Employee Holiday Pay and Your Business

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Does Santa have to pay his elves for working on Christmas Eve? Does he ever give his elves Christmas off with pay? Because it's common practice to give employees a day off with pay for various holidays, everyone assumes it's the LAW, but it's not.

The federal law regarding employee pay and working conditions is part of the Fair Labor Standards Act, administered by the Department of Labor. The DOL says:

The Fair Labor Standards Act (FLSA) does not require payment for time not worked, such as vacations or holidays (federal or otherwise). These benefits are generally a matter of agreement between an employer and an employee (or the employee's representative).

"Employee's representative" means union contract, I assume. I also don't know of any state that requires that employees be paid for holidays.

What Are "Holidays"?

In considering whether to pay employees for holidays, you should first be clear about what holidays you mean.

  • Federal holidays are the 10 major holidays in the U.S. as designated by the federal government. On these holidays, all federal facilities are closed, and there is no USPS mail delivery. The Office of Personnel Management says that "when a holiday falls on a non-workday -- Saturday or Sunday -- the holiday usually is observed on Monday (if the holiday falls on Sunday) or Friday (if the holiday falls on Saturday)."
  • State holidays are special holidays designated by specific states, in which state employees get the day off. State holidays usually follow the pattern of the 10 federal holidays, but some states don't celebrate Columbus Day in October, and some states have additional holidays. For example, Florida celebrates the day after Thanksgiving, California, and Colorado celebrate Caesar Chavez Day, and
  • Local holidays. Some counties have specific holidays they celebrate. For example, Suffolk County, Massachusetts celebrates Evacuation Day (when the British left the state).

So which holidays will you "celebrate" in your business?

Clarifications and Considerations

  1. If an hourly employee works on a holiday, that employee must be paid for the time worked. Federal law does not require that an employee is paid overtime for holiday work unless that work is in excess of 40 hours a week. The Fair Labor Standards Act (FLSA) provisions require that employees must be paid overtime at the rate of time-and-a-half for hours over 40 in a week. Of course, in any case, you can be more generous than the minimum required by law.
  2. Different types of employees can be treated differently. What you do for full-time salaried employees can be different from what you do for part-time and hourly employees. Full-time salaried employees can be given paid time off for holidays, while you can tell part-time hourly employees that the office is closed and they won't get paid for the day. You must treat all employees in each class the same, though. That is, you can't pay some salaried employees for time off on holiday and not pay other salaried employees. 
  1. You can pay a premium for holiday work. While the federal law doesn't require it, if your business requires that employees work on some or all holidays, you can pay them a premium for work on holidays. Again, just be sure to treat all similar employees the same (that is, all salaried employees vs. hourly employees).
  2. If a holiday falls on a weekend in a specific year, how will you treat the holiday for holiday pay and for closing the business? You will probably want to adhere to the federal rule (noted above).

 

It's always best to put employee policies and benefits in writing. It makes holiday pay questions easier to address. I learned a long time ago that once you give a benefit to employees, it becomes almost impossible to cancel it. Specifying holidays is limiting for you as the employer, but employees appreciate knowing when they will have a holiday.

If you don't already have one, consider constructing an employee handbook specifying all employee benefits and paid time off, as well as work rules and procedures.

A final note: Independent contractors are not employees; they do not have to be paid for holidays.