Holiday Pay

As a business owner or human resources manager, you may come across the term "Holiday Pay" in the context of employee compensation. Holiday pay refers to the compensation employees receive for time taken off during public holidays or annual leave. The specifics of holiday pay, including eligibility and calculation, vary significantly across countries, influenced by local labor laws and regulations. Understanding these variations is crucial for ensuring compliance and maintaining employee satisfaction.

For example, in European Union countries, employees are entitled to a minimum of four weeks of paid annual leave. In contrast, the United States does not have a federal law mandating paid vacation, leaving it to employers to determine their own policies. Therefore, if your company operates internationally or employs staff in different countries, it's essential to be aware of and adhere to the holiday pay regulations specific to each location to ensure legal compliance and fair treatment of employees.

Is Holiday Pay Mandatory?

Holiday pay isn’t always mandatory everywhere, but in many countries, employers are legally required to provide paid time off for public holidays or a minimum amount of paid annual leave to their employees. The exact rules depend on local labor laws, so whether holiday pay is mandatory will vary by country, and sometimes even by region within a country.

Here’s a quick breakdown:

• In the European Union (including countries like Spain, France, and Germany): Paid annual leave is mandatory, typically a minimum of four weeks per year. Public holidays may also be paid, depending on local law.
• In the United States: There’s no federal law requiring employers to offer paid holidays, but many companies choose to provide paid leave for major holidays as a benefit.
• In the UK: Paid annual leave is mandatory, but whether public holidays are included in the minimum entitlement depends on your employment contract.
• In other countries: Rules can vary a lot, so it’s important to check local labor codes.

If you’re managing employees across multiple countries, it’s essential to comply with each location’s holiday and leave requirements. Using a global HR platform like Playroll helps ensure your policies stay compliant no matter where your team is based.

Federal Holiday Pay in the USA

When we talk about “federal holiday pay,” especially in the United States, it’s easy to assume employees are guaranteed paid time off for holidays like Independence Day or Thanksgiving. But the reality is a little more nuanced.

In the U.S., no federal law requires private employers to provide paid time off, or even unpaid time off, for federal holidays. The list of federal holidays is set by the U.S. government, but these rules mainly apply to federal government employees.

According to the US Office of Personnel Management, there are eleven regular federal holidays:

• New Year’s Day
• Martin Luther King, Jr. Day
• George Washington’s Birthday
• Memorial Day
• Juneteenth National Independence Day
• Independence Day
• Labor Day
• Columbus Day
• Veterans Day
• Thanksgiving Day
• Christmas Day

How is Holiday Pay Implemented?

The implementation of holiday pay varies across organizations and jurisdictions as a result of different company policies, collective bargaining agreements, and local labor laws. For example, while U.S. federal law doesn't require holiday pay, certain state laws, like Massachusetts' "Blue Laws", mandate premium pay for employees in certain industries working on Sundays and some legal holidays.

Employees should review their employment contracts or consult their HR departments to understand their specific holiday pay entitlements.

Some employers provide paid time off for specific holidays, allowing employees to take a break without a reduction in their regular earnings. 

How Do You Calculate Holiday Pay? 

Calculating holiday pay isn’t a one-size-fits-all process, each country has its own rules, and getting it right means paying attention to the details.

Take the United Kingdom, for example:

• Employees are entitled to a minimum of 5.6 weeks of paid annual leave per year. For someone working a standard five-day week, that works out to 28 days of paid holiday. Part-time staff receive a pro-rata entitlement based on the number of days or hours they work. Holiday pay is calculated using the employee’s average weekly earnings over the previous 52 weeks, so it reflects regular pay, overtime, and even certain types of commission.

In the United States:

• There’s no federal law mandating paid holidays or vacation, so it comes down to company policy. Salaried employees typically receive their normal pay during holidays, regardless of whether they work those days. If they are required to work on a holiday, some companies might offer additional compensation, like time-and-a-half or a holiday bonus, but this isn’t required by law. For hourly employees, holiday pay usually means getting paid for the hours they would have worked, but, again, this depends on company policy.

In Canada:

• After one year with an employer, employees are entitled to at least two weeks of paid vacation—bumping up to three weeks after five years of service. Holiday pay is generally calculated as a percentage of total earnings in the previous year: 4% for employees entitled to two weeks, and 6% for those with three weeks’ entitlement.

Holiday pay structures can vary widely around the world. For employers, it’s critical to stay up-to-date with local labor laws and make sure employment contracts reflect the correct entitlements. Partnering with a global payroll provider like Playroll helps you stay compliant, wherever your team works.

Examples of Holiday Pay

Understanding holiday pay in real-world scenarios can help you build a compliant and attractive benefits package for your global team. Here are a few common examples from different countries and holiday structures:

1. Paid Time Off (PTO) for Holidays: In this scenario, employees receive their regular pay while taking time off on designated holidays. For example, a salaried employee with an annual salary of $65,000, paid weekly, continues to receive their $1,250 weekly pay even if a holiday occurs during that week. An hourly employee who typically works an 8-hour day at $15 per hour would receive $120 as holiday pay for the day off.

2. Premium Pay for Working on Holidays: Employees working on holidays may be compensated with premium pay rates (either Time-and-a-Half or Double-Time). In this case, an employee earning $20 per hour would receive $30 per hour for hours worked on a holiday on a Time-and-a-half pay rate. Similarly, an employee earning $40 per hour would receive $80 per hour for hours worked on a holiday if the pay rate is Double-Time. 

Example Calculation for an Hourly Employee Working on a Holiday:

• Regular Hourly Rate: $20
• Holiday Pay Rate (Time-and-a-Half): $20 × 1.5 = $30
• Hours Worked on Holiday: 8
• Total Holiday Pay: $30 × 8 = $240

3. Compensatory Time Off: Instead of extra pay, some employers offer additional time off for employees who work on holidays. For example, an employee who works on a holiday may take a day off at a later date.

Holiday Pay for Exempt vs. Non-Exempt Employees: What’s the Difference?

When it comes to holiday pay, whether an employee is exempt or non-exempt makes a big difference, especially in countries like the United States. Let’s break down what this means and what you should consider.

Exempt Employees

Exempt employees are typically salaried professionals who aren’t eligible for overtime pay. In the U.S., “exempt” usually refers to employees who meet certain criteria under the Fair Labor Standards Act (FLSA), for example, managers, executives, or professionals.

Holiday Pay for Exempt Employees:

• Not legally required: U.S. law doesn’t mandate paid holidays, but most companies include them as part of the benefits package for exempt staff.
• Regular pay continues: Exempt employees generally receive their full salary during holidays, regardless of whether they work those days.
• No docking pay: If the business is closed for a holiday, exempt employees still receive their full salary for the week, employers can’t deduct pay for a holiday closure.

Non-Exempt Employees

Non-exempt employees are typically paid hourly and are eligible for overtime. They’re covered by wage and hour laws, including minimum wage and overtime regulations.

Holiday Pay for Non-Exempt Employees:

• Also not legally required: U.S. law doesn’t require paid holidays for non-exempt workers, but many employers choose to provide it.
• Paid for hours worked: Non-exempt employees are paid for the hours they actually work. If they don’t work on a holiday, they only receive holiday pay if it’s a company policy.
• Premium pay: If non-exempt employees work on a holiday, some employers offer premium pay (like time-and-a-half or double time), but again, this is up to company policy, not the law.

How To Develop A Compliant Holiday Pay Policy 

Creating a holiday pay policy for a diverse workforce can be a complex task. We’ve put together several key steps to follow to ensure that your policy respects the diverse backgrounds of your employees, promotes inclusivity, and ensures fairness across your workforce.

1. Conduct a needs assessment: Survey employees to understand the cultural, religious, and personal holidays they observe. This helps in recognizing the diverse needs within your workforce.
2. Define clear eligibility criteria: Clearly outline which employees qualify for holiday pay, considering factors such as employment status (full-time, part-time, or contractual) and tenure.
3. Develop an inclusive holiday schedule: Recognize a variety of cultural and religious holidays to ensure inclusivity. Consider offering floating holidays, allowing employees to observe days that are personally significant to them.
4. Establish transparent pay calculations: Clearly define how holiday pay is calculated, including any premium rates for working on holidays, to maintain transparency and fairness.
5. Ensure legal compliance: Stay up to date on federal, state, and local labor laws regarding holiday pay to ensure your policy is compliant.
6. Communicate the policy effectively: Share the holiday pay policy with all employees through accessible channels, such as the employee handbook and provide training sessions to address any questions.
7. Monitor and evaluate the policy: Regularly solicit employee feedback to assess the effectiveness of the holiday pay policy and make necessary adjustments to address evolving needs.
   
   

When you use a global employment platform like Playroll, you can easily set up competitive holiday pay benefits that are localized and tailored to your business needs. Book a chat to find out how we can simplify benefits management for your team.