Benefits | HR Essentials
The holiday season- that time of year filled with feasts, festivities and an abundance of decorations! While often a joyous time for you and your employees, you may be grappling with a list of questions regarding how to compensate employees, when compensation is actually required, and the best way to communicate this information once you’ve finally figured it all out.
We’re here to help you with tips and best practices for addressing common employer questions related to company shutdowns, employee time off, and compensation of employees during company-designated holidays and company-sponsored holiday events!
During the holiday season, dependent on industry, it may be common for your business to slow down. Oftentimes, businesses will close for an extended period of time to reduce costs, allow employees to be home with their families, or both. If you’re considering a holiday closure, we suggest providing as much notice to employees as possible, even when notice is not required by law.
While some employers will choose to offer this time off as an extended paid holiday incorporated within their holiday calendar, others may choose to mandate an unpaid closure. Exempt versus nonexempt employees have different considerations during a period of company shutdown. While a nonexempt employee is only compensated for actual hours worked, an exempt employee must be paid their full weekly salary for any workweek in which they have performed any work. This means you will owe exempt employees a full week’s wages for only a partial week of work, so timing the shutdown to spread across a full workweek is key when the intent is for the time to be unpaid.
Finally, while it may be attractive to mandate employees to utilize available accrued time off during the company shutdown, especially in states with payout requirements upon termination, you should be cautious in doing so. While you may have more discretion in how you manage accrued vacation time than you would under local or state required paid sick leave laws, considerations will vary across jurisdictions and there could be advanced notice requirements. When in doubt, the safest option will always be to make use of accrued time off optional.
Managing employee time off requests can be a challenge during the holiday season, especially for small to mid-size employers trying to balance employee absences with business needs. A best practice to assist with this process is to send a written communication to all employees prior to holidays, outlining the need to request time off in advance and how time off requests will be evaluated to ensure appropriate coverage for operations. Evaluation criteria might include one or more of the following elements:
• Order in which requests are received
• Company tenure
• Seniority within the organization
• Departmental, geographic or customer needs.
If your business experiences a high labor demand during the holiday season, you may be considering a “blackout” period during which employees are not able to request time off. In addition to communicating the blackout period within your attendance policies, businesses should also be aware of any local, state or federal leave requirements that would create exceptions to this rule, such as paid sick leave, medical and/or family leave laws, or military leave.
Finally, we encourage managers to be mindful of the time off benefits your company offers. If paid volunteer days are available, this is a great time for employees to utilize the company-provided benefit and give back to the community. Additionally, if you provide floating holidays above and beyond your regular vacation or PTO plan, managers can recommend this time for employees who wish to observe a holiday not already included within the company’s paid holidays calendar.
If you regularly employ nonexempt employees, you may be wondering how such employees should be compensated if required to work on a company-designated holiday. The good news is, paid holidays are not required by most states, so you may have discretion to create policies which are company specific. Here are some tips to eliminate the grey area:
• Create a holiday policy that outlines the eligibility criteria for company-paid holidays, as well as how employees are compensated when required to work a designated holiday
• An exempt employee is compensated at a fixed salary and not for actual hours worked, so their compensation will typically be unimpacted if required to perform work on these designated dates. However, you may decide to offer a spot bonus or an alternative day off as a gesture of good will
• For a nonexempt employee, there may be a requirement to compensate at a premium rate of pay during specific holidays, such as in Massachusetts for certain employers. When not required by state or local laws, employers may choose voluntarily to offer a higher rate of pay on these dates to boost morale and motivate a high level of performance
• If a nonexempt employee does receive a paid holiday off, the hours for which holiday pay is received will not factor into overtime eligibility calculations, since it is not actual time worked. An employer must only take into account hours during which work was performed when determining if the employee has incurred overtime pay
While attendance at company-sponsored events may involve a few more factors in the compensation decision, below are some tips to keep you on the nice list:
• Make attendance optional! If employees are not required to attend the event, and if no work is performed during the event, your liability of having to compensate employees for attendance will be significantly reduced. Additionally, if the event takes place during work hours, such as a holiday luncheon, optional attendance provides nonexempt employees full discretion over how they’d like to spend their lunch break, thus not incurring potential penalties for failure to provide a lunch break in accordance with state laws
• You may find yourself in a position where a nonexempt employee is required to help work the event. If this is the case, be mindful that time spent working the event is often considered work time and is compensable for nonexempt employees. In addition, the hours worked would count toward overtime eligibility calculations
• Of course, there are many considerations outside of compensation for employers to consider when hosting a holiday celebration, and we encourage you to be mindful of the various ways you can minimize your risk and keep employees safe at your holiday soirees
This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.
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