How holiday pay is calculated: What you need to know

While it would be nice if every company closed on holidays, such as Christmas and Memorial Day, the reality is that many businesses need to stay open. Depending on your employer, you may receive special compensation on holidays, known as holiday pay. This guide explains how holiday pay works and how to calculate it so you know what to expect.

What is holiday pay?

Holiday pay is the compensation you receive for working or not working on a holiday. Employers often offer a special rate to employees who work on holidays, such as New Year's Day or the Fourth of July. However, there's no law that requires private employers to offer holiday pay to employees, and your employer doesn't have to give you the day off either.

If you work for the federal government, holiday pay works a little differently. Federal employers must give paid time off to employees on federal holidays or allow them to take another day off if they work on the holiday.

Types of holiday pay

Though private companies don't have to offer holiday pay, many do offer some extra compensation as a perk for employees. Offering holiday pay can improve morale and incentivize employees to work on holidays. Typically, holiday pay either includes:

Paid time off: Under this holiday pay structure, you'll get the holiday off but receive your normal daily wage.
Additional pay: If you have to work on a holiday, an employer might offer you additional pay. For example, they may pay you time and a half, which means you'll receive your normal pay plus an additional 50%.

Who gets holiday pay?

Anyone who works on a holiday can receive holiday pay. How much you get, however, depends on your employer.

If your company offers PTO or additional compensation for holidays, it may extend this benefit to all employees or only provide it to certain workers. For example, some companies only offer holiday pay to full-time employees. Others provide this benefit to all employees after working at the company for a set period, such as six months.

If you're unsure about your company's holiday pay policy, ask your direct supervisor or an HR manager. They should be able to tell you whether the company offers holiday pay and if you're eligible to receive it.

"Anyone who works on a holiday can receive holiday pay. How much you get, however, depends on your employer."

What days can you receive holiday pay?

There are 11 federally recognized holidays. Federal employers must give their employees these days off from work. Many private companies also offer holiday pay for some or all of these holidays. Here are the federal holidays and when they're observed:

New Year's Day: Jan. 1
Martin Luther King Jr. Day: The third Monday in January
Washington's Birthday: The third Monday in February
Memorial Day: The last Monday in May
Juneteenth: June 19
Independence Day: July 4
Labor Day: The first Monday in September
Columbus Day (also known as Indigenous Peoples' Day in some states): The second Monday in October
Veterans Day: Nov. 11
Thanksgiving: The fourth Thursday in November
Christmas: Dec. 25

While those are federal holidays, some companies may observe additional days. For example, a company may offer employees the entire week off between Christmas and New Year's Day as holiday pay.

How holiday pay is calculated

Holiday pay calculations vary widely among different businesses. This calculation depends on the type of pay structure your employer offers. It also differs between salaried and hourly employees.

Salaried employees

If you're a salaried employee, you make a set amount each pay period no matter how many hours you work. Most employers pay salaried workers for holidays even if they don't work on those days. Often, an employer gives you the day off and pays you the same amount as a typical day. If you work on the holiday, you might receive a bonus or additional pay at your employer's discretion.

You can calculate your holiday salary by dividing your annual wage by the number of times you get paid per year. For example, if you get paid every other week, you'd divide your yearly salary by 26. This will tell you the amount you make per pay period. You'll still make the same amount if there's a holiday during a pay period.

Holiday pay example

Here's a holiday pay example for a salaried employee who makes $65,000 annually and gets paid every week:

65,000 / 52 = $1,250

In this example, the salaried employee makes $1,250 per pay period. With holiday pay, they'll make this same amount, even if a holiday occurs during a pay period and they don't work that day.

Hourly employees

The process of calculating holiday pay is different for hourly employees. If you're an hourly employee, you earn a specific amount for each hour you work. For example, you might make $15 per hour.

Holiday pay for hourly employees can vary based on your employer. They may allow you to have a holiday off with regular pay, or they may require you to work and pay you the normal rate. In this case, you can multiply your hourly rate by the number of hours you normally work in a day or the number of hours you work on the holiday.

Many employers offer additional compensation for hourly employees who work on holidays. Companies commonly offer time and a half or double time to hourly workers on a holiday. In this scenario, you multiply your holiday hours by your hourly holiday pay rate.

Holiday pay example

Here's an example of how to calculate holiday pay for hourly employees. If you're an hourly employee who makes $18 an hour, but your company offers time and a half on holidays, first calculate your hourly rate for the holiday. Multiply your normal rate by the holiday rate:

18 x 1.5 = $27

In this example, you'll make $27 per hour on a holiday. Now, say you work eight hours on Thanksgiving. Multiply the number of hours worked by your holiday pay rate:

8 x 27 = $216

You'll make $216 on the holiday.

Are there federal holiday pay requirements?

There's no federal law requiring employers to pay their employees a standard holiday pay rate. However, federal employers must provide PTO to workers on the 11 federally observed holidays.

If you work for a private company, you may receive holiday pay, but it's not guaranteed. Usually, companies that provide holiday pay will allow you to have the day off and receive your normal pay, or they pay you extra compensation to work on a holiday. Time and a half is a common holiday pay structure, but some companies may offer double time. Check with your company's HR department or consult the employee handbook for the holiday pay policy.

Unless you work for a public employer, holiday pay can vary widely. You might receive additional compensation for working on a holiday, or your employer may give you the holiday off while still paying you for a typical day's work. Knowing your company's holiday pay policy is important so you know what you can expect to earn on those days. If you want to work for a company that offers holiday pay, upload your resume on CareerBuilder to find jobs with this benefit.