Benefits | 

Holiday Pay and Year-End Bonuses: Are You Aware of the Rules?

As the holiday season arrives and the year comes to a close, employers need to make sure they comply with holiday pay and year-end bonus requirements. To help you better understand the rules, we present several common questions below. Choose the answer you think is correct.

Question #1: If an employer closes for a holiday, are they required to pay both exempt and non-exempt employees for the time off?

  1. No, employers don't have to pay non-exempt or exempt employees for time off on a holiday.
  2. Employers are required to pay both non-exempt and exempt employees when the company closes on a holiday.
  3. While employers typically don't have to pay non-exempt employees for time off on a holiday, exempt employees must still receive their full pay, as long as they work any part of the workweek.

Correct answer

Question #2: An employee typically works eight hours per day, five days per week, but during one workweek, the employee worked 10 hours per day Monday through Thursday. On Friday, the company closed and the employer offered the employee a paid holiday. Under federal law, is the employee entitled to overtime pay for the workweek?

  1. Yes.
  2. No.

Correct answer

Question #3: If a non-exempt employee works on a holiday, how much must they receive in premium pay under federal law?

  1. 1.5 times their regular rate of pay.
  2. 2 times their regular rate of pay.
  3. It depends on the holiday.
  4. Federal law doesn't require premium pay for work on a holiday, but some state laws do.

Correct answer

Question #4: If an employer provides premium pay for work performed on a holiday, must they include that premium pay when determining the employee's regular rate of pay for the purposes of overtime under federal law?

  1. When determining an employee's regular rate of pay, an employer must always include premium pay for work performed on a holiday.
  2. When determining an employee's regular rate of pay, an employer must include premium pay for work performed on a holiday if the premium pay is less than 1.5 times the employee's normal base wage.
  3. When determining an employee's regular rate of pay, an employer must include premium pay for work performed on a holiday if the premium pay is less than 2 times the employee's normal base wage.

Correct answer

Question #5: When determining an employee's regular rate of pay for the purposes of overtime, must year-end bonuses be included?

  1. It depends on whether the bonus is considered nondiscretionary or discretionary.
  2. Bonuses never have to be included when determining the employee's regular rate of pay.

Correct answer

Question #6: If a nondiscretionary bonus is earned over a series of workweeks, how must the bonus be included in the regular rate of pay?

  1. It must be included in only the last overtime week covered by the bonus period.
  2. It must be included in all overtime weeks covered by the bonus period.
  3. It depends on whether the bonus is greater than $1,000.

Correct answer

Question #7: For 2018, how are bonuses typically taxed for federal tax purposes?

  1. Bonuses up to $1 million are typically taxed at a flat rate of 25 percent (a lower percentage for amounts over $1 million).
  2. Bonuses up to $1 million are typically taxed at a flat rate of 10 percent (a higher percentage for amounts over $1 million).
  3. Bonuses up to $1 million are typically taxed at a flat rate of 35 percent (a higher percentage for amounts over $1 million).
  4. Bonuses up to $1 million are typically taxed at a flat rate of 22 percent (a higher percentage for amounts over $1 million).

Correct answer

Question #8: Which of the following bonuses are considered taxable by the IRS?

  1. Cash
  2. A gift card to an online retailer.
  3. Both A and B

Correct answer

Conclusion:

As the year winds down, review your policies and practices to make sure you're paying employees in accordance with federal, state, and local rules.

SHARE THIS TIP | |

    Most Popular

    HR{preneur}® - A podcast for small businesses. Listen now!