Questions regarding overtime, holiday pay and seasonal hiring often arise this time of year. Here are the eight simple rules you need to know to make this holiday season run smoothly.
Holiday pay rules
Thanksgiving always falls on a Thursday, and this winter, so do Christmas and New Year’s Day. That means many companies will be offering three Fridays off to make three four-day weekends. If your business decides to close on those days, you may, but aren’t required to, pay employees for that time.
Rule No. 1: The Fair Labor Standards Act (FLSA) doesn’t mandate that employees be paid for holidays.
So nonexempts who normally work 10-hour days can be paid for eight holiday hours.
Rule No. 2: If nonexempts receive holiday pay and they also work overtime during a holiday week, don’t factor the holiday pay into their regular rate calculation as you figure their overtime rates. Holiday pay is idle time pay, which is excluded from the regular rate calculation.
Rule No. 3: If you close for a holiday, and you have a bona fide benefits plan, you can require exempts to take accrued time off, provided they receive payments equal to their guaranteed salary. Note: Exempts who have run out of accrued time must still be paid their full salaries.
Rule No. 4: If you shut down for the week, you needn’t pay exempts anything. Exempts don’t need to be paid if they don’t work for a week. They may use vacation time, if they have it.
Holiday work rules
Businesses that are open must pay their employees. But you can save on overtime liability by making some changes to your pay policies. Consider Rules No. 5 and No. 6:
Rule No. 5: You don’t have to include holiday pay in the regular rate calculation for nonexempts who work through a holiday if they receive their regular wages in addition to the holiday pay. But you can’t credit this holiday pay against your obligation to pay overtime.
Rule No. 6: If, instead of paying employees their normal wages plus holiday pay, they exchange the holiday pay for at least time-and-a-half for holiday work, you can credit that time-and-a-half premium against your obligation to pay overtime.
Example: Harry earns $10 an hour. He’s entitled to Christmas Day as a paid day off.
Option 1: He gives up his holiday and works nine hours. During the week he works 50 hours. Total pay: $630: $400 in straight-time pay, $150 in overtime and $80 in holiday pay.
Option 2: Harry gets double time for the holiday. Total pay for working nine holiday hours: $180. He still receives $400 in straight-time pay and $15 for one OT hour. Total pay: $595. Harry’s employer credits the nine hours of OT pay against the 10 hours of OT he’s owed.
Holiday hiring rules
Remember, temporary seasonal employees are still employees, even if they won’t be on your payroll for very long.
Rule No. 7: Temporary employees must complete W-4 and I-9 forms, be reported to the state as new hires and receive W-2s. Tips: Ask to see their Social Security cards and photocopy them for your records. Use the Social Security Administration’s Social Security Number Verification Service to ensure that their names and Social Security numbers match.
Rule No. 8: Finally, temps who consent may be enrolled in your direct deposit or paycard program; provide them with appropriate explanatory material.
