Holiday Pay

The Holidays are upon us! As Thanksgiving meals still cling to our waistlines and Santa’s elves are hard at work at the North Pole, myHRgenius is here to spread the joy of employment law and specifically today—holiday pay!

Holiday pay is custom for most employers as a way to promote a positive business culture, retain valued employees, and show gratitude for their efforts. To the surprise of some, there is no federal statute mandating that private employers provide paid holiday leave. Similarly, there is no federal law mandating extra pay for private employees working on holidays. Is it custom to pay a premium rate of 1.5x or 2x the employee’s hourly wage to work on a holiday? Yes, and you can thank unions for that. Is it required under federal law though? No, not unless the employee works more than 40 hours in the workweek in total.

So, the Grinch takes away pay from your non-exempt employees for time they don’t work, unless you give them paid time off for the holidays. What about exempt employees? Can you reduce their salaries by 1 day if they decide to take time off for Thanksgiving or some other day your business is closed? No. If you are shut down for the day and the exempt employee worked during that workweek, then you need to pay them for the whole week without a reduction in their salary. Similar situation if it were a snowstorm or flood or something else that shuts down the business for the day. You wouldn’t be able to deduct from the salary of an exempt employee who doesn’t work because of the business closure. If, however, the business were open on Thanksgiving or January 1 or July 4, etc., and your exempt employee chose to stay home and eat turkey, watch football games or shoot fireworks for the day, in that situation you could deduct their salary if they don’t work at all that day.

The difference between the situations is the availability to work. If the employer is in control of the availability and makes the employee unable to work, then you can’t deduct from the exempt employee’s salary. You could deduct from the non-exempt employee’s wages, of course, because non-exempt employees are only entitled to pay for the time they actually work.

While not federally mandated, most employers choose to spread cheer and provide their employees with some type of paid holiday. If you are one of those employers having the paid holidays expressed in your handbook or through an annual communication to employees is a good practice.

Thompson Coe and myHRgenius Tip of the Week is not intended as a solicitation, does not constitute legal advice, and does not establish an attorney-client relationship.