I chalk these kinds of posts up to the unsexy side of HR. I’m actually not convinced there is a sexy side of HR, but if there were, this type of talk would definitely not be on it. However, much of our work with small businesses is compliance heavy. With Memorial Day coming up, which always feels like the start of the holiday season for me since there is a holiday every other month or so after it, we thought it would be beneficial to cover some commonly asked questions we receive from our clients about holiday pay. And since we are California based, we will be covering it from not only a federal, but CA perspective as well.
First and foremost, there are no federal or state laws that require a company observe federal holidays or give time off to employees. Obviously, retailers and other companies are open for business during many US holidays and can require employees to work during that time. However, common practice is that most companies in the US do observe at least some of the federal holidays and offer holiday pay for those days.
Second, if a company chooses to allow employees time off for a holiday and pays them for that day, the pay is not considered in the calculation of overtime. Let’s take Memorial Day as an example. An employee may be allowed to take Monday off and be paid 8 hours of holiday pay for the day. If that employee then works Tuesday through Saturday, 8 hours each day, they would be paid 48 hours of pay at their regular rate of pay.
The words to focus on in overtime rules is hours worked. Overtime is calculated for hours worked over 40 in a work week (over 8 hours in a day in California). Since holiday pay is pay provided for hours not actually worked, it is not figured into overtime calculations.
Third, an employer can give holidays off, but choose not to pay. In this instance, the rules are different for hourly vs salaried workers. Hourly workers do not have to be paid for the day, however, salaried workers do. If a salaried worker works any hours during the week of the holiday, they must be paid for the holiday as well.
Fourth, employers can attach conditions to holiday pay. Common conditions are that the employee must work their scheduled day before and after the holiday in order to receive pay for the day off. Any condition can be put in place as long as it is not discriminatory to one group.
Where employers could get in trouble is in having a policy they don’t follow. While there are no laws stating that employers must give time off for holidays or have to pay for that time off, there are cases where employers had a written policy they didn’t follow. If your company has a written policy stating that it will pay double-time to employees who work on a holiday, you need to be sure that is happening.
Finally, holiday observance and pay can be a marketing tool businesses use to recruit. Because it is common place for most businesses to observe the holiday and pay employees for it, one who doesn’t may be behind the curve in attracting the talent it needs. Giving employees time off, whether on the actual holiday or another day in exchange, is a great way to tell employees you care about them as individuals and not just employees.