What Is Holiday Pay?

Holidays are normally times of joy and showing kindness to others. When a holiday occurs, you might want to share holiday cheer with your employees in the form of compensation. Holiday pay can come in a couple of forms, and it often depends on if employees work on the holiday.

What is holiday pay?

There are two ways you can give employees holiday pay.

The Fair Labor Standards Act (FLSA) does not require you to provide time off (paid or unpaid) for federal holidays. However, you can choose to give your employees paid or unpaid time off on holidays.

If your employees do work on holidays, you should give them at least their regular wages. You can also provide a premium holiday pay rate, although the FLSA does not require a premium rate.

How much is holiday pay?

How you pay employees on holidays will depend on if employees receive time off and if the employees are exempt vs. nonexempt.

If you give time off

If you have exempt employees (employees who don’t earn overtime), you must give the entire salary even if the employees use holiday time off. You must not reduce the salary for holiday time off. You do not have to include extra compensation for holiday pay.

If you have nonexempt employees (employees who earn overtime), you do not have to pay for the holiday time off. You only have to pay your nonexempt employees for time they work.

You can choose to give holiday pay to nonexempt employees. If you do provide paid holiday time off for nonexempt workers, the holiday time off does not count toward calculating overtime hours. Only the hours the employee works count toward overtime.

For example, an employee works 40 hours and receives 8 hours of holiday time off in a workweek. Even though the total hours exceed 40 hours, the employee is not eligible for overtime because they only worked 40 of the hours.

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If employees must work

How is holiday pay calculated if employees must work on the holidays? If you require employees to work on a holiday, you must give employees at least their regular rate of pay.

It is common to give employees premium pay if they work on a holiday. Typically, double-time pay is considered the premium pay. Double-time pay means you pay your employees double their regular hourly rates. So, if an employee normally earns $10 per hour, the same employee would earn $20 per double-time hour.

While some employees might work on the holiday, other employees might not. You do not have to give employees holiday pay if they do not work on that day.

Creating your holiday pay policy

You should create a holiday pay policy. Having a policy lets employees know what they are entitled to.

Things you might want to have in your holiday pay policy include:

  • If employees get the day off or must work
  • If employees are required to work a certain number of holidays each year
  • Whether holiday time off is paid
  • Holiday premium pay rate
  • Holidays that apply
  • Procedure for holidays that fall on a weekend or a day employees regularly have off
  • If employees must work at the business for a certain length of time before the policy applies
  • Differing holiday benefits for part-time employees
  • State or local holiday pay laws

When creating your holiday policy, be consistent. You want to treat your employees fairly. You can have different policies for different employee groups, such as exempt, nonexempt, full time, and part time. You should not create a discriminatory policy that divides employees by race, color, religion, sex, national origin, age, disability, or genetic information.

Once you create a holiday leave and pay policy, you should include it in your employee handbook. Employees should have access to the handbook so they can look up your business’s policies.

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This article is updated from its original publication date of November 21, 2016.

This is not intended as legal advice; for more information, please click here.

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