What Is Holiday Pay and How to Create a Holiday Pay Policy

What Is Holiday Pay

Any compensation that an employee receives to work during a vacation is called holiday pay. Some businesses can close on Christmas Day and Labor Day. Others don’t. If you have to be open on holidays, the question is whether your employees will also be available who aren’t working should be paid for these days, and those who work on holidays should receive additional compensation.

Holiday pay is usually at the discretion of the employer and can be different for each person when deciding how much, If possible to pay holiday workers who work or don’t work on holidays. It is crucial to know what holiday pay means How it is calculated and how to create a holiday pay policy.

What is holiday pay?

Holiday pay, even though it has a unique name, is simply the compensation that employees get for working or not working during any holiday. Employees may be given holiday pay as a gift to allow them to take time off for the holidays.

The most common form of holiday pay in the United States is time-and-a-half pay. This is when an employee receives their regular rate plus one-half of their regular wage for every hour they work on holidays. You may also receive a holiday bonus or time off for the day of a vacation.

The United States doesn’t have any laws that require employees to be paid for holidays. However, it is quite common to pay for the following holidays:

  • New Year’s Day
  • Easter
  • Christmas Eve
  • Christmas Day
  • Labor Day
  • Thanksgiving Day
  • Black Friday is the day following Thanksgiving
  • Memorial Day
  • Independence Day

Many companies offer additional federal holidays, such as Martin Luther King Jr. Day and Presidents Day, along with paid leave to their employees. According to a 2019 survey by the Society for Human Resource Management, 96% of private employers offer holiday pay to their employees.

Please note that Public Employers are required to observe all federal holidays

  • New Year’s Day
  • Martin Luther King Jr. Day
  • George Washington’s birthday
  • Memorial Day
  • Independence Day
  • Labor Day
  • Columbus Day
  • Veterans Day
  • Thanksgiving Day
  • Christmas Day

Also read: How The Perfect Payroll Software Will Engage Your Employees Happiness

Who is eligible to receive holiday pay?

Any employee who works on an annual vacation is eligible for holiday compensation. However, the pay must not exceed the employee’s normal rate of pay. As an incentive and benefit to employees, employers may offer higher rates of pay for certain holidays.

What religious accommodations are you required to make?

Title VII of The Civil Rights Act of 1964 states that employers who employ 15 or more people must accommodate employees’ “sincerely held religious beliefs or practices” unless it would be a hardship or difficulty. For example, You can offer employees floating holidays that they can use at their own discretion or pay them time off to observe religious holidays.

How does holiday pay work?

In general, holiday pay is not different from regular pay for employees, with three exceptions:

  • Overtime: If you have non-exempt employees who work more than usual during holidays (but not on holiday), they are entitled to overtime pay for all hours above 40 per week, “at a rate that is not less than time or one-half of their regular rates,” according to Fair Labor Standards Act.
  • Time and a half: Although it’s not required by law, employers may offer time-and-a-half pay for certain holidays to encourage employees to work those days or boost morale.
  • Bonuses: A bonus may be offered, this is basically a gift for your employees during the holidays. The company can decide on holiday bonuses based on years of service, performance, base salary, or other factors.

Holiday pay is not subject to any special laws or rules. You are required to comply with all federal and state employment laws, which do not require any special consideration to pay employees on holidays, except for overtime for employees who are nonexempt.

How do you calculate holiday pay?

You can offer time and a half for holiday work. Simply take the hourly rate of the employee and multiply it by half. If an employee earns $12 per hour on their regular pay, then they would get $18 per day for holiday pay. Online Payroll Software will usually handle all calculations.

Federal law requires overtime to be calculated weekly. This means that overtime pay can be offered to employees who are not exempt. They are entitled to time and a half pay for all hours worked above 40 per week.

What are the advantages of providing holiday pay to employees

Employees can enjoy many benefits from holiday pay in any form.

It can improve productivity.

Employees who are compensated with holiday pay may feel more valued which tends to increase engagement. Overtime pay can encourage employees to work harder, which will boost productivity across the business.

It can boost motivation.

Employees can find paid holidays off to be very motivating. They know they will get days off without having to lose their wages. Paid time off can be a motivator for employees, as it has been shown to reduce stress, improve mental health, and increase productivity. This is good news for both your business and your employees.

Jim Pendergast (senior vice president at altLine), stated that holiday pay and automatic leave are sensible, low-cost fringe benefits. It shows goodwill and is financially feasible to accept, especially when compared to other fringe benefits.

It’s an incentive to work on holidays.

Few employees want to work holidays so it’s not surprising that holiday pay isn’t popular. It’s a great way for your employees to be appreciated, such as overtime or time-and-a-half. This is particularly important if your business depends on you being open for business or doing most of it during holidays.

Ravi Parikh CEO of RoverPass stated that “the promise of more money will get people working days most would prefer not to work.” It’s a motivator and your employees might find it more appealing than taking a vacation.

It attracts top talent.

Daniel Cooper, Lolly Co’s managing director, stated that “top talent” will always seek out organizations with great benefits.

These great benefits often include time off, especially during holidays. Providing Holiday pay is a sign that you care about your employees, and how they spend their time. This will help you attract top job applicants.

Also read: 10 Ways to Create and Manage Employee Schedules

How to create a holiday policy for your company

When you create a holiday pay policy, It is important to be clear about what is permitted, What is holiday pay, and how any holiday pay is calculated. This will help you avoid disgruntled workers and possible legal action. These four elements should be included in your holiday policy:

1. Define floating holidays.

Employees may be entitled to floating holidays to cover religious and cultural holidays. It is important to clearly specify how and when these holidays accrue. Also, whether they can be carried forward into the next calendar year or cashable when the employee leaves.

2. Make sure you are clear about who is eligible.

It is important to clearly state in your policy which employees are eligible for holiday pay and what conditions they must meet. You could, for example, stipulate that holiday pay is only available to employees who are scheduled at least 20 hours per work week and must be in good standing within the company.

3. Describe how time-and-a-half pay is calculated.

If hourly employees are eligible for time and a half pay, explain in detail how this pay is calculated and determined. Hours worked on holidays are required to be paid at the same rate as regular pay. While overtime, double-time, or time-and-a-half is not required by the FLSA, it does require time-a-half pay for all hours worked beyond 40 hours in any given workweek.

4. Describe holiday pay for exempt employees.

If you have only salaried employees and exempt employees, explain how holiday pay will be handled. If your business closes between Christmas and New Year, for example, you should state in the policy whether these days will be paid. The FLSA requires that exempt employees receive their full salary for every workweek. Business closures (including holidays) are not allowed to be deducted from the FLSA. Exempt employees must also get their full salary if they close for a holiday.

Written by
Aiden Nathan

Aiden Nathan is vice growth manager of The Tech Trend. He is passionate about the applying cutting edge technology to operate the built environment more sustainably.

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