By Carolyn Moran, PHR, SHRM-CP for ThinkHR
With each holiday, the ThinkHR Live Hotline receives a number of questions about paying employees for the holiday. Federal wage and hour laws do not require employers to offer payment for time not worked, or a premium for hours worked which fall on a recognized holiday. These fringe benefits are offered at the employer’s discretion and governed by the employer’s policy and past practice.
Special note: Some state wage and hour laws may have requirements for holiday pay or premiums; however, this is generally limited to certain industries, such as retail.
The following are some myths and facts regarding holiday pay:
Myth: We are required to pay a holiday premium to nonexempt employees who work on a recognized national holiday.
Fact: An employer is not required to pay time and one half when an employee works on a holiday unless company policy provides for holiday premium pay.
Myth: Holiday pay is included in hours of work for the purposes of calculating weekly overtime for nonexempt employees.
Fact: Only actual hours of work are used to determine overtime pay requirements. Employers do not have to count holiday pay toward the calculation of the overtime requirement because these hours are not actually worked and are therefore not considered as hours counted toward overtime.
Myth: Employers can deduct a full day of salary for exempt employees due to a holiday closure.
Fact: Under the wage and hour laws, exempt employees are paid on a “salary basis.” Employers may not make deductions from an exempt employee’s pay for absences caused by the employer or by the operating requirements of the business during the workweek, such as the business being closed for a holiday.
Myth: Employees who are on a protected leave (e.g. FMLA, USERRA, etc.) still need to be paid holiday pay.
Fact: There is no requirement to provide employees on any type of leave with holiday pay, so it would depend upon the company’s policies and practices. Even if leave is taken intermittently, nothing under the federal or state family and medical leave laws require an employer to continue a holiday pay benefit during an unpaid leave for either hourly nonexempt or exempt employees. For exempt employees on FMLA leave, the “salary basis” test is suspended during periods of unpaid leave.
Myth: We have to pay a nonexempt employee holiday pay even if the holiday falls on their normally scheduled day off.
Fact: Company policy and past practice will determine obligations to pay an employee who is normally scheduled off on an observed holiday. Some employers offer a different day off to those who are not normally scheduled to work on the holiday (usually the scheduled day before or after the holiday), or they include an additional “holiday” pay on the employee’s check — meaning their paycheck includes all hours worked, plus holiday pay. Neither option is required.
Establishing your pay policy for holidays and other periods where employees take time off and communicating those pay practices to all employees can help ensure that the myths regarding pay for time not worked are clarified.