Holiday pay can sometimes be a source of confusion for employers. For which days are you required to allow employees time off, and must that time be paid? What about when employees ask off for personal religious holidays, but the office as a whole remains open for business?
Private sector employers generally have full discretion over exactly which holidays are observed by the business. A company’s holiday schedule might fall squarely in line with the federal holiday calendar, or it may vary. For example, an increasing number of businesses are choosing not to acknowledge Columbus Day.
Your starter guide on creating an employee handbook.
Your company might also have an office-wide closing for certain religious holidays, such as Good Friday or Eid al-Fitr and Eid al-Adha. Perhaps you have a majority of Jewish employees and choose to close for the High Holidays but remain open on Christmas.
Allowing for this kind of flexibility is a great way to appeal to a diverse range of employees, and foster inclusion in the workplace. Let’s take a look at some of the ways you can structure your paid time off (PTO) policy to achieve it.
Offering Paid Holidays
Exempt employees generally must be paid their fully salary for an entire workweek if any work is performed in that week. This means that for office-wide closings, such as holidays, an employer must provide paid time off to exempt employees if the employees have performed work during the workweek in which the holiday falls.
In contrast, non-exempt hourly employees can be paid solely for hours actually worked, absent an agreement providing otherwise. Many companies pay non-exempt employees premium pay (such as 1.5 or 2 times their regular pay) for working a holiday. Note that in some states, like Massachusetts and Rhode Island, certain employers may be required to provide premium pay to employees for certain holidays.
Consider offering paid holidays to all employees regardless of exemption status. It can be a low-cost demonstration of good will that generates a disproportionately powerful increase in morale.
In that vein, employers are encouraged to honor the beliefs of all their employees by providing time off for personal religious observances. These are typically called personal days or floating holidays.
Under Title VII of the Civil Rights Act of 1964 and many state and local laws, employers are required to provide a reasonable accommodation to employees for religious observances, unless the employer can demonstrate that doing so would impose an undue hardship on the business. This may include providing time off for religious observances. Unpaid time-off may be a reasonable accommodation, as well as allowing an employee to use a vacation day or floating holiday to observe a religious holiday.
Let’s take a look at a recent new law in New York City that establishes a standard that should inspire employers in all geographies. Effective October 15, 2018, employers covered by the New York City Human Rights Law must engage in what’s called a “cooperative dialogue” with employees who request an accommodation related to their religious beliefs, disability, pregnancy, childbirth or related condition, or because the employee was a victim of domestic violence, sexual violence or stalking.
Even if your business operates outside of New York, you might consider incorporating the idea of a “cooperative dialogue” into your overall PTO and leave of absence policies. Building this empathetic mindset into how you interface with employees will help you get into the habit of offering accommodations. When one arises that's required by law, you've already built that mindset into your business practices. Such laws include but are not limited to:
FMLA or similar state-level protections
Rights of disabled employees under the ADA
Paid Sick Leave, which is rapidly becoming more ubiquitous across geographies
Paid Family Leave, which provides wage replacement for family medical situations in an increasing number of states
Related Article: 6 Paid and Unpaid Leave Laws Every Employer Should Know About
Personal days are a nice option to write into your PTO policy. These are intended for time off outside the scope of vacation and sick time. Personal days are not required to be granted to employees, may be paid or unpaid, and may be used for any planned or unplanned purpose that the employer defines.
Beyond just being able to stay home when the plumber pays a visit, personal days are also important because they allow the employee to take time off for religious observances.
Related Article: Defining Work-Life Balance for Your Small Business
Floating holidays are another form of personal days with a more limited scope. Appropriate uses include observance of religious holidays not granted off by the company, or for celebrating one’s birthday. Be conscious of your areligious employees, and try to craft a policy that allows everyone to practice their traditions in their own way.
Unlike personal days, floating holidays require advance notice but are not subject to approval like vacation. Both these types of ancillary PTO can save employers time, because they institutionalize the “cooperative dialogue” and don’t require case-by-case handling.
Personal day and floating holiday policies promote inclusiveness. It might seem like semantics to break these out separately from your vacation policy, but doing so will make employees feel embraced in their personal beliefs. This small act of empathy can help retain and attract the diversity of talent that your company should aspire to engage.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.