Holiday pay is a sensitive topic. It’s considered a must by some employees, but it can put a big dent in the pockets of business owners who weren’t expecting to foot the bill for holiday paid time off.
We researched the Fair Labor Standards Act (FLSA) to determine the rules and regulations surrounding holiday pay. You might be relieved to read what we found!
Ready to find out if you’re required to provide holiday pay for employees? Keep reading!
Are you required to provide holiday pay for employees?
The Fair Labor Standards Act (FLSA) does NOT require you to pay employees for time not worked – whether that is a federal holiday or scheduled vacation time. Holiday pay falls under the umbrella of “benefits” – meaning it is something that the employer and the employee must agree upon together at the time of job acceptance.
This is where the original contract or agreement becomes important. Is holiday pay one of the benefits listed on your employees’ contract? You must abide by the benefits, if any, that you included in that contract.
However, there are two important exceptions to this general rule.
Exceptions to the holiday pay rule
One, on government contracts that the McNamara O’Hara Service Contract Act (SCA) labor standards apply to:
- Holiday pay is required in contracts over $2,500
- Vacation fringe benefits are required in contracts over $2,500
And two, on government contracts that the Davis-Bacon and Related Acts’ labor standards apply to:
- Holiday pay is required for certain classifications of workers IF the Davis-Bacon wage determination contract states so
- Vacation pay is required for certain classifications of workers IF the Davis-Bacon wage determination contract states so
Should you offer holiday pay anyway?
Now that you understand what the federal requirements are, you might be wondering if you should offer holiday pay for employees anyway, even if you’re not required to. Many employers decide to offer holiday pay because the nature of the holiday season is one of giving and spreading joy – there’s arguably no better way to spread joy to employees than by offering holiday pay for time not worked.
If you’re feeling generous, offering holiday pay as a “surprise” might be a smart tool for motivating your employees, boosting their productivity upon return from time off, and give them a little extra cash to spend over the holidays.
Holiday pay ideas
- Offer holiday pay with the condition that employees work another day – say, December 24 and 26 – to become eligible
- Decide between offering holiday pay and offering a Christmas bonus – or do both
- Offer an increased rate of pay for the holiday – time and a half, for example
- ‘Exempt’ employees have to paid for holidays when the company is closed or you risk losing that status