Paying Your Employees Holiday Pay

Surrounding the holidays, a general sense of thankfulness and giving come about in all of us (unless you are a Scrooge, of course). When the holidays roll around, you may want to share some holiday cheer with your employees in the form of compensation. Holiday compensation can come in a couple forms, depending on if the employee works on the holiday.

You can give employees holiday pay in two ways. According to the Fair Labor Standards Act (FLSA), you do not need to provide paid nor unpaid time off for federal holidays. You have the option to decide whether you will give your employees time off (with or without pay) on the holidays. If your employees do work, you must give them at least their regular wages but you can also offer a premium holiday pay rate.

The amount of holiday pay you give your employees will depend on whether they receive time off and if they are exempt vs. nonexempt.

Giving Time Off

If your exempt employees (those who do not earn overtime) are given time off, you must give them their entire salary even if holiday time off is used. You cannot reduce the salary for time off for the holidays and you do not have to include extra compensation.

If you have nonexempt employees (those who can earn overtime), you do not have to pay for holiday time off – just for the time they work. But you can choose to give holiday pay to nonexempt employees. Keep in mind the holiday time off does not count toward overtime ours – only hours an employee works count toward calculating overtime.

Working Holiday Pay

If your employees must work on a holiday, it is common to give employees premium pay. The most common pay is double-time pay. Only employees who work on the holiday will receive holiday pay.

It is wise to create a holiday policy and include it in your employee handbook, including details such as holiday premium pay rate, holidays that apply, if employees must work for you for a certain length of time before the policy applies to them and any state or local holiday pay laws, to name a few.