Updated November 2017
You’ve stuffed yourself on turkey, the lights are up and the decorations out. The season may be festive, but for a small business owner, knowing the rules for paying employees working on holidays can be confusing. Here’s a holiday refresher on what’s legal for holiday, overtime and vacation pay.
If you have employees who work during the holidays, you may be wondering about holiday pay. Here’s what you need to know if you are an employer.
What is holiday pay?
There are glad tidings for ye small business owners. If you have This is especially true for non-exempt employees in the retail or hospitality businesses, Federal law does not require you to pay your employees extra, or above normal pay, for working on a holiday.
The holidays are typically considered regular workdays and employees receive their normal pay for time worked.
If an employee is taking the day off, you’re also not obligated to pay them for the day. The Fair Labor Standards Act (FLSA) requires employers to pay only for time worked. This means that if your employee takes off Christmas Day and New Year’s Day (both federal holidays), they are not entitled to pay for that day.
The same goes for religious observances. An employer may have multiple requests off for the same religious holiday, as an employer, they will need to accommodate such requests in a consistent and nondiscriminatory fashion. An employer is not required to accommodate all requests if the requests will bring hardships to the company as stated by the Equal Employment Opportunity Commision (EEOC).
In practice, many employers provide holidays off or extra pay for working on a holiday. These arrangements are considered employee benefits and are typically included in an Employment Contract. This means that f you’ve agreed to provide paid holidays to your employees in your employment contract you must pay them for the holiday. In contrast, you may be called a Grinch for not giving holidays off, but there’s no law requiring you to pay an employee for time not worked.
What are considered “paid holidays”?
As stated previously, paid holidays are not required in the United States. However, the most typical “paid holidays” that employers will provide compensation to their employees are:
- New Year’s Day
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving Day
- The Friday after Thanksgiving
- Christmas Day
In addition to the commonly paid holidays, some employers may also consider a few other days and federal holidays paid off to their employers such as:
- New Year’s Eve
- President’s Day
- Martin Luther King, Jr. Birthday
- Veterans’ Day
- Christmas Eve
Overtime pay required on holidays
When it comes to overtime pay on holidays, Santa is on the side of small business owners. Under federal law, a holiday doesn’t have a special designation for overtime pay, nor is working on a holiday considered overtime. Federal law views holidays as just another business day.
You probably already know that both federal and state law requires most employers, but not all, to pay overtime. And some employees are exempt from overtime. If your employee is entitled to overtime, calculating pay can be a bit tricky. The important thing to know is that under federal law, overtime is calculated weekly. This means if your employee works over 40 hours during the week of typical paid holidays like Christmas or New Year’s Day, they are entitled to “time and a half”–the employee’s hourly wage plus 50 percent–for the hours worked over 40 hours.
What is time and a half?
Time and a half pay is 50 percent more than an employee’s regular pay rate. This means for every hour of overtime an employee works, you must give them their regular pay plus half of that.
How is holiday pay calculated?
If an employee works overtime they are entitled to overtime “time and a half” pay. To calculate an employee’s overtime pay rate, multiply their regular rate by 1.5.
As an incentive, some employers may opt to offer double-time to employees working on holidays, meaning that their regular rate is multiplied by 2. While there is no FLSA requirement around double-time, there are double-time rules in California, which come into play if an employee works more than 12 hours in any workday or if an employee works more than seven consecutive workdays.
In California and a few other states, there’s also a daily overtime standard. Overtime is calculated based on the day. If your employee works over eight hours on any given day, they are entitled to “time and a half” for every hour worked over eight hours. Let’s say you are a California business, and your employee worked 10 hours on Christmas Day. State law requires you pay your employee overtime for 2 hours.
Here is a sample holiday pay calculation:
What about vacation pay during a holiday?
What if your employee takes Christmas and New Year’s Day off? Are you required to pay them for the vacation day? The answer is no. Federal law does not provide for vacation pay.
Under the FLSA, you are not obligated to pay your employee for time not worked–this includes vacation days in addition to holidays. Therefore, if your employee takes a vacation day on Christmas or New Year’s Day, there is no law requiring you to pay them for the time off.
If your employee is entitled to vacation pay, it will be based on an agreement between you and the employee. Often times prior to hiring, an employee will negotiate for a certain number of paid vacation days. Or, you may have a company policy of paying for some vacation days. Under these circumstances, you will be required to pay your employee for Christmas or New Year’s Day off, for example. The best place to clarify your company’s vacation and holiday policy is to include it in your Employee Handbook.
If you have additional questions regarding holiday pay, you can ask a lawyer. Check out our Employer Help Center for any additional guidance.
It’s the most wonderful time of the year. Be sure you and your employees enjoy the season by understanding what’s legal for holiday, overtime and vacation pay. Happy Holidays!