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Holiday Pay: What is Required?

By November 10, 2016July 23rd, 2018Human Resources

by Laura Pokrzywa

Now that the election is history, all those antagonistic campaign ads will be replaced with ads featuring cookies, holly berries and jolly elves telling of big savings at holiday sales. As retailers welcome holidays3the start of the holiday shopping season, businesses everywhere are planning work schedules through the end of the year. Now is a good time to review your options and obligations concerning holiday pay.

Despite what some social media campaigns may say, employers still have the freedom to decide when to shut down and when to conduct business as usual. Whether you are open or closed on any given holiday, offering holiday pay is a common way to thank employees for their contributions year-round. For employers that are open on holidays, offering premium pay to employees who work the holiday is a great way to recognize their extra effort and personal sacrifice.

So what are your legal obligations regarding holiday pay? It all comes back to the Fair Labor Standards Act (FLSA). According to the FLSA, employers are not required to compensate non-exempt employees for any unworked time, including a holiday during which the employees are given the day off. Whether or not you pay employees for an unworked holiday is subject to your company’s compensation policy. You can choose to offer paid holidays or to simply close the business for the day and consider that as an unpaid break for those non-exempt employees. Your exempt employees, of course, must be paid on a salary basis. That means, outside of a few limited exceptions, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked. That means no deductions should be taken from their pay due to an unworked company holiday. (For more information regarding the limited exceptions that would allow deductions from an exempt employee’s salary, see the Department of Labor’s fact sheet, “Salary Basis Requirement and Part 541 Exemptions Under the FLSA”.)

Likewise, if an employee works through a company holiday, the FLSA does not require employersholidays1 to pay extra (time and a half or double time, for example). However, some employers are bound by employment or union contracts that stipulate extra pay for working on a holiday. In addition, some employers have policies clearly stating that employees will be paid for the holiday, whether it is worked or not. If that is the case, a worked holiday would require holiday pay plus payment for the hours actually worked. And, as always, unworked time–paid or not–does not need to be counted as hours worked when calculating overtime pay. For example, let’s say you have a full-time non-exempt employee named Mary who normally works eight hours per day. On Thanksgiving Day, which is one of your company’s recognized holidays, Mary works a 6-hour shift. If your company offers holiday pay for unworked holidays, Mary would be paid eight hours of holiday pay in addition to her normal compensation for the six hours actually worked. Of course, only the six hours actually worked on the holiday would be counted, along with any other hours actually worked that week, when calculating overtime due for that week.

Of course, employers are required to pay for all hours worked, whether or not those hours fall on a holiday. Additionally, employers are required to pay a minimum of time-and-one-half for every hour of overtime worked by non-exempt employees. So, if your employee worked through a company holiday, that time must be paid (straight time if it falls within the normal work hours). If those hours put your emploholidaysyee over the 40 hours in one work week, and he/she is non-exempt, then time-and-one-half for every hour of overtime must be paid, whether it fell on a company holiday or not.

This is a good time to also remember your obligation to provide certain religious accommodations. Under Title VII of the Civil Rights Act, along with other state laws, employers are obligated to provide reasonable accommodations for the sincerely held religious beliefs of their employees. Reasonable means, of course, the employer is not obligated to provide the accommodation if it can show that the accommodation would result in undue hardship for the business. Since unpaid time off is generally accepted as a reasonable accommodation, many companies add a floating holiday to their list of company holidays, to accommodate an employee who may wish to take a day off for a religious observance. However, such a request could certainly be accommodated without adding a floating holiday to your policy. For more information about religious accommodations, visit the Equal Employment Opportunity Commission’s web page on Religious Discrimination.

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