Cutting Paid Holidays to Save Money?
The Labor Law Helpline, available for unlimited calling by Preferred and Executive members, is getting a number of calls with the following question:
Can we eliminate holiday pay to cut costs?
Answer: There is no California legal requirement to provide time off, paid or unpaid, for holidays. As such, if your company wants to terminate this benefit, you may do so. There are two issues:
- Whether you wish to continue to close on holidays but no longer pay employees, and
- Whether you wish to remain open on holidays and have it a regular business day.
Under option (1), keep in mind that doing so will only provide you with cost savings for your nonexempt employees because if nonexempt employees are not working for any portion of a day or an entire day, they need not be paid. This is to be distinguished from exempt employees who must be paid if they work at all in a work week and if they are ready and willing to work. If your company shuts down on its own accord and decides to make it an unpaid holiday, your exempt employees must be paid for the entire workweek.
Under option (2) you may not save money as your regular staff will likely be expected to work unless they take a personal day. Consult your own policy as to whether you require employees to use accrued time off before they take unpaid time.
In this instance, if a nonexempt employee wants to take time off for the holiday and they do not have accrued vacation or PTO, you do not have to pay them for any time they did not work. If an exempt employee takes time off for the holiday in an increment of four or more hours, you may deduct that amount of time from accrued vacation or PTO, but an exempt employee must be paid her full salary. If the exempt employee is absent for one full workday and has not yet accrued or used all accrued vacation or PTO, her salary may be reduced for that one full day.