There is no state or federal law that requires employers to either observe holidays or pay employees differently because of them. This means it is entirely up to the policies and procedures of the employer to determine time off and/or pay for recognized holidays.
Sound too easy? It really is pretty simple. However, there are many misconceptions about holiday pay. Here are the general guidelines to help clear those up:
- Employers are not required to close their businesses or offer time off for holidays, even though it’s certainly a common practice.
- Non-exempt employees are not entitled to pay for any time they don’t actually work.
- If employees work on a holiday (regardless of whether or not the employer observes it), they are not entitled to additional pay, only their regular pay rate.
- If employers do provide additional pay for working on a holiday, employees need to understand that while the time spent working is counted as total hours worked for overtime purposes, the extra pay will be excluded from the overtime rate of pay.
- Employers can have a policy clause that states if an employee is absent (unscheduled/unexcused) the day before or after a holiday in which the business is closed, that employee is not entitled to the usual holiday pay the company offers under its policy for holidays. (see exception below)
There is an exception to providing pay for time spent not working, but not because it’s a “holiday.” Exempt employees are entitled to their full weekly salary if they work any day during that week (with very limited exceptions). That means employers are required to pay exempt employees their full weekly salary, even if the company is closed for a holiday. This means you cannot have a “waiting period” for holiday pay eligibility for exempt employees. Of course if the business is closed for an entire week, no pay would be required.
For those employers who are not able to close their businesses (those that operate 24/7 or have their busiest season during the holidays), employers might consider offering “floating holidays” to provide for extra paid time off, just for employees to schedule at different times (and upon approval), so your staffing needs are still met during business operations.
Offering paid time off for holidays is certainly a nice perk and helps with employee recruiting and retention. However, since there are quite a few misconceptions about how holidays are treated in employment, it is a good idea to have a very clear, written policy language that explains how your organization handles holidays to avoid any surprises or discord with your employees.