Tis the Season: Pay Considerations for Holiday Closures

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

For non-exempt (hourly) employees, it’s pretty straightforward. Employers decide if they’ll pay during closures, or if the employee works on the holiday, whether there’s premium pay or an additional day off provided for working on the holiday. Pro tip: Spell it out in your handbook, so no one is left wondering.

Holiday closures are a little trickier for exempt (salaried) employees. Remember, to maintain exempt status under 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 say you want to close for Christmas through New Year’s, which this year, would include Wednesday, December 25 through Wednesday, January 1. If your workweek is defined as Sunday through Saturday (which is the default for most employers), closing during this time means your exempt employees would still be owed their full salaries, as you will not be closed for an entire “workweek.” Rather, you will be closed for a seven-day period spanning between two separate workweeks.

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.