What should employers know about a company holiday party?

A company holiday party is a year-end celebration for employees. It is a chance to thank people, but for hourly staff a party that is expected rather than optional can be paid working time.

In shortA company holiday party is an end-of-year event for employees, sometimes with families, held on site, at a restaurant or as a daytime meal during shifts. Three practical rules matter. First, pay: under federal wage rules, time at a meeting or event outside normal hours is not working time only if attendance is truly voluntary, it is not directly related to the job and no productive work is done. If attendance is required, or employees are led to believe that not coming will hurt them, the hours count, including toward overtime. Second, conduct: harassment and discrimination rules apply at company events just as at work, and alcohol raises the risk. Third, inclusion: calling it a year-end party, choosing a date and food that work for most of the team, and offering a daytime option for night shift workers makes it a thank-you for everyone, not just the people who can come on a Friday night. Party costs and tax treatment are a separate question for your accountant.

Is the party paid time?

When party time counts as hours worked for hourly staff
Situation Likely treatment
Optional, after hours, no work, nothing said about attendance Generally not hours worked
Manager says everyone is expected Hours worked
Employees asked to set up, serve or clean up Hours worked for that time
Held during a scheduled shift Paid as part of the shift

If the party is paid, the hours count toward the weekly total, which can trigger overtime for anyone already near 40 hours. See compensable time.

Same party, two invitations“Everyone is expected”Required attendance120 hours worked$2,040 + $153 overtimeUnbudgeted“Optional, come if you can”Voluntary, after hoursNo work doneGenerally unpaidPlus a shift lunch
One sentence in the invitation can turn a party into paid working time.

Worked example: “everyone is expected”

A retail store’s Friday party

A retail store plans a party from 7 to 10 p.m. on a Friday for 40 hourly employees, with an average rate of $17 an hour. The store manager posts: “Everyone is expected to come.”

That makes attendance required, so the three hours are working time. For 40 people that is 120 hours, or $2,040. Six of them already worked 40 hours that week, so their three hours are overtime, adding a half-time premium of $8.50 an hour: 6 x 3 x $8.50 = $153. The total cost in wages is $2,193 that nobody had budgeted.

The store has two clean options: make the party genuinely optional and say so in writing, or hold it during paid time and plan for the cost. It chooses an optional evening party plus a catered lunch during shifts for the night crew, and records the hours of the two employees who help set up.

Mistakes that are specific to holiday parties

Planning a party around the schedule

For businesses that run every day, the party is also a scheduling problem. Someone has to cover the shifts while others celebrate, and the people who cover are often the same ones who miss every year.

  1. Pick the date early and post it with the schedule, so people can request the time off.
  2. Ask for volunteers to cover the party shifts, and rotate them from year to year.
  3. Offer the uncovered shifts as open shifts before assigning them.
  4. Plan a separate thank-you, such as a catered meal, for the people who work during the party.
  5. If alcohol is served, set a limit and plan safe rides home.

The holiday season staffing guide covers how to plan the busy weeks around the party.

Second example: a 24-hour call center

A call center that answers calls around the clock wants one party for all 90 agents. In past years the night team covered the phones every time and never attended.

This year it holds two events: an evening party for day and evening agents, and a breakfast at 6:30 a.m. for the night team as their shift ends, both optional and both on the company feed a month ahead. Supervisors who cover the phones during the evening party are paid for their shifts as usual and get first pick of the next year’s holiday time off.

Write “optional” and mean itIf the party is voluntary, say so in the invitation, and make sure managers do not keep a list of who came. One manager’s comment about who skipped can turn an optional party into paid time.

Questions people ask

Do employers have to pay employees to attend a holiday party?

If attendance is required, or employees are led to believe it is, hourly employees must be paid. A truly voluntary party after hours with no work is generally not hours worked.

Can a company require employees to attend a holiday party?

It can, but then the time is working time for hourly employees and must be paid.

Do harassment rules apply at a company party?

Yes. Company events are part of the work environment, so the same conduct rules and complaint process apply.

How do you make a holiday party inclusive?

Call it a year-end celebration, pick a date most people can attend, offer non-alcoholic options, and include a daytime option for night shift workers.

Who should cover the shifts during the holiday party?

Ask for volunteers first, rotate the duty from year to year, and pay covering staff for their normal shifts.

Should a holiday party serve alcohol?

That is a company choice. If it does, set a limit, offer non-alcoholic options and plan safe rides home, because conduct rules still apply.

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Disclaimer: This explanation of company holiday party is general information, not legal, payroll or tax advice; rules differ by state and city and change over time, and the examples are fictional.