The concept of “holidays” conjures different associations for people… gatherings of family and friends, abundant food and BBQs, travel or a day to simply sleep in and find something “fun” to do.
For employers, it can be a confusing myriad of questions on what their obligations are to their employees on holidays:
- Do we have to give employees time and a half on holidays?
- What if we close on holidays – do we owe holiday pay to all employees?
- Do we have to let employees have their religious holidays off if they’re different from company-observed holidays?
The short answer is: It depends entirely on you and your company.
There is no federal law that requires a certain set of holidays be observed by a private-sector company (non-government) or that employees working a holiday be paid at a premium. Employers also do not have to offer “holiday pay” if the company is closed to those employees who are not working, though this differs for exempt employees. (More on exempt employees in a moment.)
So what does that mean? Basically, a private sector employer has free reign over the whole concept of holidays with few exceptions in a handful of states. As a company owner, you can choose on which holidays you’d like to close or stay open, open late or early, and whether employees will be staffed on those days or not.
So, if I don’t have to treat holidays any differently, why would I want to?
- Offering incentives (such as pay at 1.5x the regular rate or double-time) on holidays when you are open may make it easier to schedule staff and lets employees know that you are aware of, and appreciative, that they are giving up time with family and friends.
- Offering holiday pay (regular pay for holidays when you are closed) is a great way to offer your employees some paid time off that is scheduled…by you.
- It may keep you competitive in the workforce when candidates are considering different companies to work for as many organizations do offer paid holidays or premium pay for working holidays.
According to Entrepreneur magazine, only 1% of companies in the U.S. don’t offer paid holidays. 28% of U.S. companies offer 10 paid holidays a year.
In a 2016 survey conducted by the Society of Human Resource Management, “more than half (57%) of respondents indicated their organizations pay a premium for employees working on a holiday when the organization would normally be closed. Of these organizations, 40% pay double-time and 21% pay one-and-a-half-time, while 19% pay overtime and 21% pay some other type of premium.”
So what exactly IS holiday pay? What is the difference between a regular holiday and a “floating holiday?” A brief summary below:
- Paid Holiday – Payment at regular rate of pay for any holidays on which the company is closed to compensate employees who would lose wages if they would normally be scheduled to work on that day. (Paid holidays do not have to be included in weekly hours for purposes of calculating overtime.) Employers can require that employees work the day prior and day after the holiday to be eligible (unless on previously scheduled time off.)
- Holiday Premium Pay – A premium rate, such as one and a half times the regular rate of pay, that a company may offer for hours worked on holidays.
- Unassigned Paid Floating Holiday – In the same category as PTO or Vacation time, this is a “free” holiday that employees can choose individually. (A nice incentive for any employees who may celebrate different holidays than those designated by the company.) Requests for taking a floating holiday should be submitted and approved in advance, paid at the regular rate of pay and do not have to be included in weekly hours for purposes of calculating overtime.
- Assigned Paid Floating Holiday – Companies may offer a standard 9 holidays but every year add on an extra “floating holiday” depending on when the holidays fall. If Christmas falls on a Tuesday, a company may opt to assign the annual floating holiday for the day before. These also do not have to be included in weekly hours for purposes of calculating overtime.
- Holiday Closure – Any days where the company is closed and employees are not expected to report to work. Holiday pay is not assumed unless specified.
- Early Holiday Closure – The day before or on a holiday where the company formally dismisses employees at an earlier hour than when a shift normally ends.
Holiday Decision Making – next steps:
Once you have decided as an organization how you would like to treat holidays, it is important to put the details in writing. What holidays are closed? What holidays are open? Will you offer “floating holidays” and if so, will they be assigned or left up to the employee to choose?
A thorough policy will include:
- Which holidays the company is closed and which of those, if any, will be paid. Do the holiday closures apply to all employees?
- Eligibility for holiday pay on days company is closed (Do employees need to complete their Introductory Period? Do they need to work the day before and after the holiday unless previous PTO/Vacation time was approved?)
- On which federal or state-recognized holidays (if any) that you will pay a premium rate to employees scheduled to work those days
- The procedure to request any holidays off that you will be open and how multiple requests will be handled
- A statement that that holiday pay on closed holidays (if applicable) will not be counted as hours worked so will not apply when looking at weekly overtime calculations.
- Consideration if optional holiday pay is granted when employees have an unexcused absence for the shift just prior and just after the holiday.
Notes of caution:
- Watch state laws! In California, an employee who is called in to work on a paid holiday when the rest of the company is closed should be offered a premium rate or an alternative paid holiday within a reasonable amount of time.
- As an unassigned “floating holiday” would be similar to PTO and Vacation time, it should be considered in that category when working with state laws as to final pay calculations. Assigned floating holidays normally do not.
- Exempt employees must be paid their same weekly salary regardless of holiday closures if any work is performed within the week. An exception to this is if a company is shut down for an entire workweek and no work is performed. (This includes keeping up with emails from home via a mobile device.)
While it is no secret that employees appreciate holidays off, paid holidays, or incentive for having to work on a holiday when they’d rather be spending time with their nearest and dearest people, there is no law dictating how you, the private employer, need to handle holidays for your organization.
The important step of crafting a holiday policy you are comfortable with that will eliminate surprises for your employees should take into consideration the needs of your business, the local market, your annual payroll budget constraints and work-life balance for your staff to be truly successful.