Tis the Season: Pay Considerations for Holiday Closures

By Giuliana Gabriel , J.D, Vice President of Human Resources

While some companies are busier than ever during the holiday season buzz, for others, December represents a “slowdown”—a time for rest, hibernation, and festivities. Many employers even shut down for a week or more until the New Year rolls around, and some require the use of vacation time to bridge the gap. However, there are important considerations to keep in mind during holiday closures, particularly when it comes to?exempt employee pay?and?vacation policies?in California.

Pay Considerations

Employers have discretion over whether they will pay non-exempt (hourly) employees during holiday closures. As such, your handbook policies should outline when you are closed for a holiday or a particular time of year, whether employees will receive holiday pay, and if a particular holiday is worked, whether you will pay a premium (i.e., a higher rate of pay per hour).?

Holiday closures are a little trickier for exempt (salaried) employees. Remember, to maintain exempt status under the executive, administrative, and professional exemptions, the employee must be paid their full salary for a workweek in which they perform?any?work. This is known as the “salary basis” rule.

Therefore, if you are closing for less than a full workweek, you must still pay your exempt employees their full salary whenever they are ready, willing, and able to work. You are not allowed to pro-rate their salary if you close for a holiday. One exception is if your business closes for a?full workweek, and you ensure that the exempt employee?performs no work?that week, then you would not be required to pay them their salary for that period. However, if the exempt employee even just checks a few emails or makes a work call, they must be paid their?entire salary?for the week. As such, make sure your expectations are clear and take steps to ensure absolutely no work is performed (e.g., block access to server/emails, take work phones/company laptops, etc.). ??

Pro Tip: Defining the Workweek

Be sure to check how your policy defines the workweek, as this will determine whether exempt pay is owed. Let’s go over an example. This year, Christmas through New Year’s Eve falls on a Sunday through Saturday. If the employer defines their workweek as “Sunday through Saturday” and closed during that week, they would not have to pay exempt employees (so long as no work is performed). However, if the workweek is defined as “Tuesday through Wednesday,” then the employer would not be closed for an entire workweek (the closure would be split between multiple workweeks). In that case, exempt employees would still be owed their full salary.

There are limited exceptions when an employer is permitted to pro-rate an exempt employee’s salary. CEA members may refer to our?Exempt Employee Deductions Fact Sheet?on our?HR Forms page.

Vacation Policies

Many employers also want to know whether they can?require?the use of vacation time during holiday closures. The benefits include lowering vacation balances on the books, avoiding disruption with healthcare premium pay deductions, etc.

The answer is yes,?but?employers need to ensure?reasonable advance notice?whenever they require employees to use vacation time. The California Labor Commissioner has determined that?90 days?constitutes reasonable advance notice. As such, it is recommended that employers put employees on notice in their handbook policies, and remind employees at least three months in advance of any company shutdowns or closures when vacation use is required.

If an employee is currently out on a leave of absence, proceed with caution in requiring the use of vacation time during a closure. For some leaves of absence, the employer?cannot?require an employee to use their vacation time (pregnancy disability leave is one example). Also remember, employers should never require employees to use their mandatory paid sick time.

There are a lot of considerations when it comes to employment policies. Let us make it easy for you with our updated 2025 Employee Handbook. We have a?do-it-yourself option?for purchase, or?we can customize it for you?from start to finish! Give us a call at 800.399.5331.