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The Basics of Holiday Pay

With the beginning of fall come cozy sweaters, seasonal beverages, cooler temperatures, and questions about holiday pay.
That’s right: the biggest holiday months are still ahead of us, which means lots of employee time off and potential confusion. Who gets paid for what time off? Should employees be able to make up missed time? What should you do about unplanned absences? I’ll take you through the basics of holiday pay and try to help you navigate your way through some of the more common scenarios you may face with your employees.

The most common U.S. paid holidays are New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. All of these are paid holidays under the Federal Government; however, businesses in the private sector are not obligated to close, too. Furthermore, businesses in the private sector who do decide to close shop on these days don’t necessarily have to do so with pay, nor do they have to pay time-and-a-half if employees work these days, federally speaking. (Your state laws may vary on both counts.) Your full-time exempt employees, even those taking advantage of any flexwork opportunities, should still be given their normal weekly salaries. Part-time exempt employees may get pro-rated salaries if the holiday falls on a normal working day. Non-exempt workers, or hourly workers, who don’t work on these days should not be paid for these missing hours.

Since there aren’t any federal laws about holidays and pay, and different employees get different pay on these days, there’s usually some confusion as to who gets paid what. It’s a good idea to send out an e-mail in advance to all employees to remind them how your business handles the holidays (who takes off which days, if different departments have different holidays) and whether or not work on these days is paid as overtime. Include a sentence that any employees should come to you if they have any questions – and they will have questions. Here are a few scenarios you may encounter and some advice on how to handle them:

  1. A part-time or hourly employee expects to receive overtime pay for working this day.
    First of all, check your state laws in this regard. Most states do not have any laws about holiday pay, but it’s always important to just double-check. The next thing to check is how many hours your employee has already worked during that workweek. If they haven’t worked over 40 hours, then they’re not entitled to premium pay under federal law. Once you’re sure about your state laws and your employee’s hours worked, try to schedule a meeting with this employee one-on-one to explain this information and apologize for any misunderstandings.

  2. Part-time or hourly employees would like to work on the holiday or another non-working day so their pay won’t be docked.
    Again, a one-on-one meeting is best here. Explain to your employee that your business is closed and no one is working, so they can’t come in since there isn’t any work to be done. For part-time workers, if they work a set schedule, remind them that it’s a fixed schedule and your business can’t accommodate their shift changes. Now, if your business can accommodate a shift change, it’s your choice as to whether or not you’ll allow them to come in. With hourly workers, check any laws or temp agency regulations as to whether an employee can work longer than eight hours in a day without receiving overtime. If that’s the case and your business can accommodate the employee to make up some of the hours over the rest of the week, again, it’s at your discretion as to whether or not you’ll allow them to do so. If you have lots of part-time or hourly workers, however, be forewarned that you have to allow everyone to do this (or set neutral, business-related criteria for extending this benefit to certain employees), which may cause some headaches down the line.

  3. Exempt employees who work compressed work weeks or part-time want an “extra” day off.
    Veterans Day falls on a Monday, and many people who work compressed work weeks already have Mondays off. This means they’ll work a 40-hour week while other coworkers will probably only have a 32-hour week. It’s entirely up to you whether or not you’ll allow them to choose another day off for that week; there are, again, no federal laws in this regard. You can point out that flexwork itself is a benefit that your employee voluntarily takes advantage of, if an employee is upset about your decision. Part-time workers should be handled similarly, if they work a set schedule that always includes Mondays off.

  4. An employee who honors a specific religious holiday expects the day off but has used up all paid time off.
    There are federal laws about this. According to the law, you are obligated to provide reasonable accommodations for religious practices, unless it would cause undue hardship for your business. If your business can afford to give the employee a day off, then you have to allow them to take that time off, if it’s for religious purposes. In the past, courts have determined that unpaid time off is “reasonable accommodation,” so if they’ve burned through their paid time, consider treating it like a vacation or personal day. Many companies offer “floating holidays” allowing employees to designate certain days throughout the year as extra vacation days as a way to accommodate these kinds of requests.

  5. An exempt employee fails to show up for work on the holiday or the day after.
    This is where that e-mail you sent to everyone may come in handy, since your employee presumably read the e-mail and knew that they were expected at work. Handle this as you would any other unannounced absence. Check in with the employee’s supervisors and coworkers to make sure this wasn’t a scheduling change or out-of-office meeting you weren’t aware of. Try to get in contact with your employee to find out when or if they’re coming in. Document the absence and try to get coworkers to handle any pressing tasks. Once your employee shows up, talk to him or her and find out whether the day should be docked as a sick day, vacation day, or an unpaid day. Be aware that federal law places restrictions on docking an exempt employee’s pay, but you do have flexibility when it comes to taking time away from an exempt employee’s time-off bank.
About Irelis Arias

Irelis Arias is a Human Resources Director who specializes in employee relations, leadership and employee development, recruitment, training, compensation, and benefits. In her role, Irelis draws from 20 years of HR compliance and employment law experience, including 12 years working for a top national labor and employment law firm. Irelis has been instrumental in helping to identify areas in need of improvement and implement successful action plans. When she’s not helping others seek career success, Irelis devotes her time and attention to her three active sons. She enjoys spending time with her family and working out to stay healthy.