What is Holiday Pay? Policies and Laws You Need to Know

What is Holiday Pay? Policies and Laws You Need to Know

Time off is important to every employee — even the ones who love their jobs. And holiday pay is often a concern since the bills don’t take time off. When hiring, you often see questions such as “Will I be paid for holidays?”, or “If I work on a holiday, how much overtime will I receive?”.

Questions about holiday pay vary as much as their answers do. These answers depend entirely on the company culture of your organization. In 2016, a study found that the typical American employee received 7.6 holidays every year if they held a full-time position with a company. However, this number varies greatly depending on the position, industry, and nature of the workplace.

Some employers provide holiday pay while others decide to provide overtime pay for a worked holiday. At the end of the day, deciding whether or not to offer holiday pay comes down to what you, as an employer, value and what you want your company’s culture to be.

What Is Holiday Pay?

Holiday pay is pretty self-explanatory. It’s when employees are paid while they have time off. That includes not only regular holidays, such as Christmas Day but also periods such as maternity leave and sick time off.

Typically salaried workers don’t receive any holiday pay as these days off are already taken into account when planning their salary. Employees in retail and hospitality also tend to draw the short straw with holiday pay and can’t expect to receive extra pay for working holidays and weekends.

Usually, employers who decide to give their employees some extra pay for worked weekends and holidays are the ones who want to incentivize job satisfaction and motivate employees.

It’s important to note that employers are required by law to pay extra for holidays worked nor do they have to grant time off for holidays. The only exception to this is if holiday pay has been stipulated in an employee’s contract.

Freelancers and contractors are in a slightly different situation when it comes to holidays. As they tend to set their own rates and hours, freelancers and contractors can request extra pay or time off on holidays from their clients. This should always be organized well in advance of any upcoming holidays and if possible should be included in the contract between client and contractor to avoid any disputes.

Who Qualifies For Holiday Pay?

Most employees qualify for holiday pay. If any of the following apply to your employees, they should be receiving holiday pay:

  • He or she is covered by a collective bargaining agreement;
  • He or she works in a civil service position;
  • Your company provides overtime for working on a holiday.

There are also some cases relating to the Davis-Bacon and Related Acts and the McNamara O’Hara Service Contract (SCA), where employees are entitled to receiving holiday pay and compensation depending on their classification or when their contract surpasses $2,500.

How Does Holiday Pay Work?

In America, the Fair Labor Standards Act (FLSA) doesn’t state that employers need to provide their staff with paid holidays. Therefore, companies can choose to give their employees holidays if they want to improve employee engagement. If you’re wondering exactly how holiday pay works and how companies manage it, here are three major aspects that have been broken down in more detail.

1. Overtime and Holiday Pay

Overtime differs from holiday pay because unlike holiday pay, overtime wages are regulated by the law. In both cases, the rates are different from an employee’s regular wages. Overtime is provided when an employee works over their contracted hours, and if it just so happens to fall on a holiday, they should be paid their overtime rate regardless of if your company recognizes holidays or not. Your human resources team should make it clear to employees if they are eligible for overtime or not.

2. Holiday Timing

Holiday timing changes depending on the workplace and how they recognize holidays. Some companies will even recognize holidays that fall on a weekend by observing them on a Friday or a Monday instead. This usually occurs for full-time employees whose regular hours aren’t on a weekend. This is known as holiday time “in lieu of”. In this situation, if a holiday is on a Saturday these employees will take off the Friday beforehand and if it’s on a Sunday they will recognize the holiday on the following Monday instead. However, this is just an option, and it is not required by law.

3. Holiday Work Schedules

Similar to holiday timing, companies have a lot of power when it comes to deciding which holidays they formally recognize. Most organizations will send out or make available a list of which holidays they take part in throughout the year. A list of recognized holidays should always be accessible through your Human Resources department.

The usual paid holidays in the United States include:

  • Christmas Day
  • New Year’s Day
  • Easter
  • Memorial Day
  • Independence Day
  • Labor Day
  • Thanksgiving Day
  • Friday after Thanksgiving

Christmas Day tends to be recognized by 97% of employers and Thanksgiving is noted by 95%. Labor Day is accepted as a holiday by 94% of employers, while Independence Day and Memorial Day are recognized by 93%. New Year’s Day also has a high percentage of employer recognition at 90%. If you fall into the minority of employers who don’t recognize these holidays, you may cause tension and gain disengaged employees.

Holidays recognized for holiday pay in America.

Other holidays that are typically acknowledged by companies are President’s Day, Good Friday, Martin Luther King, Veterans Day, Columbus Day, Christmas Eve, and New Year’s Eve. Whether these extra paid holidays should be added to your workplace’s holiday list comes down to regional differences and employee feedback.

Final Note

Whether your company provides holiday pay or not, is completely up to you. When deciding what holidays to recognize, you need to research the norms for your industry and ask your employees for their input. Employers who don’t provide holiday pay should have a reason. For example, it’s not common for retail or hospitality staff to receive holiday pay.

In any other case, you might want to offer a decent amount of paid holidays if you want your employees to feel happy and satisfied at work.