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What is Holiday Pay and How is it Calculated?

By Rebecca Lake
November 5, 2020

A little holiday pay can be a welcome addition to your bank account—especially at the end of the year. 

But is this employee perk a thing at your job? And exactly how much extra cash does it add to your paycheck? 

Understanding how holiday pay policies work can help you make the most of this valuable benefit. To start, let’s break down the basics.

  1. What is holiday pay?
  2. Who's eligible to receive holiday pay?
  3. How do you calculate holiday pay?
  4. What is time and a half?
  5. What holidays are paid time and a half?
  6. How do I know if I get holiday pay?
  7. Make the most of your holiday pay

What is holiday pay?

In simple terms, holiday pay is money you receive for working (or in some cases, not working) on a holiday. Employers can offer this benefit for federal and state government-designated holidays, including:

  • New Year’s Day
  • Birthday of Martin Luther King, Jr.
  • Washington’s Birthday (also known as Presidents Day)
  • Memorial Day
  • Independence Day
  • Labor Day
  • Columbus Day (or Indigenous Peoples’ Day)
  • Veterans Day
  • Thanksgiving Day
  • Christmas Day

Companies can also choose other days to include in this benefit, such as Good Friday, Easter, the day after Thanksgiving, Christmas, or New Year’s Eve.

Who's eligible to receive holiday pay?

Generally speaking: If you work on a holiday day, employers have to pay you. So, with the exception of seasonal and part-time workers, anyone who works on a holiday is eligible for holiday pay. 

But if your company is closed on a holiday or you opt to take time off, it’s up to your employer to decide if those days should be paid or not. That’s because the Fair Labor Standards Act (FLSA) doesn’t require payment for time not worked—including holidays or vacations.

How do you calculate holiday pay?

Knowing how much money to expect can help you plan ahead with your finances. Thankfully, there are holiday pay laws that help do that by outlining how much employees have to earn for working a holiday. 

Here’s a simple rule: If your employer pays you for holidays worked, the pay rate you earn has to at least be the same as your normal pay rate. 

So, if you’re paid $15 per hour for working a regular shift, your rate for working a holiday is legally required to be at least $15 per hour as well. 

That being said, some employers may offer a higher rate for holidays worked at their discretion. For example, you could receive time and a half pay for your effort in place of your regular hourly wage. But that decision is not legally required, it’s up to your employer.

What is time and a half?

Earning time and a half means that you’ll receive 50% more than your regular pay rate. 

If we go back to the previous $15 per hour example, your time and a half pay rate would come out to $22.50 per hour. Remember, this is what you’ll earn before taxes are taken out.

If you work overtime, you might have earned time and half pay before or be familiar with the concept. Any hours you work during the week over 40 are considered to be overtime and eligible for time and a half pay.

Some states also use a daily rule for overtime pay. Once you hit eight hours of work, any hours beyond that for the day are considered overtime and are eligible for time and a half pay. 

Employers who want to offer premium pay rates for holidays worked can increase the amount to double time. Earning double time for holiday pay means you’re getting twice your regular hourly rate. For example: A $15 hourly rate would turn into $30 an hour.  

What holidays are paid time and a half?

There are no employment laws that specify which holidays have to be paid time and half: The decision to do so is up to the employer. 

So, for example, any of the federally-recognized holidays mentioned earlier could be eligible for time and a half or double time pay if that’s included in your employer’s holiday pay policy. Time and a half pay could also be offered for any other days your employer designates as a holiday.

The only scenario where time and a half is required is if you work overtime during a holiday week. And then, your time and a half rate would still be based on your regular hourly wage and the number of hours you worked over 40. 

You can earn holiday pay and overtime pay in the same week. But overtime calculations are only based on the number of hours you actually worked. If you receive holiday pay for eight hours that you didn’t work, those hours wouldn’t count toward your total for overtime pay

How do I know if I get holiday pay?

If your employer offers holiday pay, the details of their pay policy should be spelled out in your employee handbook. If you don’t have a copy of your employee handbook available, you can reach out to your HR or payroll department for more answers. 

When discussing holiday pay benefits, either as a current employee or a new hire, be sure to ask the following questions:

  • Does the company have a holiday pay package?
  • Which holidays are included in the company’s policy?
  • Does the policy designate paid holidays, regardless of whether you work?
  • How much will I be paid for working on a holiday? (i.e., your regular rate, time and a half or double time)
  • Is working a holiday voluntary or mandatory?

Remember, there is no federal law that requires your company to give you a holiday off. The exception is if you need to take a holiday off for religious observance. In that case, the Department of Labor requires employers to make reasonable accommodations so you can do so. 

Make the most of your holiday pay

If your employer offers holiday benefits, whether you’re working the holiday or not, it pays to take advantage of them. Having extra money come your way could help you cover last-minute shopping or pay off any credit card debt you might have accumulated buying presents. 

Another good way to make use of your employer’s financial gift? Use your holiday pay to open a savings account. That way, you could jumpstart your emergency fund or start planning for a long-term financial goal without taking away from your regular paychecks. 

It’s easy to think of holiday pay as free money—especially if you’re getting paid for a holiday without working. But even if you only receive it a few times a year, it’s still important to stretch those extra dollars as far as possible.

This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.

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