intended for educational purposes only and should not be considered legal advice. If you have specific questions regarding holiday closures at your organization, we recommend you consult with an attorney.


Subscribe to Our Resource Center Digest

Enter your email below to receive a weekly recap of the latest articles from Paycor's Resource Center.

Check your inbox for an email confirming your subscription. Enjoy!

More to Discover

CFO

Compliance Guide for Finance Leaders

Compliance Guide for Finance Leaders

As part of our commitment to help Finance leaders make a difference in their organizations, we’ve published this compliance deep dive to help you stay current and effective in a fast-paced and changing world. Inside you’ll learn: How to maintain compliance with federal regulations through the employee lifecycle Potential violations to watch for and tips to avoid them Expert advice on how HR can mitigate risk Complete the form and get your 2019 Compliance Guide instantly.

HR COE Compliance Benchmark Quiz

HR COE Compliance Benchmark Quiz

Is your organization at risk? The path to achieving excellence in recruiting is a continual journey that evolves over three phases. To find out what phase you’re in and get a customized action plan. TAKE OUR QUIZ TO FIND OUT: Quiz will load down below shortly Content loading... Please enable javascript! Compliance Benchmarking Quiz What’s preventing you from attracting and hiring top talent? To get to the next level, analyze your current compliance practices to find out where you are at risk. Then develop strategies to address those problem areas. Based on your responses, you’re in Phase 1: To get to the next level, look for the right technology to proactively monitor compliance. When you find the right fit, invest in technology to lay...

3 Steps to a Successful Year End

3 Steps to a Successful Year End

Year-end is a busy time for businesses, and it can be stressful to think about all the things you need to do to prepare for the end of one year and the beginning of the next. To help you avoid uncertainty and desperation, follow this 3-step guide to ensure a successful year-end.

What's Changing in 2019 Infographic

What's Changing in 2019 Infographic

Regulation changes, wage increases and new contribution limits…oh my! Here’s a look at the latest updates that are likely to impact your organization in 2019.