Asking employees to work holidays and give up precious time with their families is a big task. They need to be compensated fairly for this time. American businesses solve this issue by giving workers holiday pay that is over and above their regular pay. 

What Is Holiday Premium Pay?

Holiday premium pay refers to the extra pay organizations give employees who agree to work on holidays. American employees who work on a holiday are eligible for at least 2 hours of holiday pay. 

  • Those who work on a flexible schedule are eligible for up to 8 hours of holiday pay. If they work more than 8 hours on holiday, the extra time is compensated with compensatory time off. 
  • Those who work according to a compressed schedule get up to 9 or 10 hours of holiday pay according to their work schedule. 

What Is Overtime?

Overtime is the extra working hours by employees after their regular shift hours. It is only considered when employees are asked to work extra by the management. 

Holiday premium pay is usually equal to the basic pay rate provided on an hourly basis. Overtime pay is usually 1.5 times the basic pay as per the hourly rate.  

How Do Corporate Companies Pay Overtime and Holiday Pay to Their Employees? 

Premium pay rates can be different for different organizations. Managers can implement overtime tracking software to calculate overtime hours without any issues. Similarly, the holiday pay provisions can be included in the HRM software, which handles the payroll process. 

For instance, an employee eligible for a holiday pay of 8 hours at $6 per hour works for 9 hours on Eid, which is a holiday. Suppose they work for 45 hours in the entire week; the employee will be eligible for $270 as compensation and an additional $48 as holiday premium pay. A further $12.5 will be provided to the employee as overtime for working 5 hours extra as per additional overtime.

Employees who work extra hours on holiday will be eligible for the same overtime as they would get on any regular day. Usually, companies recommend that employees not work beyond the usual hours on holidays.

The key differences between holiday premium pay and overtime are highlighted below:

Holiday Premium Pay Overtime 
Holiday Premium Pay is the payment employees receive for rendering their duties on a holiday.  By definition, overtime is the amount payable to an employee who has worked for more than 40 hours per week. The overtime amount is decided based on the number of extra hours employees work in a particular week. 
A holiday premium pay can also be paid in the form of PTO (Paid Time Off) that an employee is given on holiday. It is also referred to as Time Off in Lieu. Employees who have worked on a holiday can receive paid leave on any weekday they choose.  Overtime hours can only be paid out, and are not convertible to paid leaves or paid time off. 
If HR professionals need to pay a premium rate, it can be calculated according to their organization’s double-time pay or overtime pay rules. Holiday premium pay is not to be accounted for in the overtime pay calculation. Also, the organization does not have to provide holiday pay to employees who choose compensatory time off instead of a holiday premium.  As per FLSA (Fair Labor Standards Act), employees get 1.5 times the standard hourly wages for every hour that is considered to be overtime hours by the organization. 
For example, an employee works for 8 hours on holiday apart from the regular 40 hours. In this case, if they are paid 2 times the regular wages, it will not be accounted for in the overtime wages as they already receive 2 times the regular pay as a holiday premium pay.  For example, a non-exempt employee normally completes 40 hours of work in a week. But they work 48 hours one week by putting in 2 extra hours from Monday to Thursday. Their monthly overtime pay will include the 8 extra hours they worked that week. 

How to Calculate Premium Pay for Holiday Work and Overtime?

An employee may work on holidays and extra (overtime) in a particular month. In such cases, the final payment calculation could be slightly complex. HR professionals can follow federal laws and create a payment policy in such cases. The payment policy should be such that it deals with the extra work hours fairly and brings everyone on one page. It should also be in accordance with the leave policy of an organization.

HR professionals must create a comprehensive premium pay policy for holidays. The policy must address these things:

  • The days for which the employees can apply for a paid leave after working on holiday 
  • Whether the company offers paid or unpaid holidays
  • Are employees eligible for holiday premium pay after working on a holiday?
  • Which rules are applicable if a holiday falls on the weekend?
  • Which rules are applicable if an employee has already applied for leave on a holiday? 

If the holiday falls on a non-working day like the weekend, the employees are eligible for an ‘in-lieu of’ holiday. In-lieu holiday means the paid leave they can take on any working day after working on a holiday. 

FAQs on Holiday Premium Pay

Do employees get paid extra for working on a holiday?

Extra pay depends upon whether the organization offers a premium to pay for working during a holiday. If an employee thinks that they are eligible for it but are not being provided with the same, they should go through their employment contracts and contact their HR department. 

What is holiday premium pay for federal employees? 

As per the US Department of Commerce, federal employees who work on holidays are eligible for extra pay or double time. It is considered a holiday premium pay and does not include the work hours that an employee has completed as overtime. 

Employees are eligible to receive a payment equal to the payment of the regular days if they do not work on a public holiday. It is because all public holidays are paid holidays. 

What is the difference between holiday premium pay and overtime?

Holiday premium pay is for working on holidays. The working hours covered in holidays are considered to be non-overtime hours. 

On the other hand, over time refers to the extra hours an employee works after completing the working hours of a day. The total overtime hours are calculated on a weekly basis. For example, if an employee works 44 hours a week, the overtime hours will be 4 hours (44 – 40 = 4). 

What happens if employees don’t work on a scheduled holiday?

If employees are expected to work on a holiday but are unable to due to illness or any other critical reason, they can convey the same to their HR. If the leave is approved, they will be given a paid or unpaid leave depending on company policy. If their leave is rejected, it will be considered AWOL (Absence Without Leave), and they will not be paid for that particular day. 

What is a night’s pay?

A night’s pay is the special pay provided to the employees who work at night while completing their holiday work hours or overtime. Night pay is provided in addition to overtime or holiday premium pay. 

Many factors must be considered when deciding which employees qualify and which do not for holiday premium pay. Firstly, they must investigate whether the employment contract provided by their organization mentions holiday pay. If it is mentioned, they can refer to FLSA (Fair Labor Standards Act) to figure out the holiday premium pay rate.