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Don’t let holiday pay/work missteps make Payroll grumpy

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in Office Management,Payroll Management

The time between Thanksgiving and New Year’s is a busy time for many companies. Questions regarding overtime, holiday pay and temporary hires often arise. You don’t have to play Scrooge this holiday season if you know the rules.

Holiday pay rules

Companies that close on Thanksgiving Day, Christmas Day and New Year’s Day may, but aren’t required to, pay employees for that time.

Rule: The Fair Labor Standards Act (FLSA) doesn’t mandate that employees be paid for holidays. Thus, nonexempt employees who normally work 10-hour days can be paid for eight holiday hours.

If you do pay nonexempts 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. Rule: Holiday pay is idle time pay, which is excluded from the regular rate calculation.

What about exempts? 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. Watch out: Exempts who run out of accrued time due to current debiting, and those who have already run out of time, must be paid their full salaries. Rule: If you shut down for an entire week, you needn’t pay exempts anything. They may use vacation or other accrued time, if they have it.

Holiday work rules

For businesses that are open, nonexempts can make a substantial dent in their holiday bills by picking up overtime work. Just how serious a dent depends on company policy. Consider these two FLSA rules.

  • 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.
  • 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. Everyone wins: Employees don’t lose a dime in overtime and the company saves money.

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

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. Also, use the Social Security Administration’s Social Security Number Verification Service to ensure that their names and Social Security numbers match.

Finally, temps who consent may be enrolled in your direct deposit or paycard program; provide them with appropriate explanatory material.

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