The holiday season is right around the corner and your business is gearing up to meet the demands of your customers. Before the ghosts, turkeys, and tiny reindeer come to town, it’s crucial to understand your rights and responsibilities regarding holiday pay. There are many reasons knowing why holiday pay matters is critical, and the more you know, the better business will be this holiday season.

Holiday Pay: Exempt & Non-Exempt Employees

Most employees who work in the retail and hospitality sector are non-exempt. This means they are entitled to receive 1.5x their regular pay for any work performed in excess of 40 hours in a week. This applies regardless of whether the employee is salaried or on an hourly wage.

Exempt employees, on the other hand, are not entitled to receive more than their regular rate. In order to qualify as exempt, individuals must be on salary and earn a minimum of $455 per week (or $27.63/hr for computer employees). Most exempt employees hold executive, supervisory, administrative, professional, or sales positions.

Holiday Pay and the FLSA

While many businesses choose to pay exempt workers 1.5x their regular pay on holidays, there is no legal requirement under the Fair Labor Standards Act to do so. This is a perk employers provide to show gratitude for workers who provide services to customers on national holidays. While this is a common practice on Thanksgiving, Christmas, and Easter, it is less common on Independence Day, Memorial Day, Labor Day, and other holidays.

The Value of Paid Holidays

Paid holidays are a significant benefit for both exempt and non-exempt employees. These holidays include Christmas, Thanksgiving, Easter, etc. This benefit boosts employee morale and increases productivity throughout the year. While employers are not obligated under the FLSA to give workers paid holidays, those business who can provide holiday pay to employees do so because they recognize the long-term benefits in morale, productivity, and employee retention.

In addition to holiday pay, many employers offer paid vacation. This typically accrues throughout the year and many employees tend to use these accrued paid vacation days to visit family and take extended vacations. When either exempt or non-exempt employees take their paid vacation, they are not entitled to additional pay at overtime rates if one or more of those days falls upon a holiday.

One thing you will want to prepare for and address in your company policy is what happens to unused vacation days. Some companies have a “use it or lose it” policy, while others allow employees to roll some or all of these days over into the next year. In many cases, companies allow employees to cash in unused paid vacation days which many use as an added bonus around the holiday season.

The “Overtime Standard” and “Double-Time Rules”

Many holidays require workers to put in more than 8 hours in a day. When this happens, some states require employers to pay the employee overtime rates for those extra hours. For instance, if a worker puts in a 11-hour day, the employer is required to pay 3 of those hours at overtime rates. If the worker puts in more than a 12-hour day, some states require double-time pay for any hours in excess of 12.

Contact GreenLink Payroll at (480) 385-2525 to learn more about why holiday pay matters to your business. We are happy to answer your questions and help you identify the best solutions for managing holiday, vacation, and overtime pay for your business this holiday season.