Providing Holiday Pay for Hourly Employees

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Do U.S. employers need to provide holiday pay for hourly employees? At a federal level, the Fair Labor Standards Act (FLSA) does not require private employers to pay employees for unworked time.

(Keep in mind that federal employees, some state employees, and eligible government contractors must pay for specific holidays. It’s also important to check your state’s laws because some states, such as Massachusetts and Rhode Island, require private employers to pay for holidays.)

If you have the option of providing paid holidays, these tips can help you set your policy. Like with any policy, it can be helpful to have an employment lawyer review it before you add it to your employee handbook.

Benefits of Offering Holiday Pay for Hourly Employees

Although you may not be required to pay salaried and hourly employees for holidays and vacations, many businesses do so to stay competitive. It can help you recruit and retain top talent and boost employee morale and engagement. Research shows that companies with high employee engagement often have higher profits because of factors including better productivity, work quality, customer loyalty, and employee retention.

Step 1: Determine Your Paid Holidays

Once you’ve decided to give holiday pay for hourly employees, your first step is to decide which holidays you’ll pay employees for even when they take the day off. For example, you may choose to pay employees for all the federal holidays or for the most common paid holidays. According to the compensation data resource Payscale, the most recognized paid holidays for private companies are:

  1. New Year’s Day
  2. Easter
  3. Memorial Day
  4. Independence Day
  5. Labor Day
  6. Thanksgiving
  7. Day after Thanksgiving
  8. Christmas

Many companies also give paid time off on Martin Luther King Jr. Day, Presidents’ Day, Veteran’s Day, Good Friday, Christmas Eve, and New Year’s Eve, per Payscale. Some companies offer “in lieu” of days when there’s a holiday over the weekend. For example, if a holiday falls on a Sunday, your employees would get a paid day off on Monday.

Step 2: Create a Process for Requesting Religious Holidays Off

Under Title VII of the Civil Right Act, employers are prohibited from discriminating against candidates and employees because of their religious beliefs. Employers must accommodate a candidate’s religious beliefs unless it would cause an “undue hardship” for the business, meaning it would be a “significant difficulty or expense.” While it’s likely you must give employees the day off for major religious holidays, you can decide whether you will still pay them for the day.

If you offer holiday pay for hourly employees, you may want to offer a certain number of “floating” holidays so employees can get paid for religious holidays that are important to them.

Step 3: Choose a Pay Model for Paid Holidays

If you decide to provide holiday pay for employees who take the day off, you’ll likely pay them their regular rate. However, you may want to pay employees more when they work on holidays. There are three common pay models:

  • Regular rate. If you choose this model, you’d pay employees their regular hourly rate.
  • Time-and-a-half. You’d pay employees their regular hourly rate and an additional half the amount. For example, if your employee’s hourly rate is $30, you’d pay them an extra $15 for the hour, amounting to $45 an hour.
  • Double pay. You’d pay employees double their hourly rate. If they normally get $30 an hour, they’d be paid $60 an hour for working on a holiday.

Continue to Learn Hiring and Management Best Practices

Now you know the benefits of providing holiday pay for hourly employees and salaried employees and how to set your policy. Continue to strengthen your company with expert hiring and management advice from Monster.

Legal Disclaimer: None of the information provided herein constitutes legal advice on behalf of Monster.