What Is Holiday Pay? Definition, Overview And How It Works in 2023

All employees who have a contract of employment are entitled to holiday pay or annual leave payment. Its goal is to ensure that workers are not penalized financially for taking a vacation or holiday.

Workers should, in theory, be paid the same amount while on vacation as they would if they worked their regular hours. The holidays are a time for joy and celebration, but they also demand business owners to think about holiday compensation differently.

Employees can stay at home for various holidays and still get paid for those days with this form of remuneration. However, depending on your company’s needs, this benefit isn’t always a given.

When it comes to calculating paid time off, determining which holidays are included as vacation time, and estimating how much focused work time you can expect around those key dates, managing holidays can be a difficult task.

A deeper awareness of holiday legislation will help you arrange your holiday pay schedule more clearly and informally.

To understand how holiday pay works, keep reading this article.

What Is Holiday Pay?

Any paid time off, such as a government-designated holiday, maternity leave, or sick leave, is referred to as holiday pay.

Employees are entitled to holiday pay as soon as they work – there is no waiting period like there is for vacation pay.

They do not compel an employer to pay part-time or seasonal employees holiday pay. They traditionally define a holiday as one declared by a governing body, such as the federal or state governments.

In certain circumstances, employers allow workers to work on holidays and pay them in cash for the time off they don’t get.

This is most common in the service industry, when someone must be present at all times or when the workload is so heavy that they cannot do it without working through the holidays.

Salaried personnel is exempt from this clause because they pay them the same amount every pay period, whether there are any holidays.

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What Are Paid Holidays?

They pay paid holiday days off, which employers can grant to their employees on national, state, or religious holidays.

The Fair Labor Standards Act (FLSA) particularly controls minimum wage and overtime compensation, so no federal regulation calls for establishments to make provisions for paid holidays to their employees.

Typical paid holidays in the United States include: 

  • Martin Luther King Day 
  • Presidents’ Day 
  • Memorial Day
  • Independence Day (observed) 
  • Victoria Day (Rhode Island only) 
  • Labor Day
  • Columbus Day/Indigenous Peoples’ Day
  • Veterans Day
  • Thanksgiving
  • Day After Thanksgiving
  • Christmas Eve
  • Christmas Day
  • New Year’s Eve
  • New Year’s Day

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Is Holiday Pay Required By Law?

Employers are frequently required by international labour rules to provide paid time off during major holidays.

Paid holidays off are not required by law in the United States, nor are there any requirements that an employer pay additional compensation for labor over the holidays.

Employers must make reasonable accommodations for employees to celebrate religious holidays under federal law, but they do not compel them to give holiday time off or additional pay.

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What Amount Is Paid For Holiday Pay?

They calculate holiday pay at the same rate as regular pay. As an example, if they pay you $20 per hour on a regular workday, they will pay you the same amount per hour during a holiday.

Holiday Pay Reporting

On a paycheck remittance advice, holiday compensation is rarely itemized.

It is instead treated as part of a regular salary and hence is not segregated in the accounting system or on the paycheck.

They expect employees to know that they combine this remuneration with their regular salary.

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Accounting for Holiday Pay

They pay employees in the normal course of the month for holidays that occur during the month, hence organizations rarely try to accrue holiday pay.

As a result, no unpaid holiday expense will be carried over to the next reporting period.

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Who Is Eligible For Holiday Pay?

They must compensate anyone who works on a holiday, although it does not have to be more than the employee’s regular pay rate.

Employers can offer employees a raise in pay, dubbed “holiday pay,” as a benefit to assist them in attracting and keep top talent.

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Do Businesses Need to Provide Holiday Pay?

While many companies provide holiday compensation, it is not required by law. “The Fair Labor Standards Act (FLSA) doesn’t call for reimbursement for time not worked, like vacations or holidays (federal or otherwise),” according to the Department of Labor.

They treat holidays the same as any other day of the week. Employers would only pay non-exempt employees for the time they worked as a result (exempt employees would receive their normal salary whether they had the holiday off).

While it is not mandatory, employers may provide holiday compensation to their employees.

Although you are not obligated to pay a premium rate, especially for holiday pay, the conditions of the holiday pay are subject to an agreement between the employer and its employees.

What Are The Benefits of Offering Holiday Pay?

There are a few reasons you could opt to offer holiday pay to your employees. One motivation is to allow employees to spend time with their families and friends throughout various holidays without worrying about how their compensation will be affected.

You may remind your employees that you appreciate their hard work throughout the year by providing some days off and holiday pay.

Another reason you might provide paid vacation time is to make your company appear more competitive during the hiring process.

While they may pay for a holiday the same as any other day, it can feel far more significant to your staff. Offering those days off with pay can make a difference in attracting and keeping exceptional employees.

How Should I set up a Holiday Pay Policy?

Because you set the terms of your holiday pay policy, it’s critical to include it in your employee handbook and make it known to your employees.

If you opt to grant particular holidays off and holiday pay, this will allow you to express the full parameters of your policy clearly. They should include the following in the policy’s details:

  • A calendar of holidays is a list of dates declared (whether it follows the list of federal holidays or a changed list). 
  • Which employees are entitled to compensation over the holidays? 
  • If there are any bonuses related to working a holiday, the rate of pay or if there are any incentives attached to working a holiday.
  • When a paid holiday falls on a weekend, how does it work?

Frequently Asked Questions (FAQs)

Are businesses compelled to pay extra?

No, they do not compel businesses to pay extra or triple time for holidays. Suppose a company has a written contract or policy stating that they will pay employees double time or triple time for holidays. In that case, the employer must pay employees under the contract or policy.

Must employers pay day off?

Federal law does not require employers to provide employees a day off on federal or other holidays. Employers must, however, provide reasonable accommodations for employees to observe religious holidays, according to federal law. Businesses provide this accommodation in a variety of ways, including floating holidays.

Is there a law for employers to pay holiday pay?

Currently, no federal law requires firms to give their employees a paid holiday. It’s usually done on the merits of the employer. Furthermore, if an employer provides their employee’s vacation time, the law does not compel them to compensate them for it. While it is not a legal necessity for businesses to provide employees with vacation time or pay for any time off, most employers do so as a bonus. It’s a strategy for keeping staff happy, productive, and content. It’s more vital than ever in today’s war for talent to do so.

Will you pay holiday pay?

You are not required to pay “holiday pay” to seasonal or part-time employees as an employer. Prior to onboarding, most businesses establish the wage structure of seasonal workers in their contracts. Offering higher compensation on holidays is a common strategy for motivating employees to work on such days.
If you choose to do so, you don’t have to give holiday compensation to your employees. If the selection criteria aren’t discriminatory, you can offer holiday pay to some employees but not others. You can, for example, limit holiday pay to full-time staff or office workers if you so desire. You cannot, however, decide based on protected characteristics such as age or race.

Requirements of FLSA

The Fair Labor Standards Act (FLSA) does not require that time not worked, such as vacations or holidays, be compensated (federal or otherwise). They usually negotiate these benefits between an employer and an employee (or the employee’s representative).
If you work as a nonexempt (hourly) employee, your employer is not legally required to compensate you for time off on holidays. If you are an exempt (non-overtime salaried) employee, your employer must pay you your entire weekly income if they give you a day off but work any hours during the week in which that day off falls.
Managers are just like everyone in the company.


Ultimately, they do not compel businesses to provide time off for holidays, nor are they required to offer any salary rise for working those holidays.

Law requires them to provide reasonable accommodations for employees who observe religious holidays.

Although businesses are not legally required to provide holiday benefits, they strongly recommend doing so.

Attracting and keeping great personnel is more crucial than ever for organizations. If a company’s turnover is a problem, the benefits, or lack thereof, could be a helpful sign.



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