Anyone who doesn’t think human resources work is challenging has obviously never tried to navigate through the payroll jungle during the holidays. Holidays bring challenges to the workplace in terms of who has to work, who doesn’t and how they are compensated. According to the U.S. Office of Personnel Management, there are 10 federal holidays, including Martin Luther King, Jr. Day, Washington’s Birthday, Independence Day, Columbus Day and Thanksgiving. Of course, that doesn’t mean private companies need to grant the same paid holidays. They might choose to award extra holidays like the day after Thanksgiving or December 31. What constitutes a holiday varies from workplace to workplace and region to region. Here are a few things you need to know when dealing with holiday payroll issues.

Working holidays

When it’s necessary in your business to have people working on a holiday, it’s traditional to compensate them more highly than you would on a normal work day. While this is not an actual requirement (unless it is part of a union contract), most places find it beneficial to give more compensation so they have less trouble finding people willing to work on holidays. Some workplaces may offer overtime, some may offer overtime plus regular pay (the equivalent of 2.5 times their base salary) and still others might just offer an extra day off, like a comp day to be taken somewhere down the line.

Not working holidays when your business is open

When your business is open for the holidays, invariably there will be people who are not able or do not want to work on the holiday. The first thing to be decided is how to decide who gets to take the day off. Most institutions will handle the decision based on seniority. Besides fairness, long-time employees tend to make a higher pay rate, so it will cost a company more to pay them overtime or holiday pay. Companies who do not use seniority might tell employees to formally request the holiday off and decide who gets it on a first-come, first-served basis. However you choose to decide who works and who doesn’t on a holiday, it’s important to have your policy in writing so you cannot be accused of favoritism or discrimination. In terms of pay, logically you could apply regular time off rules to holidays. If an employee is regularly scheduled to work  and they choose not to, they either will not get paid or they will need to take their own paid time off. Of course, there’s nothing wrong with having a more generous policy of giving paid holidays.

When your business is closed for the holidays

Overtime-eligible employees are not usually required to be paid for holiday time off when the business is closed, unless they choose to use their regular accrued paid time off. Of course, many companies choose to pay their employees for holidays anyway. There are benefits to paying employees for “closed” holidays in terms of overall morale and reputation — doing so can even help to lure better employees in the future.

Holiday employment needs

Some businesses are actually busier during the holidays and those businesses often need extra staff. One solution is to hire temporary or seasonal staff. Special care be taken to make sure all the proper tax and payroll paperwork is filled out for these seasonal hires, as they are still employees of your company. If you want less paperwork and don’t mind paying a bit more, go with a temporary employment service. In this case, simply tell the service how many employees you need, they send them, and you just have to pay the service.

Holiday payroll issues can be challenging, but they can be handled as long as you prepare yourself. Have clear plans and policies in place before the holidays come and you will be able to keep your employees happy and your bottom line positive.