Lights, trees and decorations are going up. Ovens are fired up for seasonal holiday baking, and carols can be heard all around. All this means that it’s the most wonderful time of the year.

Paid time off and holiday pay is a greatly appreciated benefit that will help to attract and retain employees. Companies that offer flexibility during the holidays definitely have an edge compared to companies that offer limited holiday pay and time off. While we all scramble to find the perfect gifts and attend countless parties, employers are wondering about payroll and time off requirements for their employees during the holidays. Take a look as we address the most common questions employers have during the holidays:

Does holiday time off have to be paid?

When exempt employees, those who meet salary requirements, are given the day off, employers are required to pay their full weekly salary if the employee works any hours at all during the week. This is also the case if your company is closed on a certain day or holiday. As long as an employee worked at a point during the week, they should still receive full pay.

Unless written in a contract or agreement, non-exempt employees, those who are paid hourly, do not have to be paid for time off. An employer is required to pay these employees only for the hours they have worked.

What holidays should my company observe?

Employers have the ability to choose which holidays are considered pay time off and which are not. Although, they are required under many federal and state laws to provide reasonable accommodations for an employee’s sincere religious practices, unless to can be proven that this would result in hardship to the business. Some states may have laws against opening on holidays for certain types of businesses. Check your state laws for full compliance into what may be required of you or what may restrict you.

Also, consider flexible scheduling or shift swaps during this time in order to accommodate all your employees. Some employers offer a floating holiday, time off for an employee’s religious observance that is not a part the of the company’s holiday schedule. For floating holidays, employees are required to give an advance notice when time off is planned, and these days are taken in the same year and do not carry over.

What about overtime during the holidays?

Under federal law, an employee must actually work over 40 hours in a week to be eligible for overtime. Employers do not have to count the paid time off as hours an employee worked when figuring out if an employee is entitled to overtime. Paid time off is not considered time worked.

As an example, if an employee worked 40 hours or less Monday through Thursday and took Friday off, they would not be eligible for overtime pay under federal law. However, some states have different requirements when it comes to how many hours worked in a day. In these states, employees who work more than 8 hours a day might be entitled to overtime pay.

What if our payday falls on a holiday?

If this occurs, employers usually have the option to pay employees the day after or the day before the holiday. Some states require payment to occur the business day before a holiday. Consult your payroll specialists if you want to adjust when your checks are distributed during the holidays. If you’re looking for more information about payroll during the holidays or in general, look at our payroll options or contact us.

If an employee works on a holiday, are they entitled to premium pay?

According to federal law, an employer is not legally obligated to pay a premium pay to an employee who works on the holidays. However, it is appreciated by the employee and a good recruiting and retention benefit if it is absolutely necessary. This is also a law that varies depending on what state your company operates in. Once again, be sure to check your state laws.