Holiday pay, Exempt employees, and Recordkeeping

It’s time again for our HR Basecamp roundup. If you’re new here, we take the most popular submitted questions from our HR Basecamp Facebook group every other week and go more in-depth on the answer. Join the over 10,000 other office managers and business owners here to submit your questions and participate in the discussion!

Podcasts and Resources in this Roundup:

• What the Hell Just Happened?! Episode 301: Year-Round Holiday Pay
• Wage Compliance Guide

I usually only close for a holiday if it falls on a Friday or a Monday. My employees are upset I’m not closing the office on the 4th of July and say I’m legally required to close and give them holiday pay since it’s a federal holiday. Is this true?

The legal side of things: This is a common cause of confusion for employees and employers – we get some variation of this question multiple times around each holiday. While there are a handful of state laws relating to holiday pay, they only apply in very limited circumstances. In most cases, there is no state or federal law requiring private businesses to close or provide holiday pay for any holidays. 

Note that if you do close for a holiday and you don’t provide holiday pay, exempt salaried employees still need to receive their regular pay. There are some instances where you can prorate an exempt employee’s salary, but a holiday closure is not one of them.

Now for the human approach: Holiday closures and pay are entirely up to you as employers. So, how should you communicate this with your employees? 

If you guessed the employee handbook, you’re right! Having a clear-cut holiday policy in your handbook guarantees your employees know how things work right off the bat since they review and sign the handbook when they get hired. It also gives you something to point to when employees question whether the office closes for a particular holiday, or whether they are getting holiday pay. You can simply say “check your handbook.” 

Beyond that, we recommend sending out a holiday schedule for the year. It’s a good idea to make decisions about closures prior to the start of the calendar year and then share the schedule with your entire staff. 

Here’s what to do:

1. Review your Employee Handbook to confirm which holidays you’ve identified as being typically observed by your business.
2. Look at the actual calendar to see where each of those holidays falls during your work week.
3. Decide which days you will close for each holiday:
   1. You can give more time off than usual: This year, Independence Day falls on a Thursday, which resulted in many businesses (including CEDR) opting to close on both Thursday and Friday of that week.
   2. You can also forgo a holiday closure if you wish: If you normally close for New Year’s Day but it happens to fall on a weekend, you might choose not to close at all for that holiday.
4. Make a list of the holiday closure schedule for the year, and use the HR Vault to share the list with your team
5. Make sure your holidays are also blocked on your team/scheduling calendar
6. Provide your list of holidays to your timekeeping administrator so that the holiday schedule is set up for the entire year ahead of time for payroll purposes.

Have more questions about holiday pay and closures? Find answers on our podcast: Episode 301: Year-Round Holiday Pay.

I thought that the only requirement for employees to be ineligible for overtime was that I pay them salary instead of hourly. I was recently told that’s not correct. What other requirements are there?

The legal side of things: Don’t let salary pay fool you! Any employee can be paid salary instead of hourly, but only employees who are paid the minimum required salary and meet the job duty requirements set by the Fair Labor Standards Act (FLSA) can be classified as exempt. Meaning, exempt from requirements like overtime. 

There are different categories of exempt employees, and there are specific rules for each category, so it’s important that you look at the position as a whole when determining an employee’s classification. The Department of Labor is going to look at whether the job duties and authority of the position meet the exempt requirements of a particular exempt category.

If an employee doesn’t meet the job duty or salary requirements (which may be changing soon), they are considered non-exempt. A non-exempt employee can be paid hourly or salary but either way they must track their hours and be paid overtime if they work more than 40 hours in a workweek (or over 8 hours a day in some states). 

Take a look at our Wage Compliance Guide for a detailed breakdown of exempt vs. non-exempt requirements.

Now for the human approach: Because of the strict requirements to meet exempt classification, most employees are considered non-exempt. If you’ve been classifying employees incorrectly, it’s not too late to fix things! 

First, review each “exempt” employee’s position and pay and confirm how they should be classified. If you’re a CEDR member and need assistance with this step, reach out to the Solution Center. 

Next, notify your employees of their change in classification and why it’s being changed. The why is extra important. Employees may see a change to non-exempt as a demotion, so it’s important that you explain the legal reasons behind why the change is happening and the fact that this doesn’t impact the amount they’re being paid or their job duties. Again, CEDR members can reach out to the Solution Center for guidance before talking to the employee.

I’m a new office manager and have been tasked with organizing existing employee records, which are currently a mess. Are we supposed to keep employee records after the employee separates? What’s the best way to store them?

The legal side of things: Yes, you are required to keep employee records even after an employee separates. How long you’re required to keep them depends on the kind of record and where you are located. While there are federal laws that govern how long you’re supposed to keep different kinds of records, many states have stricter rules. Be sure to double-check what your local laws say before getting rid of anything!

A quick tip: if it’s been less than 3 years since the employee left, you still need those records. 

Now for the human approach: The best way to store employee records depends on what works best for your business. That said, digital storage typically makes the most sense. It’s much easier to keep track of electronic files and you pretty much eliminate the risk of misplacing a paper record. 

If you’re a CEDR member, you’re already familiar with the HR Vault. The Vault not only allows you to upload and store employee documents but also gives you the ability to collect employee signatures digitally. It even keeps a record of each signature so you know the exact date and time the document was signed. The best thing about the Vault? You can access it even if you aren’t a CEDR member! You can unlock the Vault and all its benefits here.