Holiday Pay for Hourly Employees: How to Calculate It Right
Learn everything you need to know about holiday pay for hourly employees. Discover eligibility requirements, calculation methods, and how to establish a fair holiday pay policy.
What Is Holiday Pay?
Workers obtain holiday pay through the system of payment, which exceeds regular rates when they work on holidays either physically or by taking time off those days.
Knowledge of holiday pay calculation, average holiday pay rates, and holiday pay rules stands essential for business owners because it:
- shapes workforce planning
- meets legal obligations
- ensures employee engagement.
Companies that offer generous holiday pay benefits will:
- increase employee satisfaction
- build the position as a top-choice employer
- improve employee retention
- provide legal compliance
- gain a competitive advantage.
Business success depends on companies developing clear holiday pay policies because they can:
- prevent disputes between employers and staff members
- create a positive work setting.
Holiday Pay Laws for Hourly Employees
✒️Holiday pay rules for hourly workers imply limited federal regulations since state laws and employer-specific policies dominate actual holiday pay calculations.
Federal Laws
According to the Fair Labor Standards Act (FLSA), which determines questions of workforce eligibility, employers must compensate employees for their worked hours; yet, they do not have to pay for holidays where staff members are absent from work.
⚖️Under federal law, employers do not need to pay staff extra for work performed on public holidays or for time not worked, including holidays.
Employers are only obligated to pay non-exempt (hourly) employees for hours worked.
⚖️If an hourly employee works more than 40 hours in a week, including holiday hours, they must be paid at least 1.5 times their regular rate for overtime hours.
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⚖️Work performed on holidays by employees becomes a normal workday for pay purposes, and the employer has no obligation to pay extra unless the situation triggers overtime requirements.
While not required, many employers offer PTO or holiday pay as a benefit to attract and retain employees.
⚖️Certain federal contractors may be subject to the McNamara-O’Hara Service Contract Act (SCA) or Davis-Bacon Act (DBA), which could include construction, alteration, or repair work on federal projects and require holiday pay based on prevailing wage standards.
State and Industry Regulations
In California, employers need to provide premium salary payments for holiday work under limited circumstances when employment agreements or collective bargaining documents make such arrangements explicit.
Massachusetts is under "Blue Laws" – it forces retail workers to receive one and a half times their regular pay whenever they work on designated holidays like Thanksgiving and Christmas.
The Rhode Island state law obligates employers to provide double time pay for their workers performing tasks on Memorial Day and Labor Day holidays.
Texas follows federal legislation regarding holiday pay benefits, so employers have freedom to determine employee compensation for these days.
Employers in New York are not obligated to provide additional pay for holidays but must observe overtime regulations when employees perform work on such days.
Healthcare, retail, and hospitality often have industry-specific holiday pay practices – it is determined by their 24/7 operation cycle.
Union contracts frequently include detailed provisions for hourly employees holiday pay, including which days qualify and payment rates.
Some industries observe different holidays (e.g., financial markets closed for Good Friday).
Holiday Pay Trends
- Companies across industries present their employees with floating holidays which they may use for personal significant dates.
- Businesses that employ employees across the globe have experienced significant changes in their holiday policies because of remote workplace arrangements.
- The introduction of "unlimited PTO" systems by some organizations influences the management of employee holiday time.
- Cultural awareness about non-federal holidays from various religions continues to increase in recognition.
Holiday Pay vs Overtime Pay
Employees who must work on holidays receive holiday pay at elevated rates that serve as compensation for sacrificing their personal time on those specified days.
Holiday pay also refers to:
- the designated company holidays, including Christmas and Thanksgiving
- particular dates in the calendar by the choice of the company.
Workers usually get their standard paycheck on scheduled company holidays.
Additional pay (overtime pay) for regular work performed beyond the standard workweek (as a rule, 40 hours) faces an hourly multiplier of 1.5 times the standard rate to boost compensations for additional hours worked.
Each jurisdiction defines payment regulations about these compensation types through separate laws at the state, federal, and local levels.
Employers can use TMetric overtime tracker to guarantee accurate calculations for holiday and overtime pay.
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How to Calculate Holiday Pay
Below, we discuss how to calculate holiday pay for hourly workers
Holiday pay calculation for employees
- Determine the eligibility criteria for holiday pay for hourly employees.
- Identify the specific holidays for which pay will be provided.
- Review the company policy regarding holiday pay calculations.
- Gather data on hourly employees' regular pay rates.
- Calculate the holiday pay amount for each eligible employee based on their hours worked and pay rate.
- Communicate the holiday pay policy and calculations to employees.
- Process and distribute the holiday pay in accordance with the payroll schedule.
- Review and address any questions or concerns from employees about their holiday pay.
- Document the holiday pay process for future reference and compliance.
Holiday pay for hourly paid workers
⚖️Hourly employees receive wages based on actual hours worked, typically recorded through time cards or electronic time-tracking systems
⚖️Federal law determined by Fair Labor Standards Act, or FLSA requires overtime pay of at least 1.5× regular rate for hours worked beyond 40 in a workweek for non-exempt employees
⚖️Some states mandate "reporting time pay" if an employee shows up for a scheduled shift but is sent home early
⚖️Premium holiday pay (time-and-a-half or double-time) is not legally required but is a common benefit, especially in union environments
⚖️Some companies offer "holiday pay" even when not worked, calculated as the employee's regular hourly rate × typical shift length.
Holiday pay for salaried employees
⚖️Salaried exempt employees must receive their full salary regardless of quantity of work or hours, with very limited exceptions
⚖️Their salary cannot be reduced for partial day absences or most company closures, including holidays
✒️To qualify as exempt, employees must:
- Be paid at least $684/week ($35,568 annually) as of 2024
- Meet specific duty requirements for executive, administrative, professional, or other exempt classifications
🗓️Some companies offer additional "holiday premium pay" or comp time for exempt employees who work holidays, though this is discretionary
Holiday pay calculation for part-time staff
⚖️Part-time employees who regularly work at least 20 hours/week often receive prorated holiday benefits
⚖️Temporary workers hired directly by the company may be eligible for holiday pay based on company policy
⚖️Employees from staffing agencies typically receive holiday benefits through their agency, not the client company
⚖️Some companies require a waiting period (30-90 days) before new part-time employees become eligible for holiday pay.
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Regular Pay Rate Calculation
The first step to calculate regular pay requires setting base hourly rates for each employee, serving as their fundamental payment basis.
The established base rate must reflect both employee experience and their job responsibilities as well as the current salary market.
The base hourly rate needs to be multiplied by the total hours worked to obtain gross pay. Workers who complete 40-hour shifts at a wage of $20 per hour will receive a gross pay amount of $800.
Additional overtime compensation must be calculated by identifying nonstandard work hours, then applying rate multipliers of a typical 1.5 regular pay amounts as the overtime fundamentals.
Employee hours should be tracked accurately – for instance, with TMetric holiday pay tracking software for small business, which allows users to record their work time and time off.
Precise pay amounts can be calculated because they are directly linked to actual work durations.
Team Time Tracking with TMetric
Productivity and accurate payroll processes depend on effective time tracking practices among team members.
TMetric enables managers to track employee working hours through its complete time monitoring system that generates reports about time log data and billable hours alongside time balance information.
Example of Calculations for Average Hourly Rate for Holiday Pay
Let's consider the following hourly rates for the team members shown in the TMetric Team Summary:
💵Aduard Settin: $25 per hour
💵Ella Reg: $30 per hour
💵Ketrin Zet: $40 per hour
Aduard Settin worked 1 hour⏳
- Cost: 1 hour x $25/hour = $25
Ella Reg worked 1.75 hours (1 hour and 45 minutes)
- Cost: 1.75 hours x $30/hour = $52.50
Ketrin Zet worked 8 hours
- Cost: 8 hours x $40/hour = $320
Time and a Half Calculation
Before obtaining time and a half pay for overtime hours, you need to establish the regular hourly rate of each employee.
The initial setting of a regular hourly base rate enables subsequent multiplication by 1.5 to determine overtime pay amounts.
Formula:
Overtime Hourly Rate = Regular Hourly Rate x 1.5
Example applied to the previously mentioned hourly rates (from the TMetric Team Summary)
If Aduard Settin gets a regular hourly rate of $25 per hour, the overtime hourly rate will be:
$25 x 1.5 = $37.50 per hour
For Ella Reg, the overtime hourly rate is calculated as follows:
$30 x 1.5 = $45 per hour
For Ketrin Zet whose regular hourly rate is $40 per hour, the overtime Hourly Rate will be:
$40 x 1.5 = $60 per hour
The formula for overtime pay is:
Overtime Hourly Rate x Overtime Hours Worked
Employees can track their regular hours and overtime exactly using tools such as TMetric.
This precision is crucial for:
- Employees must get their payment commensurate with their job responsibilities.
- The workplace must meet all governmental requirements that specify overtime pay regulations.
- Payroll accuracy results from minimizing errors in payroll processing.
- Through data provision, managers obtain the tools needed for controlling labor costs.
Holiday Pay Calculation Examples
Example 1: Hourly Employee
Scenario
- An employee works 40 hours per week.
- Hourly wage is $20.
- The employee is entitled to 8 hours of holiday pay for a single holiday.
Calculation
- Holiday pay = Hourly wage × Number of holiday hours
- Holiday pay = $20 × 8 hours = $160
✒️In this example, the employee would receive $160 for the holiday.
Example 2: Salaried Employee
Scenario
- Employee earns an annual salary of $52,000.
- Employee works 5 days per week.
- Employee is entitled to one day of holiday pay.
Calculation
Calculate the daily wage:
- Annual salary / Number of working days in a year
- $52,000 / 260 days (assuming 52 weeks × 5 days per week) = $200 per day
Holiday pay = Daily wage = $200
✒️In this example, the employee would receive $200 for the holiday.
How To Create Your Holiday Pay Policy
A policy must outline the criteria that establishes who receives holiday pay benefit. Your policy should address decisions between part-time/full-time workers as well as employment duration together with workday status.
Businesses in the United States independently select days they offer paid holidays because the country does not enforce any specific federal paid holidays.
The popular observed holidays at work include the combination of holidays for New Year's Day, Memorial Day, and Independence Day, followed by Labor Day and Thanksgiving, and finally ending with Christmas.
Review the cultural makeup of your current workforce before determining official paid holidays. A holiday plan that encompasses important days for most staff members should be considered.
Research how major business sectors handle their holiday observances by studying industrial standards.
Your business performance will improve by choosing holidays that match industry standards and match employee expectations.
Choose Your Paid Holidays
Observance of federal holidays is voluntary for most businesses, even though they exist, but numerous organizations choose to celebrate them🗓️
- New Year's Day (January 1) 🥳🎉
- Martin Luther King Jr. Day (Third Monday in January) ✊🏿🕊️
- Presidents' Day (Third Monday in February) 🇺🇸🏛️
- Memorial Day (Last Monday in May) 🇺🇸🎖️
- Juneteenth (June 19) ✊🏾🎉
- Independence Day (July 4) 🇺🇸🎆
- Labor Day (First Monday in September) 👷🏽♀️🛠️
- Columbus Day (Second Monday in October) ⛵🗺️
- Veterans Day (November 11) 🇺🇸🫡
- Thanksgiving Day (Fourth Thursday in November) 🦃🍂
- Christmas Day (December 25) 🎄🎁
Set a Pay Rate for Paid Holidays and Holiday Shifts
The company will set a fixed wage for workers in paid holiday situations and during holiday shift assignments.
Organizations need to establish if employees should get standard wages or receive higher pay at double their regular rate for workforce commitments on holiday dates.
The policy must contain explicit details about your payment rate for holidays.
The decision regarding shift staffing during business days that fall on holidays needs clarification.
The first option is to ask volunteers to work first, followed by rotating staff holiday duties among employees.
Holidays become a paying time for employees who choose to work through premium pay programs offered by most employers.
Common practices include:
Time-and-a-half – 1.5 times the regular hourly rate.
Double-time – 2 times the regular hourly rate.
Organizations operating during holidays such as hospitals or retail stores generally pay their staff different rates according to their selected shifts.
The Bottom Line: Employees earn their standard daily pay during holidays when they do not need to perform work duties. The compensation for hourly workers depends on their everyday hour average.
Salaried employees receive their permanent pay amount as usual during paid holidays without work requirements.
❗Clearly Communicate Your Policy:
Your organization should record its holiday pay policy either within employee handbooks or official organizational documents.
All employees need to comprehend the established policy. To ease the process, there is TMetric Time Off Module that enables users to:
- submit time off requests
- monitor time off usage
- automate time off calculations.
Final Thoughts
An effective holiday pay policy is a strategic investment in your workforce.
It extends beyond mere compliance.
With clear holiday pay guidelines, businesses gain multiple benefits - the most substantial one is creating a positive image for employment.
To be a success in implementing holiday pay policy, take the following steps:
- Make an entry on holiday pay rules in employee handbooks
- Use time tracking tools like TMetric - they are your assistants for calculating regular and premium pay
- List specific industry standards that apply to holiday schedules in your business
- Learn mandatory legal requirements and balance them with competitive benefits
- Follow changes in regulations
- Learn workforce demographics.
FAQs
Do hourly employees get paid for holiday?
The law does not oblige employers to give holiday pay to their hourly workers unless these staff members work on the holiday day or when employers grant such payment as a voluntary benefit.
According to the Fair Labor Standards Act (FLSA) employers lack a mandate to pay employees who do not work even during holidays.
An employee can receive holiday pay based on how their employer decides or through company policies or employment agreements.
How do I calculate holiday pay for part-time hourly workers?
When you need to calculate holiday pay for part-time hourly workers, first you must determine their regular pay rate and then apply the holiday pay rate, - it is often 1.5 times their regular rate.
For example, if a part-time employee's regular rate is $18 per hour, their holiday pay rate would be $27 per hour.
If your company policy includes prorating holiday pay based on the number of hours worked, first, you must calculate the part-time employee's average hours worked and then apply the holiday pay rate accordingly.
How can I track holiday hours accurately for my employees?
Employ time-tracking applications and software like TMetric for precise document and observation of employee work duration as well as holiday working hours.
Labor law compliance and error reduction also occur through automated time-tracking tools.
The implementation of clear time-tracking policies must be scheduled after you communicate them to the team members. The company must promote open channels to address issues immediately.
Can holiday pay push an hourly employee into overtime?
The purpose of holiday pay does not determine how overtime calculations are processed. The exact calculation for overtime relies on actual employee work hours, but holiday time operates as paid leave.
The extra hours would become eligible for overtime payment if the total weekly hours surpass 40 when an employee chooses to work on a holiday.
How does TMetric help with tracking and calculating holiday pay?
TMetric offers functionality for time tracking and scheduling: it calculates employee wages along with holiday-based payrolls.
The system enables users to define working schedules while keeping track of holidays before calculating compensation based on recorded time and payment rates.
The integration between TMetric and payroll systems enables automated calculations to guarantee appropriate payments while decreasing management costs.