'Tis the season for family, food, presents… and confusing payroll administration situations? Could be!
Handling holiday pay may be easier than juggling multiple state holiday travel plans or hanging lights on an icy roofline, but it can still raise some pretty tricky questions.
What do you need to know? Check out the following 8 important holiday pay insights and get on to the egg-nog:
If you’re an employer who’s more Grinch than St. Nick, bear in mind that you are not required to compensate employees for the time they are out of the office on the holidays. As described on the United States Department of Labor page covering holiday pay, the Fair Labor Standards Act stipulates that neither vacation nor holiday pay is federally required; it’s a matter of agreement between the employer and employee.
While the federal government doesn’t require employers to pay employees when they are celebrating holidays, it turns out that employees like it when they do. Surprise, surprise!
While companies at large are not legally required to pay holiday wages as a standard practice, there are some situations where it is required of government contractors. For bid work where the McNamara O’Hara Service Contract Act (SCA) or Davis-Bacon and Related Acts (DBRA) apply, one of the stipulations is that employees must receive holiday pay.
Had a change of heart on providing holiday pay? Better check state payroll laws. Many states have made “use-it-or-lose-it” rules illegal, banning businesses from reneging on previous holiday or vacation pay commitments.
In fact, printer manufacturer, LexMark International, recently lost a $13.6 million class action lawsuit after a California appeals court upheld the finding of a lower court that employees were due holiday and vacation back pay. Law360.com (free registration required).
An alternative for employers who no longer wish to pay out on holidays is to cap the ability to accrue holiday or vacation pay moving forward. Law360 noted:
An accrual cap is legal… because it prohibits the employee from earning vacation time in the first place, rather than taking away vacation time after the employee has earned it.
Which holidays should your business provide pay for? It’s a question for every company to answer individually. But many companies opt to provide paid time off coinciding with federal holidays. Here’s a list of the 10 most frequently business holidays in US & Canada:
|US Holidays||Canadian Holidays|
|New Year’s Day||New Year’s Day|
|Birthday of MLK, Jr.||Good Friday|
|Washington’s Birthday||Easter Monday|
|Memorial Day||Victoria Day|
|Independence Day (4th of July)||Canada Day|
|Labor Day||Labour Day|
|Veterans Day||Remembrance Day|
|Thanksgiving Day||Christmans Day|
|Christmas Day||Boxing Day|
Progressive employers are increasingly augmenting their paid leave options with “floating holidays.” A floating holiday is a paid day off which can be utilized at the employee’s discretion. Technically, a floating holiday is functionally equivalent to a standard vacation day. But a floating holiday option can help companies with diverse employee backgrounds more visibly honor the desire of employees of all faiths to observe religious holidays.
Managing holiday pay for salaried employees is straightforward. Standard pay period compensation continues as normal without debiting vacation hours to cover sanctioned holiday time out of the office.
However, there are a couple of different ways to handle holiday pay disbursements for wage-earners.
The benefit of the latter approach is that it keeps holiday hours from getting mixed in with actual hours worked. Additionally, paying out holiday time as a bonus rather than “hours worked” can prevent the early onset of an overtime payout threshold.
As with any payroll task, the tools that you have at your disposal will greatly impact the efficiency and accuracy with which you complete the job.
A capable payroll software package can help you answer yes to the following questions: