- The Fair Labor Standards Act contains no legal requirement for paying an employee for hours not worked.
- A fair holiday pay policy applied to all employees can increase employee retention.
- If an employee works more than 40 hours in any given week, you are required to pay overtime regardless of any holiday observance.
Are you on the hook for holiday pay? There is nothing in the Fair Labor Standards Act that requires any non-government business to pay for time not worked. For vacation, sick leave, or holidays of any persuasion, you are not required to pay your hourly or non-exempt employees if they don’t work the holiday. You are also not required to pay additional wages for working a holiday.
Nevertheless, you should consider implementing a holiday pay policy. Remember what happened to Ebenezer Scrooge when he got huffy about paying Bob Cratchit for one holiday a year?
Defining Holiday Pay and Time Off
To the federal government, a holiday is just another workday and workers are entitled to their regular pay for working. However, it doesn’t mean that businesses choose to see things the same way. Expectations have become somewhat enshrined around holiday pay. In the interests of attracting and retaining talent, develop a policy for handling the holidays before you hire a single employee.
That being said, if your business will be open during a religious observance and you receive multiple requests for time off, you must accommodate the requests consistently and in a non-discriminatory manner. You are not required to do so, however, if granting all the requests will cause your business hardship, according to the Equal Employment Opportunity Commission (EEOC). The same reasoning can be applied for non-religious holidays.
There are two sides to holiday pay.
- Regular pay for hours not worked if the business is closed, or if the employee does not work the holiday if the business remains open.
- Regular or above normal pay if an employee works on the holiday when the business remains open.
Most businesses define above normal pay as time and a half and calculate wages and withholdings accordingly.
Holidays and holiday pay are considered part of the benefits package a company provides. It is up to you whether to pay for hours an employee has not worked or pay above normal wages for employees who do. Whatever you decide to do, put it in writing and make sure every employee understands your policy.
Typical Holidays in the United States
There are six holidays observed by most businesses in the US. Not every employer includes every holiday in their holiday pay policy, but most are acknowledged.
- New Year’s Day (January 1)
- Memorial Day (3rd Monday in May)
- Independence Day (July 4th)
- Labor Day (1st Monday in September)
- Thanksgiving (4th Thursday in November)
- Christmas (December 25th)
Some businesses may observe Martin Luther King, Jr. Day, President’s Day, Columbus Day, or Veteran’s Day. Others also provide the day after Thanksgiving and all or part of Christmas Eve.
To the federal government, a holiday is just another workday and workers are entitled to their regular pay for working.
If your employees have school-age children, understand that the children may be out of school for many of the holidays occurring between September and May each year. A flexible work arrangement may be necessary if your business does not observe a particular holiday.
Exempt employees, even though they may have the holiday off, must be paid their full annual salary, holidays and all. You are not required to pay hourly or non-exempt employees for taking the day off, nor are you required to pay time and a half for working a holiday. In the interests of employee retention, however, you may wish to provide holiday pay.
On the other hand, if a non-exempt employee works over 40 hours in a given week, overtime pay is mandatory, regardless of the observance of a holiday.
Employees who work an irregular schedule can be offered an alternate day off if an observed holiday falls on their normal day off. Also, you can attach conditions to the receipt of holiday pay. Treat everyone consistently and don’t give anyone special treatment to avoid any claims of discrimination.
Are you on the hook for federal holiday pay? No, but your employees will appreciate it if you can offer holiday benefits. Create a written holiday pay policy. Highlight it during new employee training and distribute annual policy reminders to keep everything running smoothly throughout the year.