Holiday pay is a voluntary benefit that employers offer to compensate employees during the holiday season. This additional compensation can be included in an employee’s package along with other benefits such as sick leave, vacation days, and health insurance. In this article, we’ll explore the different types of holiday pay, its benefits, legal requirements, and how to calculate it.

Types of Holiday Pay

Companies offer holiday pay in various forms, including:

1. Fully paid time off: Employees receive their regular pay while taking time off during holidays.
2. Partially paid time off: Employees receive a portion of their regular pay while on holiday leave.
3. Bonus payment: Employers provide a one-time bonus to employees during the holiday season.
4. Paying “time-and-a-half” or “double-time”: Employees who work on holidays receive 1.5 or 2 times their regular hourly rate.

Full-time salaried employees are typically eligible for holiday pay, and the specific arrangement should be outlined in the company policy and employee handbook. Some organizations may also extend holiday pay to hourly employees and independent contractors who work a regular schedule. Businesses should honor all union contracts that include provisions for holiday pay.

Common Paid Holidays

While each organization can choose which holidays to observe, most private employers follow federal government guidelines. The United States celebrates the following national holidays:

• New Year’s Day
• Memorial Day
• Independence Day
• Labor Day
• Thanksgiving Day
• Christmas Day

When a holiday falls on a weekend, employers may offer holiday pay for other days in the workweek, usually the surrounding Friday or Monday.

Benefits of Offering Holiday Pay

Holiday pay offers several benefits for both employers and employees:

1. Attracting talent: Holiday pay can be an appealing perk during the recruitment process, helping companies attract top talent.
2. Improving employee morale: By providing paid time off, employees can spend time with their families without worrying about finances, boosting morale and job satisfaction.
3. Encouraging holiday work: Offering extra pay incentivizes employees to work on holidays, ensuring business continuity.

Legal Requirements for Holiday Pay

In the United States, there is no federal or state law that requires employers to offer holiday pay. The Fair Labor Standards Act (FLSA) regulates minimum wage and overtime pay but does not mandate holiday compensation. Employers can require employees to work during holidays and pay them their normal rate. However, offering extra compensation can positively impact the employer-employee relationship.

Calculating Holiday Pay

Holiday pay calculations can vary depending on the type of employee and company policies. Here are some examples of how to calculate holiday pay for different scenarios:

Salaried Employees

For salaried employees, holiday pay is typically built into their annual salary. They generally receive their usual pay for holiday periods, whether they work or not[1].

Example:
An employee has an annual salary of $52,000, paid bi-weekly (26 pay periods per year).
Gross pay per pay period = $52,000 / 26 = $2,000

Even if a pay period includes a holiday, the employee would still receive $2,000.

Hourly Employees

Calculating holiday pay for hourly employees can be more complex, depending on whether they work on the holiday and the company’s policy[1].

1. Employee doesn’t work on the holiday (paid holiday)

Formula: Average daily hours x hourly wage = Holiday pay

Example:

• Employee usually works 8-hour days
• Hourly wage: $15/hour
  Holiday pay = 8 hours x $15/hour = $120

2. Employee works on the holiday (regular pay)

Formula: Hours worked x hourly wage = Holiday pay

Example:

• Employee works 6 hours on the holiday
• Hourly wage: $15/hour
  Holiday pay = 6 hours x $15/hour = $90

3. Employee works on the holiday (premium pay, e.g., “time-and-a-half”)

Formula: (Hours worked x hourly wage x 1.5) = Holiday pay

Example:

• Employee works 6 hours on the holiday
• Hourly wage: $15/hour
  Holiday pay = 6 hours x $15/hour x 1.5 = $135

Employees with Irregular Hours

For employees with irregular hours, holiday pay can be calculated based on their average earnings over a specific period[2].

Formula:

1. Count back the number of weeks they worked (up to 52 weeks)
2. Add up what they’ve been paid for each week
3. Divide the sum by the number of weeks

Example:

• Total earnings over 52 weeks: $31,200
• Average weekly pay = $31,200 / 52 = $600
• If the employee takes a week of holiday, they would receive $600

Shift Workers with Different Hourly Rates

For shift workers with varying hourly rates, calculate the average hourly rate[2]:

1. Add together the employee’s total remuneration for the last 52 weeks
2. Divide by 52 for average weekly pay
3. Divide average weekly pay by average weekly hours for average hourly rate

Example:

• Total remuneration over 52 weeks: $41,600
• Average weekly pay = $41,600 / 52 = $800
• Average weekly hours = 40
• Average hourly rate = $800 / 40 = $20/hour

Use this average hourly rate to calculate holiday pay.

Piecework Employees

For employees paid based on tasks completed[2]:

1. Calculate the average hourly rate over a period (e.g., 52 weeks)
2. Multiply that rate by the number of holiday hours taken

Example:

• Average hourly rate calculated: $18/hour
• Employee takes 8 hours of holiday
  Holiday pay = $18/hour x 8 hours = $144

Remember that specific calculations may vary depending on local laws and company policies. It’s always best to consult with a legal or HR professional to ensure compliance with relevant regulations.

Calculating Holiday Pay for Paid Time Off

To calculate holiday pay for employees taking paid time off, determine their hourly rate by dividing their monthly salary by the number of hours worked in the last month. For example, if an employee named Max earns a monthly salary of $6,160 and works 176 hours in November (22 working days at 8 hours per day), their hourly rate would be:$6,160 / 176 hours = $35 per hourThis equates to $280 per day of holiday pay.

Calculating Holiday Pay for Working During a Holiday

If an employee works during a holiday, their holiday pay is calculated by multiplying their hourly rate by a premium rate, such as 1.5 (time-and-a-half) or 2 (double-time). Using the previous example, if Max works on Christmas Day, their holiday pay would be:$35 per hour × 1.5 = $52.50 per hour
or
$35 per hour × 2 = $70 per hour

Accommodating Non-Traditional Holidays

As workplaces become more diverse, it’s essential to consider holidays beyond traditional federal holidays. Some employees may celebrate cultural, religious, or personal holidays such as Juneteenth, Indigenous Peoples Day, or New Year’s Eve. To accommodate these non-traditional holidays, some organizations offer floating holidays, which allow employees to take paid time off for celebrations of their choice. Another option is to provide unlimited time off, which promotes a healthy work culture and prioritizes inclusivity. Proper planning and open communication are key to successfully implementing these policies.

In conclusion, holiday pay is a valuable benefit that can attract talent, boost employee morale, and ensure business continuity during the holiday season. While not legally required, offering holiday compensation can strengthen the employer-employee relationship. By understanding the different types of holiday pay, its benefits, and how to calculate it, employers can create a fair and inclusive workplace that acknowledges the diverse needs of their workforce.