Holiday pay is more than just a line item on your payroll—it’s a way to reward your hardworking team and help them enjoy time off without financial stress. While federal law doesn’t mandate holiday pay, the reality of implementing it often involves careful planning and calculation.

Let’s break down the essentials of holiday pay, from eligibility and calculations to crafting a compliant and employee-friendly policy.

What is Holiday Pay?

Holiday pay refers to compensation employees receive for time off during public holidays like Christmas, New Year’s Day, and Thanksgiving. For some businesses, it also includes a premium for working on holidays, such as time-and-a-half or double-time pay.

While not legally required under the Fair Labor Standards Act (FLSA), holiday pay is a common benefit offered to enhance employee satisfaction, retention, and morale.

Types of Holiday Pay

1. Paid Time Off for Holidays
Employers often provide paid leave on designated holidays, primarily for full-time staff. For example:

• Linda, a part-time employee, works 20 hours weekly. On a holiday, she might receive pro-rata holiday pay for 4 hours.

2. Premium Pay for Working Holidays
Some businesses incentivize holiday shifts with extra pay. For instance:

• Linda works a 6-hour shift on New Year’s Day at $20/hour. At double-time rates, she earns $240.

Who’s Eligible for Holiday Pay?

Eligibility is typically outlined in company policies. While full-time employees are often included, part-time staff or hourly workers might have specific criteria, such as a service period. Independent contractors are generally not eligible.

How to Calculate Holiday Pay

For Salaried Employees:
Holiday pay is typically built into their annual salary. For example, if an employee earns $52,000 annually with bi-weekly payments, they receive $2,000 per period, regardless of holidays.

For Hourly Employees:
Calculations depend on work status and policy.

Example 1: Paid Holiday Off

• Average daily hours × hourly wage = Holiday pay
• An 8-hour shift at $15/hour results in $120 holiday pay.

Example 2: Time-and-a-Half Pay

• Formula: (Hours worked × hourly wage) + [(hours worked × hourly wage) × 0.5]
• A 6-hour shift at $15/hour yields $135.

Benefits of Holiday Pay

1. Improved Employee Retention
Providing holiday pay fosters a sense of appreciation and financial security, reducing turnover rates.

2. Increased Productivity
Premium pay for working holidays can motivate employees, improving efficiency and helping to cover challenging shifts.

Setting Up a Holiday Pay Policy

A clear policy ensures consistency and fairness. Include these components:

• Eligibility: Define who qualifies (e.g., full-time, part-time).
• Holiday Schedule: List paid holidays.
• Pay Calculations: Clarify rates (e.g., time-and-a-half or double-time).
• Request Process: Outline deadlines and criteria for approval.
• Unused Pay: Specify carry-over rules or forfeiture.
• Exceptions: Address probationary periods or temporary staff rules.

Simplify Payroll with CTR Payroll | HR

Managing holiday pay doesn’t have to be a holiday headache. With CTR Payroll | HR, you can:

• Auto-convert timesheets into wages.
• Easily calculate holiday premiums.
• Ensure compliance with federal and state regulations.

Let us help you focus on spreading holiday cheer while we handle the numbers.

➡️Contact us today to learn more about simplifying your payroll process.