Holiday Pay in the US: What It Is, Who Gets It & How to Track It

Holiday pay is a type of compensation employers offer to their workers for certain holidays. It comes in the form of paid time off or pay at an increased rate for working during these days. While this form of compensation isn’t legally mandated, many businesses offer it in practice to incentivize or reward their employees.

This article examines the intricacies of holiday pay, including which holidays typically qualify for it and the corresponding compensation amount. We’ll explore the differences between holiday pay for employees and contractors, and provide guidance on what to do if you’re eligible but haven’t received it yet.

Key Takeaways

• Holiday pay is a type of voluntary compensation that employers offer to employees for certain holidays.
• Employers can provide employees with paid time off, or they can give them premium pay at an increased rate for working on a holiday.
• This type of pay isn’t mandated by law, except in some government roles and for specific businesses in some states.
• By offering holiday pay, employers attract and retain top talent, boost morale and loyalty, and enhance productivity while reducing burnout.

What Is Holiday Pay?

Holiday pay is a form of optional compensation that employers and businesses can provide to their employees for specific holidays. These are typically federal holidays, like Christmas and Thanksgiving.

For instance, if a store closes during a national holiday, an employee can still receive their wage as if they had worked. Alternatively, if a store remains open, it can offer premium holiday pay to its employees as an incentive or to reward them for their work.

Whether an employee is eligible for holiday pay depends entirely on the employer and their policy. Since this type of compensation isn’t mandated by the Fair Labor Standards Act (FLSA), companies establish their own holiday pay rules.

As a result, employers determine which holidays will be covered, who is eligible for holiday pay (e.g., full-time vs. part-time employees), the rates to be applied, and the type of payment structure to be offered.

Holiday pay, while not legally mandated, is a part of an employee's compensation package. As such, companies are encouraged to offer it to their workers if they want to attract talent, retain their existing workforce, and improve morale and productivity.

Types of Holiday Pay

There are two main types of holiday pay:

1. Paid time off. Employees receive their wages regularly, even though they haven’t worked for the holiday.
2. Premium pay. Employees who work during a holiday are paid a premium. They will earn their salary at an increased rate (e.g., double time or time-and-a-half pay).

On top of that, employers can offer a floating holiday. This is a flexible solution that allows employees to choose which holidays they want to be paid for, even if they aren’t outlined in a company’s policy or holiday calendar.

Is Holiday Pay Required by Law?

Holiday pay is not required by federal law. The FLSA, which governs aspects such as minimum wage and overtime pay, does not require private businesses to compensate their workers for time not worked, which includes holidays. More than that, they don’t require companies to pay workers at a premium if they work on holidays, either.

Ultimately, paid time off for holidays or premium pay is a voluntary benefit that stems from the agreement between an employer and employee. However, there are some exceptions, though they are typically specific to some states, areas, or even industries.

For instance, employees on a government contract subject to the McNamara-O’Hara Service Contract Act (SCA) may be entitled to holiday pay. Another example includes businesses in Rhode Island that are required to pay employees time-and-a-half pay if they work on certain holidays.

That’s why, as a business, you should always check your state and local laws to see if there are any requirements regarding holiday pay.

On the other hand, if you’re an employee applying for a job, you should check the company’s policy or ask the employer or a relevant department whether they offer holiday pay as part of a compensation package.

Which Holidays Typically Qualify for Holiday Pay?

Many federal holidays typically qualify for holiday pay. Companies usually keep track of holidays and their workforce and choose dates that boost morale the most and keep the company competitive in the job market.

Private businesses most commonly offer pay for the following holidays:

• New Year’s Day (January 1)
• Birthday of Martin Luther King, Jr. (January 20)
• Memorial Day (last Monday in May)
• Independence Day (July 4)
• Labor Day (first Monday in September)
• Thanksgiving Day (fourth Thursday in November)
• Friday after Thanksgiving
• Christmas Day (December 25)

Other federal holidays that often qualify for holiday pay are:

• Washington’s Birthday (February 17)
• Juneteenth National Independence Day (June 19)
• Columbus Day (October 13)
• Veterans Day (November 11)

Apart from federal holidays, employers can also add other dates to their paid holiday schedules. These dates include:

• Good Friday (two days before Easter)
• Easter
• Christmas Eve (December 24)
• New Year’s Eve (December 31)

While these are some of the most common holidays that qualify for holiday pay, they aren’t the only dates that companies can use. Some companies may have specific lists that can include lesser-known holidays.

Holiday Pay for W-2 Employees vs. 1099 Contractors

There are significant differences between employees and independent contractors regarding holiday pay.

For starters, W-2 employees are on the company’s payroll. Employers control when and how they work and withhold taxes from their paychecks. The workers are protected by the FLSA and are entitled to various benefits associated with traditional employment (e.g., minimum wage and overtime pay). One of these benefits, although not mandated by the FLSA, can be holiday pay.

For example, a company can have a policy that provides its W-2 employees with ten paid holidays per year or specify the exact holidays when they can take paid time off.

On the other hand, 1099 contractors are responsible for their own taxes, business, and benefits. These are self-employed professionals and entities that sell goods or provide services to clients, but they aren’t on a payroll. This means independent contractors don’t enjoy the same company-provided benefits as employees, which include holiday pay.

Instead, a contractor’s compensation is determined solely by their contract with the client. While that contract typically won’t include paid time off for holidays, it’s possible to negotiate it and include it in the agreement.

The bottom line is that holiday pay is mainly reserved for W-2 employees. Independent contractors aren’t entitled to it in the vast majority of cases, and they are responsible for their own time off.

How Much Is Holiday Pay: Calculation Example

How much holiday pay is depends entirely on the company’s policy.

As a general rule, employees who receive paid time off during holidays will be compensated at a regular rate for that day. On the other hand, when employers calculate holiday pay for employees working during a holiday, they often use an increased rate. This rate will be outlined in the company’s policy and the employee’s contract.

Here’s an example of a calculation of holiday pay for hourly employees who work during holidays:

• Employee’s regular hourly rate: $20 per hour.
• Company’s holiday pay policy rate: Time-and-a-half (1.5 times the regular rate) for hours worked on the holiday.
• Employee’s hours worked on holiday: 8 hours.

Now, let’s calculate holiday entitlement based on hours worked:

• Premium hourly rate: $20 * 1.5 = $30 per hour.
• Employee’s total earnings during holiday: $30 * 8 hours = $240.

In this scenario, if the employee received their wage at a regular rate for working during the holiday, they’d earn $160. By using a premium rate to calculate their earnings, the employer increased the employee’s paycheck from $160 to $240, which is $80 more, or a 50% increase.

What to Do If You Haven’t Received Holiday Pay

If you haven’t received your holiday pay yet, you should take a structured, step-by-step approach to resolving the issue.

First, you should carefully review your contract and the company’s policy regarding holiday pay. You want to make sure that the mistake is on their end and it wasn’t you who made an oversight. Look for aspects such as holiday pay rules, eligibility, rates, and similar details.

Then, you want to gather all relevant documentation to back up your case. This includes your pay stubs and timesheets; you can also bring a copy of your contract if there are specific details you would like to discuss.

With the documents as evidence, you should approach your supervisor, the HR department, or your employer for guidance. Explain your case in a calm and professional manner, clearly stating your concerns and supporting them with the information you have gathered. In most cases, missed or late payments result from simple clerical errors and can be easily corrected.

However, if speaking to a person in charge or to your employer doesn’t resolve the issue and you still believe that you’re owed holiday pay, you may file a wage complaint. For best results, you should contact your state’s department of labor or a legal expert for advice.

Benefits of Holiday Pay

While holiday pay isn’t mandated by law, it’s common practice among many businesses, as it comes with numerous benefits. It’s a strategic decision that can enhance the performance of the workforce and foster a stronger company culture.

Here are the three main benefits of holiday pay for employers:

• Attracts and retains talent. Many companies, especially those in competitive fields and job markets, use benefits to differentiate themselves from the competition and attract top talent. Employees often expect paid holidays, and not offering them can be a significant disadvantage that makes it hard to find and retain workers.

• Boosts employee morale and loyalty. Employers who offer holiday pay demonstrate that they appreciate their employees. This act shows that a company values the well-being of its workers and seeks to help them achieve a better work-life balance. This can lead to a boost in job satisfaction, motivation, and loyalty.

• Improves productivity and reduces burnout. Well-rested, satisfied, and motivated employees are usually more focused and productive in their work. Paid holidays give them a chance to rest and recharge without worrying about a reduced wage. This is further reflected in reduced employee burnout and absenteeism.

How to Track Holiday Pay with Paystub.org

You can easily track holiday pay with Paystub.org by using our generators to create professional and accurate records to keep.

Our pay stub generator is a robust and user-friendly tool that helps you create these documents in minutes. Here’s a step-by-step process on how to use it:

• Select a pay stub generator on our website (note that we also offer a Form 1099 generator, a Form W-2 generator, and an invoice generator).
• Choose one of the many professionally designed templates and pick a color that aligns with your business.
• Input the details about the payment, your company, and your employee.
• Fill in an earnings statement.
• Preview your pay stub and make any necessary final adjustments.
• Go to checkout to download the document.

To make a pay stub with holiday pay included, you simply add the rates and the hours in the earnings statement. You’ll also find other types of earnings, such as vacation, bonus, float, and tips, and you can add custom earnings if you need.

Our software also has a built-in calculator that automatically multiplies rates by hours to determine totals, as well as gross and net pay. This minimizes the risk of error and ensures the accuracy of your pay stubs.

Final Thoughts

Holiday pay, while not legally mandated, is a handy financial tool that businesses use to create competitive benefits packages. This helps them attract and retain top talent, keeps the workforce productive and motivated, and reduces instances of burnout and absenteeism.

Since there’s no law that governs this type of compensation (apart from a few exceptions), employers create their own policies. This often results in paid time off on certain federal holidays or premium pay for those who work during these holidays.

Remember to include premium pay in your pay stubs to provide your employees with a detailed earnings statement and avoid potential issues. To help with that, you can leverage our pay stub builder.

Holiday Pay FAQ

#1. Can part-time employees receive holiday pay?

Part-time employees can receive holiday pay, although it is not a legal requirement. Whether they receive it depends on their arrangement with the employer. Some employers may require part-time employees to work for a certain period before becoming eligible.

#2. What is holiday premium pay?

Holiday premium pay is extra compensation for employees who work on holidays. The rate is typically calculated by using a multiplier with the employee’s regular rate. Common examples include time-and-a-half (1.5 times) or double time (2 times) pay.

#3. Does paid holiday time count toward overtime?

No, paid holiday time generally doesn’t count toward overtime. Under the Fair Labor Standards Act (FLSA), paid time off for holidays doesn’t count as hours worked for an employee, so employers don’t include it when calculating their total hours and gross wages.