Everything Small Businesses Must Know About Holiday Pay



Holiday pay can result in some complex questions for both employers and staff, especially for those unfamiliar with payroll administration. To ensure you have a smooth and hassle-free experience, we are providing top tips on everything small businesses need to know about holiday pay.

Utilize the Best Payment Tools

Managing holiday pay doesn’t have to be complex. You simply need to take advantage of the best payroll tools to improve both accuracy and efficiency. For example, you can easily provide details of holiday pay using a check stub maker, which will indicate the remaining vacation time an employee has left to use, in addition to their take-home pay, taxes and deductions.

Holiday Pay is Not a Legal Requirement

It is important for employers to be aware that they are not legally required to provide their employees with holiday pay. If you class yourself as more of a Grinch than good ol’ Saint Nick, you can request that your employees work over the holiday period. It is at the business owner’s discretion to provide holiday pay or vacation time during a festive or religious period. If in doubt, consult the Fair Labor Standards Act for more information.

Paid Holidays Can Boost Employee Morale

The federal government might not require employers to provide holiday pay to their employees, but it can provide an opportunity to prove to your team that you are a caring company. In fact, a study found that it is the second most desirable employer benefit after health and medical coverage, and ranked higher than pension contributions. So, boost employee moral by providing them with paid holidays so they can celebrate the holidays in style.

It is Occasionally a Legal Requirement

While most companies are not legally obliged to pay employees a salary for holidays, there are some circumstances that will require an employer to pay a government contractor’s salary. Any bid work that applies the Davis-Bacon and Related Act (DBRA) or McNamara O’Hara Service Contract Act (SCA) require employees to receive holiday pay.

How to Choose Holiday Pay

With so many public holidays to choose from, you might be unsure about which holidays to provide pay for. It is therefore recommended to provide paid time off for coinciding federal holidays, such as New Year’s Day, Independence Day, Christmas Day and Thanksgiving Day.

Floating Holidays

Many progressive employers are choosing to provide their staff with floating holidays, which are paid leave options that can be used at an employee’s discretion. It is similar to standard vacation time, but allows employees of different cultural and faiths to take paid leave to observe a religious holiday.

Holiday Pay for Hourly Employees

Providing holiday pay for salaried staff is straightforward, as you simply do not debit their vacation hours against their standard vacation allowance. Yet, offering holiday pay to hourly employees can be a little trickier. There are different ways to handle holiday pay for a wage-earner. For example, you can add a line-item bonus on the employee pay stub, which is paid from the value of their holiday time. Alternatively, you could add a corresponding number of hours an employee has worked to the pay period, which will supplement the vacation shortfall.