What to Know When Payday Falls on a Holiday

Here's what you need to know when payday falls on a holiday so employees are paid timely and accurately. Learn more!

How to Pay Employees When Payday Falls on a Holiday

A vital part of any business is paying employees accurately and on time. According to a recent report, somewhere between 61% of Americans earn just enough money to pay their bills each month. This statistic alone puts employers in a unique position. Your ability to pay employees regardless of external factors is crucial to the success of your workforce. If paying employees accurately and on time is critical, how do you plan for paydays that fall on holiday? We’ll answer that question and more as we navigate payroll processing on holidays, weekends, and special bank days. Then, you’ll be prepared to pay employees timely and accurately.

Does Direct Deposit Go Through on Holidays?

The simple answer to this question is no. The Automated Clearing House (ACH) is the electronic network that processes direct deposits. They only handle direct deposit transfers Monday through Friday. ACH transfers exclude holidays and weekends.

Therefore, when payday falls on a holiday, employee direct deposits can be delayed. With 93% of American workers using direct deposit to get paid, it’s essential to plan accordingly for paydays that occur during holidays.

When Does Direct Deposit Hit After a Holiday?

One of the biggest HR challenges in the hospitality industry is staff attrition. This term refers to when an employee leaves and their position is not filled. If you submit payroll on a holiday, direct deposits won’t transfer from your business account to employees’ accounts until the following banking day.

For example, if you schedule direct deposits on Thanksgiving, your transaction won’t go through until Friday, the day after. This delay in direct deposit is why it’s standard practice for organizations to pay employees the day before a holiday occurs.

Can an Employer Pay an Employee Late Because of a Holiday?

The Fair Labor Standard Act (FLSA) of 1938 governs employers’ obligations to pay employees regularly. However, it doesn’t provide guidance when payday falls on a holiday. The FLSA does stipulate that pay frequencies can’t be random. This requirement means if you pay employees monthly, you can’t switch back and forth between a monthly and a weekly pay schedule.

While federal laws don’t provide holiday pay standards, many states have different frequency laws that regulate how often employees must receive pay. You can access a complete list of state pay frequencies here. If a holiday puts you at risk for delayed payment, we suggest processing your payroll one business day earlier. An earlier payroll date enables you to reduce your risk of legislative error by paying employees the day before the holiday occurs.

While federal and state laws have dictations for pay frequency, there are a few exceptions to the rule. You can change your pay frequency if all of the following situations apply:

You have a legitimate business reason
The change is permanent
You are not avoiding overtime or minimum wages
You don’t unreasonably delay payment of wages

*Please note this article is not legal advice. If you need assistance regarding legal pay requirements, please consult with your lawyer or tax professional.

Don’t Have a Tax Expert on Hand?

Schedule a demo with APS. Our dedicated team of tax experts can help you avoid compliance fees and holiday pay delays.

Can an Employee Still Get Paid on a Bank Holiday?

Now that you’ve learned about regular holidays let’s talk about what happens when payday falls on a bank holiday. Most transactions are halted on bank holidays because these days are set aside by the Federal Reserve for the observance. Some examples of bank holidays are Martin Luther King Jr. Day and Memorial Day. These holidays can be problematic for employers, especially those who pay their employees on a particular day each month.

Banking holidays operate like regular holidays; therefore, you can prepare your payroll processing similarly. If financial institutions are closed, you can opt to process your funds the day before your regular payroll date.

Processing payroll in advance ensures your employees get paid early. If you don’t run payroll earlier, payments will be delayed until the business day after the banking holiday. To avoid delaying employee payments, you can use a federal banking holiday chart like the one we listed below.

Standard Federal Banking Holidays*
New Year’s Eve Day	January 1st
Martin Luther King Jr. Day	January 18th
Washington’s Birthday / Presidents’ Day	February 15th
Memorial Day	May 31st
Independence Day	July 4th
Labor Day	September 6th
Columbus Day	October 11th
Veterans Day	November 11th
Thanksgiving Day	November 25th
Christmas Day	December 25th

*For holidays falling on Saturday, Federal Reserve Banks and Branches will be open the preceding Friday. For holidays falling on Sunday, all Federal Reserve Banks and Branches will be closed the following Monday.

A payroll and HR provider can also help you streamline bank holiday pay. Many payroll solutions offer automatic banking day reminders and holiday preloading. Holiday preloading automates the process of assigning holiday hours to employee time cards.

Since holidays are generally hectic, a preloading tool eliminates the need to manage holiday pay individually. If your company doesn’t offer holiday time off, managers can bulk-assign holiday pay to employees.

Does Your Provider Offer Holiday Preloading?

If not, now is the perfect time to switch to a better payroll and HR platform.

How to Pay Employees During Holidays

So now that you know what to expect during regular and banking holidays, it’s time to learn how to pay employees when they occur. Whether you handle payroll in-house or partner with a provider, understanding holiday pay is the key to a consistent employee paycheck. To prevent any unnecessary speedbumps, here are some tips you can use to pay employees regardless of the day:

Maintain Consistency

Determine whether you will pay workers before or after a holiday and stick to that schedule. Avoid making multiple changes to your plan throughout the year since these can cause employee frustration and confusion.

Make it Simple

Once you have created your payroll calendar, circle any payday changes due to holidays or weekends. A more visible date keeps change at the front of employees’ minds. Have a manager from another department review the calendar to see if it is easy to comprehend.

Then, distribute the calendar to your employees via email, Slack, Google Teams, etc. You can also link the calendar to the homepage of your employee intranet site.

Create Reminders

Sending something to employees doesn’t guarantee they will read it. To proactively avoid frustrations, set dates to remind employees of upcoming payroll changes. Make sure your employees know when they will be paid.

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Business Administrator, Christ’s Church

As the payroll administrator, APS has cut my time for processing payroll from 2 days to 2 hours. Reports are available within minutes of submitting the payroll batch. APS has been a great timesaver for our company!

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The Hospice of East Texas

How APS Can Help With Holiday Payroll

APS’ all-in-one payroll and HR technology automates holiday pay. With holiday preloading, you can eliminate the need to apply holiday pay to employees manually. Our Holiday Preloading Wizard makes it easy to add new holidays, select employee requirements, and choose when to apply holidays to time cards.

Our blackout dates feature lets you handle time-off requests proactively, especially during busy times of the year. Dates may be restricted for employees to request time off, ensuring adequate staffing during critical periods.

Avoid manual processes and automatically process your payroll in hours. Utilizing a unified solution like APS will make your employee pay process easier during the holiday season and all year long. Schedule a demo to learn more about how we can help you today!