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Holiday Pay

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I have a client that wants to keep the employees at 40 hours per week.  This isn't a problem until we hit a holiday. The holiday is usually a typical 8 hour day.  If an employee has worked 33 hours and I do the 8 then they get paid 41 (no overtime).  The owner wants to just pay 7 hours for the holiday to make it to the 40 hours.  I don't feel this is correct.  If the manual states 8 hours for holiday pay that is what should be paid.    I feel if we are audited this would be an issue because we are not following the stated vacation pay in the company manual.  Does anyone have any direction or a place to direct me to back this up? Do I need to just be quiet and pay the 7?   Thanks in advance for any input....


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