If you have employees who work during the holidays, here’s what you need to know to pay them the right amount and keep it all legally above-board.
The holiday season–it’s here again. 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.
There are glad tidings for ye small business owners. Federal law does not require you to pay your employees extra, or above normal pay, for working on a holiday. This is especially true for retail or hospitality businesses. 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.
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. However, if you’ve agreed to provide paid holidays to your employees, 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.
Overtime Pay 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. The law views holidays as just another business day.
You probably already know that both federal and state law require 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 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.
In California, and a few other states, there’s 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.
For more information about overtime requirements in your state, visit the US Department of Labor website.
What if your employee takes Christmas and New Years 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.
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!