It's certainly hard to keep track of holiday pay, vacations, and paydays, especially during the holiday season, so it's extra important to stay on top of things. 

It's that time of year to relax and spend time with your loved ones, so don't let your business operations hinder your holiday spirit.  

Here is some advice for common questions to ease your mind during this busy season: 

Holiday pay. 

Unsure whether to pay your employees when you close the shop for the holidays? Read this reminder as to whether or not you are required to pay your employees.  


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What if I close for the holidays? 

According to the Fair Labor Standards Act (FLSA), you are not legally required to pay non-exempt employees for the time they’re not working. These incentives are generally up to the employer and agreed between the employer and the employee which are super important to communicate through an employee handbook.  

Most businesses choose to pay non-exempt employees for closure on a holiday. The compensation and measurement of the holiday pay are up to the discretion of the employer.

For exempt employees, if an employee works the week of the holiday, as an employer, you must compensate them for their full weekly salary regardless of the time off given for the holiday.  

What if I stay open for holidays? 

If you decide to stay open on a given holiday, you may consider providing extra compensation for the work your employees put in. Consider your state laws when it comes to holiday pay.  

Many businesses may pay employees at a special rate for holiday hours, but usually, the worker is only entitled to his or her regular pay plus overtime. Remember that states will generally enforce an employer's written HR policy regarding holiday pay, so it's important to follow company policy and to apply the rules consistently and fairly to all employees. 

What about religious holidays? 

Small business owners and HR managers should review time-off policies for religious holidays since a refusal to accommodate them could put your business at risk for a discrimination lawsuit.  

As far as pay is concerned, the same FLSA rules apply to religious holidays in that there is no federal law requiring an employer to pay an employee for a period of time off to observe a religious holiday, practice, or belief. 

However, as far as religious practices are concerned, consider Title VII of the Civil Rights Act. Under this regulation, employers are required to fairly accommodate an employee's spiritual beliefs or practices, unless this will result in more than a minimal impact on business operations. 

For more information on religious holidays, read PrimePay’s latest blog titled “Guidelines for Time Off Surrounding Religious Holidays” here.  

Most common paid holidays. 

The federal government recognizes 10 holidays annually, however, if employees work these holidays, it is up to the employer to decide whether they want to offer holiday pay as neither federal nor state law requires employers to do so. Here is a list of those holidays along with the percentage of companies offering pay for each: 

New Year's Day - Wednesday, Jan. 1, 2020  

90% of U.S. companies pay their employees for New Year’s Day, even if they're closed. 

Martin Luther King, Jr Day - Monday, Jan. 20, 2020  

39% of U.S. companies pay their employees for Martin Luther King, Jr Day, even if they're closed. 

President's Day - Monday, Feb. 17, 2020 

34% of U.S. companies pay their employees for President’s Day, even if they’re closed.  

Memorial Day - Monday, May 25, 2020  

93% of U.S. companies pay their employees for Memorial Day, even if they're closed. 

Independence Day - Saturday, July 4, 2020 

93% of U.S. companies pay their employees for Independence Day, even if they're closed. 

Labor Day - Monday, Sep. 7, 2020 

94% of U.S. companies pay their employees for Labor Day, even if they're closed. 

Columbus Day - Monday, Oct. 12, 2020 

14% of U.S. companies pay their employees for Columbus Day, even if they're closed. 

Veterans Day - Wednesday, Nov. 11, 2020 

19% of U.S. companies pay their employees for Veterans Day, even if they're closed. 

Thanksgiving Day - Thursday, Nov. 26, 2020 

95%  of U.S. companies pay their employees for Thanksgiving, even if they're closed. 

Christmas Day - Friday, Dec. 25, 2020 

97% of U.S. companies pay their employees for Christmas, even if they're closed. 

Payroll processing around these holidays may be impacted by closing. If payday falls on a holiday, there is no law that requires employers to pay their employees before the holiday.  
 
Tip: Make sure you have payroll planned in advance in the event that the person in charge of the payroll is expected to take a few days off around the time it is due. 

Holidays & direct deposit. 

Today, businesses and even some banks are a lot more lenient when it comes to holiday closing and time off. Some banks may actually remain open on holidays. However, it is important to understand that even though a bank may be open if the Federal Reserve is closed, no money is being moved.  
 
It’s also important to consider the schedule of the automated clearing house (ACH). The ACH is an electronic financial transaction network in the U.S. that is used for business-to-business transactions, direct deposit, utility purchases, social security, e-commerce payments, and tax payments.  
 
The two national ACH providers are reserve banks and the electronic payments network (EPN), which means they rely on each entity to process your deposits. Being that the ACH follows the same rules as the Federal Reserve, your direct deposit cannot be processed on holidays.  

For more tips for handling your holiday pay and direct deposit, read here.


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Stay compliant. 

Keep in mind that states will usually enforce the contractual holiday pay policy of an employer, so it is important to follow company policy and apply the rules to all workers reasonably and on a consistent basis Contact your state labor department or a professional employment attorney for information about the specific requirements in your state if you have any further questions! 

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Disclaimer: Please note that this Q&A is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding specific application of the information to your own plan.

Editor's Note: This post was originally published in Nov. 2012, Dec. 2015, and includes information from previous blogs posted in Oct. 2018, and Jul. 2019 and has been updated for freshness, accuracy, and comprehensiveness.