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Payroll Tips – Answers to 7 Holiday Pay Questions

Published November 17, 2011 | By Nancy Smyth

Payroll and holiday pay can be confusing and overwhelming and here we are right at the height of the upcoming holiday season!  I found these great tips from HR Matters and wanted to share them with you.  These tips provide answers to common questions such as:  Do you have to provide paid holidays?  What about for new employees?  Do you have to pay overtime to employees who have to work on a holiday?

We’re officially heading into the holiday season with Thanksgiving coming up next week and Christmas and the New Year just around the corner. If you are like most employers, you may be dealing with holiday pay issues. To help you out, the HR Matters E-Tips Editors have put together the top seven holiday questions that they answer on a regular basis. (You also can find the answers to these and many more holiday questions in the HR Matters Tools and Resource Center online, Policy Manual, Holidays, Chapter 503.)

1.  Do we have to provide paid holidays?

Absent a collective bargaining agreement or other contract providing paid holidays, federal law does not require you to pay nonexempt employees for holidays that they do not work. Most organizations offer a limited number of paid holidays to create employee goodwill. According to the Society for Human Resource Management 2011 Benefits Survey, 97% of responding employers provide paid holidays to their employees.

Note, however, that if you do not provide paid days off for holidays, you should pay exempt employees for any holidays that your organization is closed. (As a reminder, the Department of Labor (DOL) regulations implementing the Fair Labor Standards Act (FLSA) provide that the following categories of employees are exempt from the overtime and minimum wage requirements of the FLSA: (1) bona fide administrative, executive, or professional employees; (2) workers employed in outside sales; (3) highly skilled computer-related employees; and (4) certain “highly-compensated” employees.)

Although the DOL regulations implementing the FLSA do not specifically address unpaid holidays, they do provide that an employee will not be considered paid “on a salary basis” if deductions are made “for absences occasioned by the employer or by the operating requirements of the business.” Unpaid holidays generally are considered the type of absence “occasioned by the employer.” According to a DOL Wage & Hour Opinion Letter dated 5/27/99, the DOL indicated that an employee will not be considered to be paid on a salary basis if deductions from the employee’s predetermined compensation are made for absences occasioned by the employer, such as being closed on certain holidays, or the operating requirements of the business. Further, the regulations recognize only a limited number of instances when an employer may make deductions (or “dock”) for absences of a full day or more without jeopardizing the exemption and thus incurring overtime liability. But, holidays do not fall under any of those exceptions.

2.  Can we require employees to complete an introductory period before becoming eligible for holiday pay?

You most likely can exclude new nonexempt employees from holiday pay. If there is no collective bargaining agreement or other contract specifying that new employees are eligible for holiday pay, then it is up to your organization’s policy. Many employers exclude new employees from certain benefits granted to longer-term employees until completion of the introductory period.

However, new exempt employees should not be covered by this policy and should receive pay for holidays. As explained in # 1, above, if you do not pay exempt employees, new or old, for holidays they do not work, you may jeopardize their exempt status.

3.  Can we require employees to work on holidays?

Since paid holidays are a discretionary benefit, you may require employees to work holidays according to the operating needs of the organization (and assuming no collective bargaining agreement or other contract prohibits this work). We recommend that employers’ holiday policies should include language that indicates employees may be required to work on holidays. For example, our HR Matters Tools and Resource Center, Policy Manual, includes the following provision in the model Holiday policy in Chapter 503: “The Company may schedule work on an observed holiday as it considers necessary. Normally, work on an observed holiday will be paid as if the day were a regularly scheduled work day. Employees will be given the option of receiving additional pay for the day or a “floating” holiday that may be taken, with the prior approval of their supervisor, at another time during the year.”

Note that you generally are not required to pay nonexempt employees for time and one-half for holiday work unless the employee has already worked 40 hours in the week (see # 4, below) or to provide a paid floating holiday at a later point. However, the model policy provides these extra benefits in recognition of the extra burden for employees who work on holidays.

4.  Do we owe nonexempt employees overtime if they work on holidays?

The FLSA requires you to pay overtime to nonexempt employees at time and one-half their regular rate of pay for all hours actually worked over 40 in a single workweek. Accordingly, you will owe nonexempt employees who work on holidays overtime only if the employees end up working more than 40 hours because they are working on the holiday.

So, for example, if an employee has worked four 10-hour days (40 hours) and then works on a designated holiday that same week, then the employee should receive overtime for all of the holiday work hours. But, if the employee works four 8-hour days (32 hours) and then works an additional eight hours on the holiday, for a total of 40 hours worked in the week, then that employee is not entitled to overtime for the holiday work hours. (Note, however, that a limited number of states, such as Rhode Island, require payment of at least time and one-half for employees who work on certain holidays, so be sure to check state law, too.)

As an aside, if you voluntarily pay a premium of time and one-half (the equivalent of overtime) for work on a holiday, the FLSA regulations generally allow you to credit this extra compensation towards any overtime that might actually be earned in the same week.

5. If an employee works 40 hours in a week and then takes a paid holiday, do we owe the employee overtime?

No. As discussed in # 4, above, nonexempt employees must be paid overtime only for all hours actually worked over 40 in a single workweek. Thus, in calculating actual working hours for a nonexempt employee, you do not have to count any paid time off in the overtime calculation if the employee did not perform any work during the time off.

So, even if a nonexempt employee works a full 40-hour workweek and also takes a day of paid holiday and is paid for 48 hours that week, the employee is not entitled to overtime pay since he did not actually work more than 40 hours in the workweek.

6.  What if an employee is on FMLA leave when a holiday occurs?  Should they receive holiday pay?

The answer depends on your policy. You generally do not have to pay an employee for holidays that occur while the employee is out on unpaid FMLA leave if it is not the employer’s policy to provide this benefit during other types of unpaid leave. Similarly, if an employee’s work schedule is reduced for intermittent FMLA leave, you may reduce proportionately the employee’s benefits, such as holiday pay, if the employer’s normal practice is to base this benefit on the number of hours an employee works. However, you may not eliminate the full-time employee’s benefits because the employee is working a part-time schedule if part-time employees normally are not eligible for these benefits.

7.  How do we pay nonexempt employees who work a compressed workweek, working four days a week, ten hours a day?  Should these employees receive holiday pay if the holiday falls on a day that they are not scheduled to work?

Whether the nonexempt employees working compressed workweeks qualify for holiday pay depends on the terms of your holiday policy and how it has been implemented. Employers using compressed schedules (such as employees working four days/ten hours a day) generally take three basic approaches to eligibility for holiday pay.

(Download free Holidays model policy including best HR practices and legal background. Will require that you create a free account.)

Some employers pay only for holidays occurring on the employee’s regularly scheduled work day. Another more common approach is to allow compressed workweek employees to take off a day on which they would otherwise be scheduled to work. For example, if the employees normally work four days, they work only three days during weeks with holidays. Still other employers prefer to have compressed workweek employees on the job at least four days a week and pay for the holiday even if the employee is not scheduled otherwise to work that day, giving the employees an extra day of pay. This last practice, however, may lower the morale of employees who work a regular schedule and thus receive less pay for the holiday week.

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About HR Matters:

HR Matters E-Tips is a free service of Personnel Policy Service, Inc. To subscribe, go to: http://www.ppspublishers.com/ezsignup.htm

© 2011 Personnel Policy Service, Inc. All Rights Reserved.  HR Matters is a registered trademark of:  Personnel Policy Service, Inc., 159 St. Matthews Ave., Suite 5, Louisville, KY 40207 Tel: 1-800-437-3735 – Fax: 1-800-755-7011

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We hope you’ve found these answers to 7 holiday pay questions to be helpful; if so please take a moment to leave a comment or share this with others on your favorite social networking sites.

 

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#Payroll Tip – Snow Days and Pay, Questions & Answers

Published February 2, 2011 | By Nancy Smyth

winter stromYet another massive winter storm is threatening snow and freezing rain from Colorado to the East Coast this week. Do you know what your obligations are to employees who cannot get to work on these bad weather days?

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Q: We are expecting more snow and ice this week and anticipate that employees may have a difficult time getting to work. Several of our employees have already used up their paid days because of bad weather this winter. How should we deal with these absences?

A: If you have operations in areas that experience severe weather, such as winter storms, flooding, or hurricanes, you should include provisions in your policies for weather-related absences. Most employers discuss weather-related absences in their attendance policies. Any policy dealing with attendance during periods of inclement weather should give employees an incentive to get to work and should distinguish between nonexempt and exempt employees.

Nonexempt employees (those employees who are covered by, and not exempt from, the minimum wage and overtime provisions of the federal Fair Labor Standards Act (FLSA)) generally only have to be paid for time actually worked. Accordingly, many employers do not pay nonexempt employees for weather-related absences, although the absence usually is excused. Some allow nonexempt employees to use accrued paid vacation or personal days so that they do not lose compensation. In exceptional situations, some employers pay all nonexempt employees for the day but recognize the efforts of those who worked by providing them with an extra floating personal day.

Some employers allow nonexempt employees to make up the missed time. However, if the employees make up the time in a week in which they also work 40 hours, you will owe them overtime for the additional hours worked over 40. For this reason, most of these employers do not allow the make-up time unless it is scheduled within the same workweek as the time missed. But, even this approach is likely to cause scheduling headaches.

Exempt employees should be handled differently. They are exempt from the FLSA’s minimum wage and overtime requirements because of the nature of their job duties and the fact that they are paid on a salary basis. The most common exempt classifications include executive, administrative, and professional employees.

Under the “salary basis” definition, exempt employees generally must receive their full salary for any week in which they perform work, without regard to the number of days or hours worked. Deductions may be made for less than a full week only in limited circumstances, such as for full-day absences for personal reasons or under a bona fide sick policy. However, deductions for less than full days are not allowed under any circumstances.

Deductions for absences of a day or more because of bad weather are not specifically allowed for exempt employees by the FLSA regulations. However, two Department of Labor (DOL) opinion letters indicate that you can require exempt employees to use paid leave when they are absent because of weather related conditions. In addition, the DOL opinions indicate that it may even be okay to make deductions from exempt employee pay for full-day weather-related absences in certain circumstances.

In the letters addressing snow day absences, the DOL indicated that if an employer is open for business and an exempt employee does not come to work that day, the employer may require the employee to use a paid vacation day or dock the employee for a full-day absence. According to the agency administrator, when a vacation day is used, the employee still receives the same guaranteed salary for the week, so the salary basis is maintained.

To make the case for docking an exempt employee’s pay, the agency reasoned that any absence caused by inclement weather is considered an absence for personal reasons if the employer’s business is open. The employee in effect chooses to stay home instead of reporting to work when the business is open.

If your organization is closed for the day, the opinion letters indicate that you cannot make deductions for full day absences from exempt employee pay because the FLSA regulations specifically do not allow deductions for absences occasioned by the employer or the operating requirements of the business.  Under the regulations, no deductions are allowed when work is not available.  However you can require that exempt employees use their paid time off (PTO) since they then would receive their entire salary.  But, if you do not have any accrued PTO time, you still cannot make a deduction from their pay.

Distributed by Sunburst Software Solutions, Inc. with permission from:
HR Matters E-Tips, copyright Personnel Policy Service, Inc., Louisville, KY, all rights reserved, the HR Policy and Employment Law Compliance Experts for over 30 years, 1-800-437-3735. Personnel Policy Service markets group legal service benefits and publishes HR information products, including the free weekly electronic newsletter, HR Matters E-Tips (www.ppspublishers.com/hrmetips.htm). This article is not intended as legal advice. Readers are encouraged to seek appropriate legal or other professional advice.

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QuickBooks Question – Inventory for Contractors

Published July 6, 2010 | By Nancy Smyth

A reader asked the following question:

We are a small contractor in San Diego and we are wondering how we get around having to always do an inventory adjustment to get our purchases to the correct COGS account?  We have (2) departments but they are both doing construction projects:  Service dept does smaller installs and Contracts dept does the bigger jobs so I have been doing a JE to move the material from the Contracts material COGS account to the service COGS account.
Is there an add-on for QB Enterprise 8 that we could use?

Thank you so much for your website/blog. I’ve been reading it faithfully every day!

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There are several inventory add-ons for QuickBooks Pro, Premier and Enterprise; check out these 3rd party add-ons at the Intuit Marketplace.

double-sided item

Recording costs and income with an item

Based on your comment about “always having to do an inventory adjustment in order to get your Purchases to the correct COGS account”, makes me think that perhaps your items are not correctly set up.

Make sure that your QuickBooks Inventory Items are set up so that they capture both the cost/purchase account as well as a sales account; this method is called a “double-sided” item.

When any type of QuickBooks Service, Inventory, Non-Inventory, Other Charge Item is set up this way you are able to capture the purchase price as well as the sales price.

When you enter a bill from a vendor for the inventory item (or write a check) you should be using the ITEM tab and not the Expense tab.

I’m confident that if you aren’t currently using the QuickBooks Purchase Order function that you would find that beneficial also.

Additionally, rather than using Journal Entries to classify whether it was the Service or Contracts Department – consider using “classes” to handle that.

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