Are you wondering how holiday pay works? We explain the legalities of working on a holiday and the meaning of time and a half. The season may be festive, but the holiday pay policy can be confusing for small business owners and employees. Here’s a brief refresher on what’s legal for holiday, overtime, and vacation pay.
What are federal holidays in the U.S.?
Federal holidays are holidays observed by the U.S. government. While a majority of government offices are closed on these days, small business owners and other private employers have the option of staying open. Businesses that close on federal holidays are not required to pay their employees for the day off, and those that stay open are not obligated to pay employees extra for regular work hours. Holidays are generally considered regular workdays, and employees receive their standard pay for time worked. The federal holiday falls on weekends and is usually observed on weekdays.
The U.S. government lists these days as federal holidays:
- New Year’s Day
- Birthday of Martin Luther King, Jr.
- Washington’s Birthday (also known as Presidents Day)
- Memorial Day
- Juneteenth National Independence Day
- Independence Day
- Labor Day
- Columbus Day (or Indigenous Peoples’ Day)
- Veterans Day
- Thanksgiving Day
- Christmas Day
What are paid holidays?
Paid holidays are not required in the United States. However, some employers may decide to provide compensation to their employees as a matter of policy, as laid out in an employment contract or employee handbook. In addition to the federal holidays listed above, other paid holidays might also include:
- Good Friday
- The Friday after Thanksgiving
- Christmas Eve
- The day after Christmas (also known as Boxing Day)
- New Year’s Eve
- Other commemorative holidays like César Chávez Day
Ultimately, paid holidays are up to each employer to define. Whether you’re an employer with questions about documenting your holiday policy or an employee with questions about holiday pay, you can ask a lawyer to get answers.
Do employers have to allow time off for religious holidays?
If multiple employees request time off in observance of a religious holiday, an employer must accommodate such requests in a consistent and nondiscriminatory fashion. As stated by the Equal Employment Opportunity Commission (EEOC), an employer is not required to accommodate all requests if the requests will bring hardships to the company.
What is holiday pay?
Under federal law, a holiday doesn’t have a special designation for overtime pay, nor is working on a holiday considered overtime. Federal law views holidays as just another business day. That said, federal and state law requires most employers, but not all, to pay overtime to employees whose hours meet the criteria. This is important if employers hold special extended hours during the holiday season or rely on employees to cover additional shifts.
How much is holiday pay?
Calculating pay can be tricky if employees are entitled to overtime. The critical thing to know is that overtime is calculated weekly under federal law. This means if employees work over 40 hours during the week of typical paid holidays like Thanksgiving, Christmas, or New Year’s Day, they are entitled to “time and a half” for hours worked over 40 hours.
There’s also a daily overtime standard in California and a few other states. Employees who work over eight hours on any given day are entitled to “time and a half” for every hour worked over eight hours. For example, let’s say you are a California business and your employee worked 10 hours on Christmas Day. State law requires you to pay your employee overtime for 2 hours.
As an incentive, some employers may opt to offer to double-time employees working on holidays, meaning their regular rate is multiplied by two. While there is no federal requirement around double-time, there are double-time rules in California, which come into play if an employee works more than 12 hours in any workday or works more than seven consecutive workdays.
For more information about overtime requirements, visit the U.S. Department of Labor website or ask a lawyer.
What are time and a half?
Time and half-pay are 50% more than an employee’s regular pay rate. This means for every hour of overtime an employee works, an employee must be given their regular pay plus half of that.
What is double-time?
Double-time pay is twice the employee’s regular rate. This means that for every overtime hour, an employee is paid twice what the employee typically earns.
How do I calculate time and a half?
To calculate an employee’s overtime pay for the time and a half, multiply their regular rate by 1.5.
Here is a sample overtime pay calculation. In this example, the employee earns $20 per hour and has worked 4 hours of overtime for the week.
Note that the sample calculations above are pre-tax and are examples only. Please ask a lawyer or the payroll administrator for details specific to your situation.
What about vacation pay during a holiday?
Under the Fair Labor Standards Act (FLSA), employers are not obligated to pay employees for time not worked. This includes vacation days in addition to holidays. Therefore, if an employee takes a vacation on Christmas or New Year’s Day, there is no law requiring the employer to pay them for the time off.
An employee entitled to vacation pay will be based on an agreement between the employer and the employee. Sometimes, before hiring, an employee will negotiate for a certain number of paid vacation days. While individual agreements should be recorded in an employment contract, the best place to document a company’s rules is the employee handbook or a separate vacation policy.
If you have additional questions regarding holiday pay, you can ask a lawyer or check out more resources for employers and employees.