The approaching holiday season calls for a lot of time off. But there are instances when you may have to work or ask your subordinates to pitch in. Asking someone to contribute when the employee would rather be with the family and celebrate can be rather difficult. Sometimes it feels wrong and other times there’s too much ambiguity around whether or not it is a holiday, or you can ask them to work. That’s where having some holiday laws in your employee handbook comes into play.

If you or your employees are often asking the following questions or talking about it amongst themselves, it’s time for you to define some holiday laws:

Do people work on Labor Day?
What is the deal with working on Thanksgiving?
Do people work on Memorial Day?

Now the answers to the aforementioned are, yes, but on a case to case basis. And that is where the concept of defining holiday laws as well as the holiday pay rate comes in.

When your employees are working on a designated off-day, they have the right to get their holiday pay. But when the holiday is not recognized in the organization handbook, you’re not required to pay the employees even if they demand so.

In this handy guide, we will tell you all about holiday pay, the extent of it, the laws to be aware of, and more. Read on for a complete and comprehensive understanding of holiday laws and how you can implement them in your organization.

What is a holiday?

A holiday refers to an extended period of leisure and recreation, especially one spent away from work, home, or traveling. From an organization’s point of view, it refers to the number of days an employee takes time off from work.

As per the US federal government laws, there are ten paid holidays each year. However, how these holidays are utilized within the organization actually depends upon their individual policies. The most common holidays which come under the purview of holiday pay, are the following:

  • New Year’s Day
  • Martin Luther King, Jr.’s birth anniversary
  • President’s Day or Washington’s birth anniversary
  • Memorial Day
  • 4th of July or Independence Day
  • Labor Day
  • Columbus Day
  • Veterans Day
  • Thanksgiving
  • Christmas

Note: The holidays recognized may vary based on the country you are residing in or your company is registered in. 

In most of the cases, the organizational policies define whether the employees are entitled to holiday pay for these holidays, or if these are holidays without pay, or payable if the employees are working on these days.

But before we get into what qualifies for holiday pay and what doesn’t, let’s understand what holiday pay is.

What is holiday pay?

Holiday pay is usually a compensation that is offered to the employee in exchange for work being done on designated or federal day off. However, it depends on the organization’s policy. At some organizations, it also refers to the salary an employee receives for days taken off work, which is usually pre-defined in an employee handbook.

How much is holiday pay?

As mentioned above, holiday pay depends on whether or not the employee has received time off. If he or she has, then the organization’s policy decides whether that time off is a paid one or an unpaid one based on whether it was a working holiday or a non-working holiday.

Working holiday pay

If the employees are working on a federal holiday, laws state that the compensation should be at least equivalent to their regular pay. However, they can also be compensated at premium pay or double pay. Again, the organization’s policies define what are the rates that should be doubled.

Whatever may be the decided rate, a working employee’s holiday pay should at least be the regular payment that was offered originally. It can be more than that, but cannot be less than that.

Non-working holiday pay

This one is a little tricky and the organization has the option to pay or to not pay the employee. However, it also depends on whether your employees are exempt employees or non-exempt employees.

Exempt employees are those who do not earn overtime. In their case, even if they have taken time off during the holiday, they are legally entitled to receive holiday pay. While they may not receive any premium or extra compensation, they should be paid their usual salaries without any cuts as holiday pay.

On the other hand are the non-exempt employees. These are the ones who receive overtime pay. In that case, they obviously do not need holiday pay if they take time off. They only get paid for the hours they work. The organization can, of course, choose to pay, but that depends on its policies.

How to create a holiday pay policy?

Every organization should ideally have a holiday pay policy, the goal of which should not only provide eligible employees with well-deserved pay but also to create a proper procedure for holiday pay management.

Following are some of the things that you should keep in mind while creating a holiday pay policy for your organization:

  • Whether your employees are exempt or non-exempt
  • Whether your employees are required to work on some holidays per year
  • The nature of your industry. For instance, if you are a journalism business, you may not work as per a usually fixed calendar. The holiday pay policy may vary, in that case
  • Whether you wish to provide a premium holiday pay rate
  • Whether you wish to provide separate holiday pay for flex employees or part-time employees
  • What are the state or local holiday pay laws
  • What are your work hours

Once you have taken all the aforesaid into consideration, craft a fair and accurate holiday pay policy. Make sure your policy is flexible and has room enough for changes, if any, that need to be made in the future for accommodating different work scenarios and changing labour laws.

Holiday pay policy template

Here is a template for the holiday pay policy for your reference. You can customize it as per your organization’s rules and the agreement with the employees.

Policy: Purpose

Here are the holidays which are acknowledged as designated holidays by our organization. Please note the guidelines thereof.

Scope of policy

This policy is applicable to all the employees of the organization. Please note that the usual differences between exempt and nonexempt employees are applicable.

Policy elements

Following are the days that will be considered holidays as per this policy:

  • New Year’s Day
  • Martin Luther King, Jr.’s birth anniversary
  • President’s Day or Washington’s birth anniversary
  • Memorial Day
  • Inauguration Day (Every four years on Jan 20th or 21st)
  • 4th of July, i.e. the Independence Day
  • Labor Day
  • Columbus Day
  • Veterans Day
  • Thanksgiving
  • Christmas

In case the holiday falls on a non-working day, it will be observed on the next working day. Compensatory off can be taken in case an employee misses a holiday due to a compressed workweek.

(Note: You can edit this section to accommodate the holidays relevant to your location)

Working on a holiday

In case an employee has to work on a holiday, managers have to be intimated at least a week in advance. Non-exempt employees are to be paid at double their hourly rate. Established overtime holiday pay rate to be paid in the case of hours spilling over. Exempt employees can be offered compensatory leave to be utilized in the coming working year.

Holiday pay when on leave

When employees are on leave, whether sick or on an actual holiday, they are entitled to the standard amount, provided they are on pay status. If they are not on pay status, they will not receive holiday pay.

Religious holidays

We have a strong anti-discriminatory policy in place which celebrates the diversity of people from all cultures. Unpaid holidays, thus, are allowed for such religious observances. However, these are subject to prior discussions with the managers.

Remember to edit this template according to the policies you follow at your organization. Also, make sure that your holiday pay policy is clearly understood by your employees and nothing is ambiguous at any point.

Holiday pay laws to be aware of

As far as holiday pay is concerned, different countries have different policies. It is important to understand the differences and not judge all under the same lens.

Here are a few holiday pay laws, in different nations:

1. Italy

In Italy, employees are usually entitled to a four-week holiday period, which can be extended on the basis of a mutual agreement with the organization. According to the laws, an employee also has the right to refuse to return early from leaves, unless there is an urgent and specific need or if this clause has been stated in an agreement.

Further, if these employees come back early from their entitled leaves, they are supposed to get indemnities, which should be mentioned in their agreement with the organization. The employee is also entitled to receive the costs of coming back early from the leave. Italy’s holiday laws do not allow asking an employee to work during the holiday period. As per the decision of a Supreme Court, the exception to this can only be exercised if it is included in the agreement.

2. France

In France, employees are entitled to 30 days of paid holidays during a working year. However, additional days can be acquired after an agreement with the employer. One thing to note is, that paid leaves are a mandate in France and cannot be waived on anyone’s end.

Also, the leave dates should be communicated to the employees a month in advance, and once set, it should be respected by both parties.

3. US

Companies in the US are not bound by any federal law to give holiday pay to the employees. However, many organizations provide the same as a part of the benefits that accrue to the employee. Most of the holiday pay policies are created as per an agreement between employers and employees, without any legal or federal obligation. It is more of ethical practice, rather than a rule-based one.

Despite the pay laws and information around holiday pay policies, a lot of employers still get the holiday pay wrong.

Why are the employers getting holiday pay wrong?

While holiday pay is a fairly easy concept, there are certain facets that the employers still get wrong. Here are a few reasons why organizations still fumble when it comes to holiday pay.

1. There is no set formula

While there are laws in place, most of those are vague in nature, with no formula of calculating the pay. It depends from organization to organization. Often, confusions occur because of this and thus employers may end up creating irrelevant policies.

2. There is no enforcement

Again, after the dilemma of calculating the correct holiday pay, lies the problem of its uniform enforcement. There is no specific way to ensure if all the employees are getting holiday pay or not. There are no penalties, monetary or otherwise, in case the employees do not receive their holiday pay.

Apart from the aforementioned reasons, there are certain misconceptions amidst the employees too as far as holiday pay is concerned. This can further add confusion to holiday pay calculations.

1. Working on holidays means premium pay

This is clearly a misconception. Holiday pay depends on the organizational policies, and further on whether the employee is exempt or non-exempt. In no way does it mean an ensured pay if an employee works on a federal holiday.

2. Day off is counting towards overtime calculation

If an employee is receiving overtime or even paid holidays, employers are not entitled to count the paid hours as working hours while figuring out whether or not the employee is eligible for holiday compensation.

3. Not counting religious holidays is discrimination

This is a tricky path to tread upon, so proceed with caution. The best way would be to ask the employees well in advance to accommodate their respective religious holidays. This can be done via one on one meetings or even at the start of the employment.

A perfect holiday pay policy does not exist. It varies from one company to another, taking into account their own culture, the labor laws and compensation laws in their country. The best way to address holiday pay is to document the policy from the start and make sure it is flexible enough to be altered any time a loophole is found.

Do you need a holiday pay policy?

Holidays are as essential a part of work culture as working days. Breaks and holidays ensure a boost in productivity. A fixed holiday pay rate and policy will instill a sense of security in the employees and will also improve the overall work culture of the organization.

So yes, having a holiday pay policy is a good step.

Does your organization have a holiday pay policy? We’d love to know more about how you created a policy. Share your tips with us on Twitter at @HarmonizeHQ.