The best tips for managing payroll around public holidays
Payroll
Author
Laura Bohrer
Date published
March 18, 2024
Banks don’t operate on public holidays. Instead, they remain closed, which means that financial transactions are on hold until the next business day. Direct deposits to employee bank accounts might therefore be delayed.
Delayed salary payments are just one example of how payroll is affected by public holidays. There are several other implications bank holidays can carry for payroll processing.
Read on as we explain how public holidays impact payroll schedules and processes and how organizations with global teams can effectively manage payroll on public holidays.
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How do bank holidays affect payroll?
Bank holidays can carry several different implications for payroll processing. Here is how public holidays can affect payroll.
Special bonus payments
Big festive holidays, such as Christmas, are a good occasion for employers to provide special bonuses to their employees. While Christmas bonuses and the like are a great incentive for employees, they create additional work for the payroll department.
Bonus payments that are determined based on the employee’s usual earnings require additional calculations. Plus, bonuses are typically subject to payroll taxes, which means that payroll calculations for employees earning a fixed monthly salary need to be adjusted for this particular payroll run.
Higher pay rates for work performed on public holidays
In many countries, employees who perform work on public holidays are entitled to higher pay than usual. Or they might be entitled to additional pay, depending on the country-specific regulations.
On rare occasions where employees are required to put in additional hours on a public holiday, the pay rates for overtime might also be higher. Plus, additional pay for work on public holidays might need to be taxed differently, depending on local tax laws.
Delayed direct deposit
What happens if payroll falls on a public holiday? This question is commonly raised among both employers and employees. While employees are mainly worried about the timeliness of their paychecks out of financial concerns, employers worry about potential compliance issues that may arise from delayed salary payments.
If payday falls on a public holiday, payroll dates need to be shifted to avoid late payments. That’s because banks are closed on these days, which means that no transactions are being processed and direct deposits are being delayed.
For payroll runs that coincide with bank holidays or that fall around a public holiday, payroll processing needs to be started earlier than usual and payroll cut-off dates need to be adjusted.
Processing payroll before or after a public holiday?
If payroll falls on a bank holiday, employers might raise the question of whether they need to process payroll before or after the public holiday. The main aspect to consider here is that delayed salary payments might lead to a violation of pay frequency laws, which could trigger fines. Employers should therefore either run payroll earlier or expedite their payroll process.
Payroll staff being out of office
Public holidays and the days and weeks surrounding them are a popular time for employees to go on holidays. This includes the payroll team. PTO requests from the payroll team need to be handled carefully to avoid that the payroll department is understaffed during holiday periods when there is even more work than usual.
The most common example is year-end. Many employees are off during the festive season and with many employers offering year-end bonuses, this often means that there is more work but fewer payroll team members to handle the additional workload.
Tips for processing payroll on public holidays for global teams
Processing payroll on or around public holidays poses additional challenges, but even more so for organizations with international teams. One reason for this is that payroll and compensation rules surrounding public holidays differ from country to country.
In many countries, employees are entitled to a paid day off on a public holiday. In other countries, however, employers are not required to provide pay for time not worked. For instance, there is no statutory requirement to pay employees for public holidays in the Netherlands—and neither in the United States.
Here are a few tips for navigating payroll and public holidays for global teams.
Checking statutory holiday pay laws: Processing payroll around public holidays is, first and foremost, a matter of compliance. The most important step multinational organizations must take is to review the local laws surrounding holiday pay, pay frequency, and more.
Diversifying available payment solutions: Delayed salary payments due to payday falling on a bank holiday almost exclusively impact direct deposit recipients because bank transactions are not processed on these days. Switching to alternative payment methods for global teams can solve this problem.
Ensuring consistency: No matter which approach you choose for processing payroll on public holidays, make sure to be consistent. Decide on an approach and then stick with it.
Keeping employees in the loop: Sharing payroll schedules with employees can also help simplify payroll processing around public holidays. This way, employees know by what date they have to provide the data that is needed for processing payroll.
Creating a centralized database: Another tip for mastering payroll processing and public holidays for global teams is to create a centralized database that consolidates information on public holidays and statutory regulations regarding pay frequency, holiday pay, and more for all payroll countries.
Working with buffer days: There are different best practices for managing payroll processing on public holidays. One of them is to include buffer days in the organization’s payroll schedules. Buffer days allow businesses to prevent their payroll schedules from being messed up because of a public holiday.
Developing a detailed holiday pay policy for global teams: Another crucial step towards effectively managing global payroll around public holidays is to create a detailed public holiday and holiday pay policy that determines how bank holidays are managed across the organization.
A final word on managing payroll on public holidays
In many countries around the world, public holidays are paid days off on which banks are closed. Since there are no transactions being processed on these days, bank holidays can lead to delays in direct deposits. This means that payroll dates need to be shifted to account for the expected delay and ensure timely wage and salary payments.
Another side effect of public holidays is that there might be additional bonus payments or higher pay rates that need to be considered when calculating gross and net pay. Also, public holidays that mark important celebrations are often a popular time for employees to take a vacation, which could lead to the payroll team being temporarily understaffed.
Mastering payroll timing around public holidays is even more challenging for organizations with global teams. That’s because statutory holidays, pay frequency laws, and compensation rules for work performed on public holidays differ from country to country.
The easiest way to avoid payroll compliance mishaps and ensure timely payments for globally distributed teams is to outsource payroll to local payroll providers. In-country payroll partners are experts on local payroll rules and regulations and can compliantly navigate payroll processing around public holidays.
Lano works with a global network of vetted payroll partners. Book a demo with one of our experts to learn more about Lano’s Global Payroll Services.
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