woman at work in Santa hat

Holiday pay 101: Guidelines and requirements for employers


Most companies offer six holidays off for their employees each year: New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. Although these holidays are widely recognized, companies aren’t legally obligated to pay nonexempt employees for office closures.

Holiday pay for nonexempt and exempt employees

Legally, companies can handle holiday pay for exempt and nonexempt employees differently.
Nonexempt employees are hourly employees that are eligible for overtime pay. Exempt employees are salaried employees who are not eligible for overtime pay.

Nonexempt employees

Companies are not legally required to pay nonexempt employees for time that offices are closed during holidays. However, if a company chooses this route, it must be stated clearly in their employee handbook. If a nonexempt employee has paid time off available in the form of a floating holiday or vacation time, they can request to use that time off to receive payment during office closures.

Although companies are not legally required to pay nonexempt employees for holidays, it is an added benefit that many companies offer. This gesture of goodwill can be an important demonstration of how you value all of your employees. It can also be a valuable way to boost morale and retain talented employees.

Exempt employees

For exempt employees, companies are legally required to pay their normal salary when the office is closed for a holiday; the paycheck of an exempt employee should look no different than it would on a normal work week.

Businesses open on holidays

If your business is open during common holidays, such as Thanksgiving and Christmas, then it’s important that your employees understand that they may be required to work. If you don’t offer traditional holidays off for all employees, creating a system in which some employees are required to work one holiday while others are required to work another can help your business stay staffed while giving employees some time off.

Another tactic that’s useful for holiday staffing is offering incentives, though it’s not legally required to offer more pay to employees who are willing to work on a holiday. A survey conducted by SHRM of 2017 holiday schedules, found that 57 percent of the companies surveyed offered premium pay to employees for working holidays, which is a compelling benefit for working on days that many people have off.

The benefits of flexibility

Legally, the federal government and the Department of Labor require employers to do little with respect to days off. However, offering flexible schedules or allowing people to leave early for travel, especially around the holiday season, is an effective way to keep employees happy.

For employers, the holidays can be a tricky time. Employees are preoccupied, the business is often slower than usual, and a majority of employees are submitting paid time off requests to supplement their other days off. Though it can be a bit hectic, it’s important to remember that almost every other business is experiencing something similar.

While the holidays may seem like an inconvenience to the business, taking a flexible approach can be beneficial in the long run. The holidays are an important time for many of your employees and granting added flexibility and understanding is not only a way to boost morale but also a reflection of the company culture.

Be clear and communicative

Since federal law doesn’t closely regulate the rules that companies must follow regarding holiday pay, you have plenty of freedom when deciding what is right for your business and employees. If you are setting rules for holiday pay for your company, no matter what you decide, make sure you are consistent and clear.

Once you decide on the best approach for your business, be sure that the information is made available to all employees. Typically, detailing holiday pay in the official employee handbook is sufficient, but it’s not a bad idea to provide additional emphasis.