Holiday Payroll Tips for Michigan Employers
The holidays bring celebration, but for employers, they also bring unique payroll challenges. Between federal bank closures, year-end adjustments, bonuses, and paid time off, even small errors can cause frustration for employees and compliance headaches for businesses.
Here’s how to keep payroll accurate, compliant, and stress-free as the year comes to a close.
Plan Around Federal and Bank Holidays
Every December, the Federal Reserve observes multiple bank holidays. Direct deposits don’t process when banks are closed, which can delay paychecks if you don’t adjust payroll schedules in advance.
Plan to submit payroll at least two business days early for pay periods that overlap with Christmas, New Year’s, or other federal holidays. Communicating these dates to your team helps manage expectations and keeps everyone on schedule.
Review Holiday Pay Policies
Michigan doesn’t require employers to offer paid holidays, but if your company does offer it, consistent application is key. Review your policies to ensure all eligible employees are treated equally.
For those who work additional shifts during the holidays, UAP will make sure overtime is properly calculated. Under the Fair Labor Standards Act (FLSA), employees must receive time and a half for hours worked over 40 in a week, even if those hours include a holiday.
Handle Bonuses Carefully
Holiday bonuses are a great way to recognize hard work, but they can complicate payroll and taxes. The IRS treats bonuses as supplemental wages, meaning they’re subject to withholding.
Also consider whether bonuses are discretionary (unexpected, not promised) or non-discretionary (promised or performance-based). The latter type affects overtime calculations and must be included when determining the regular rate of pay.
Verify Employee Information
Before you close out the year, confirm that employee addresses, tax elections, and benefit deductions are up to date. This ensures accurate W-2s, prevents reporting errors, and simplifies January processing.
It’s also a good time to review unused sick leave or PTO balances under Michigan’s Earned Sick Time Act (ESTA) to confirm carryover and payout rules are applied correctly.
Double-Check Tax Deadlines and Withholding
Year-end adjustments often include holiday bonuses, commissions, and extra pay runs. UAP will withhold the right amount of state and federal taxes and remit them promptly to avoid penalties from the Michigan Department of Treasury or IRS.
Communicate Early and Often
A short email or staff meeting can go a long way toward preventing confusion. Share your holiday payroll schedule, cutoff dates for timecard submissions, and bonus payout details. Transparency builds trust and reduces last-minute payroll questions.
Wrapping Up the Year
A smooth holiday payroll process sets the tone for a strong start to the new year. By planning ahead, reviewing policies, and double-checking data, employers can avoid compliance problems and keep employees happy through the busiest season of all. Contact UAP for more information. Happy Holidays from UAP!
