What is Holiday Pay & How Is It Calculated?

Holiday pay is an important benefit that many employers offer to compensate employees who work on designated holidays. It ensures employees are fairly compensated for working during times when others may be off, such as national holidays or company-observed days off.

It is often calculated at a higher rate, typically one and a half or double the regular pay, depending on the employer's policy. In this article, we'll explain how to calculate holiday pay, what it is, and answer common questions about it.

What is holiday pay and how does it work?

Holiday pay is compensation employers provide for company-recognized holidays, either as paid time off or as premium pay (e.g., time-and-a-half) for working on the holiday.

It often includes the employee's regular pay for the hours worked, along with additional premium pay, often at a higher rate, such as time-and-a-half (1.5) or double-time (2).

Under the Fair Labor Standards Act, private employers are not required to provide paid time off for holidays. If they do, they need to set their own policies regarding eligibility, pay rates, and whether employees must work on holidays to qualify for the holiday. Most federal employees, on the other hand, are eligible for holiday pay for up to eleven (11) paid holidays per year.

To calculate holiday pay, here's the basic formula: Holiday pay = (hourly pay) x (holiday pay rate) x (hours worked on holiday)

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Why give paid holidays?

Holiday pay can be a game-changer for many organizations. While it's often a gesture of goodwill, there are several key reasons why businesses choose to offer it:

• To make employees feel appreciated and happy: Giving holiday pay shows employees that the company values them, making them feel good and happy about their work.

• To attract talented people: Offering double time can help bring in skilled workers because it shows the company cares about its employees.

• To keep employees: When employees get holiday pay, they are more likely to stay with the company, which reduces the need to hire and train new people.

• To increase productivity: Happy employees work better. Holiday pay can boost their mood and make them more productive.

• To gain a positive reputation: Companies that give double time are seen as good places to work. This can attract employees.

With the right compensation strategy, your organization can gain these benefits. Compensation experts offer a competitive pay assessment to show how your organization's base and total cash compensation compare to the market.

What holidays get holiday pay in the US?

Before learning how to calculate holiday pay, it's important to know that holidays are national, state, or religious holidays employers can choose to give as paid time off.

• Martin Luther King Day

• Presidents' Day

• Memorial Day

• Independence Day

• Victoria Day

• Labor Day

• Columbus Day or Indigenous Peoples' Day

• Veterans Day

• Thanksgiving

• Day After Thanksgiving

• Christmas Eve

• Christmas Day

• New Year's Eve

• New Year's Day

Common Federal holidays

As mentioned above, federal employees will receive holiday pay for 11 days per year under federal law, and those who work on these holidays receive their regular pay plus holiday premium pay—i.e., double (200 percent) of their basic pay rate.

Below are the common federal holidays in the United States:

Month	Federal Holiday
January	New Year's Day; Birthday of Martin Luther King, Jr.
February	Washington's Birthday
May	Memorial Day
June	Juneteenth National Independence Day
July	Independence Day
September	Labor Day
October	Columbus Day
November	Veterans Day; Thanksgiving Day
December	Christmas Day

The exact dates of these federal holidays depend on the year. Some holidays are observed on specific weekdays (e.g., Thanksgiving is the fourth Thursday in November), while others may be observed on a different date if they fall on a weekend.

How to calculate holiday pay for salaried employees

This calculation section covers both salaried and hourly employees. For calculating holiday pay for hourly workers, here's how to do it:

1. Get the daily salary: To find it, divide the annual salary by the number of working days in a year. For example, for John with an annual salary of $52,000, the daily rate is $52,000 ÷ 260 working days = $200.

2. Check holiday entitlement: Find out how many paid holidays the employee gets. Let's say John is entitled to 10 paid holidays.

3. Find the holiday pay: To do this, multiply the daily rate by the number of holidays worked. Formula: Holiday pay = daily wage x number of holidays. Here, $200 x 10 = $2,000.

In this example, John is entitled to $2,000 in holiday pay.

How to calculate holiday pay for hourly employees

For calculating holiday pay for hourly workers, here's how to do it:

1. Find the regular hourly rate: Divide the weekly salary by the hours worked per week. For John, if he earns $52,000 a year, his weekly pay is $1,000 (52000 ÷ 52 weeks). At 40 hours a week, his hourly rate is: 1,000 ÷ 40 = 25

2. Identify the holiday pay rate: Holiday pay is usually 1.5 or 2 times the regular rate. If John's holiday rate is time and a half, his rate becomes: 25 x 1.5 = 37.50

3. Determine the hours worked on holiday: Find out how many hours John worked on the holiday. If he worked 8 hours, use that number.

4. Calculate the holiday pay: Multiply the holiday pay rate by the hours worked on the holiday to determine the holiday pay: 37.50 x 8 = 300

Here, John would earn an additional $300 for holiday pay work.

Holiday pay or double time is just one of many benefits businesses should offer to employees. Salary.com's consultants can help improve your pay programs and create cost-effective, competitive benefit packages.

FAQs

Now that you know how to calculate holiday pay, let's answer some common questions about it.

How much is holiday pay?

In the United States, there isn't a legal requirement for employers to provide paid holidays. However, many employers do offer paid holidays as part of their benefits package. U.S. workers typically receive about 10 paid holidays per year.

Is holiday pay mandatory?

No, holiday pay isn't mandated by federal law. This means that employers are not legally required to provide paid holidays to their employees.

What's the difference between holiday pay and overtime pay?

The difference between holiday premium pay and overtime pay is that holiday pay is for non-overtime hours worked on a holiday, while overtime pay is for hours worked over the daily or weekly standard, no matter the day.

How do you calculate time and a half for holiday pay?

To calculate time and a half for holiday pay, start with the employee's regular hourly rate. Multiply this rate by 1.5 for the holiday pay rate. Then, multiply the holiday pay rate by the hours worked on the holiday.

For example, if the regular rate is $20, the holiday rate is $30 ($20 x 1.5). If they work 8 hours, their holiday pay is $240 ($30 x 8).

Salary.com's experts can help improve your benefits, including double time or holiday pay, to make your program more competitive by considering your budget, industry, and employee feedback.