What is holiday pay?
Holiday pay is a voluntary benefit or compensation that an employer offers employees during holidays, such as Christmas, Labor Day, or Thanksgiving. Holiday pay can take many forms. For instance, some employers offer fully or partially paid time off during holidays.
While some businesses have the luxury of closing during holidays, many don't. Companies that have to remain open during the holidays offer their employees the opportunity to earn more by working on a recognized holiday.
Typically, these businesses offer time-and-a-half hourly rates, double-time pay, or another reward as an incentive to motivate employees during times when most people would generally choose to take time off.
The benefits of offering holiday pay
Offering holiday pay — in any form — to your employees has several benefits. The benefits of offering holiday pay include:
- Increasing your company's ability to attract top talent
- Boosting motivation within your workforce
- Increasing productivity
- Providing an incentive for employees to work during the holidays.
How does holiday pay work?
Holiday pay can look different from one jurisdiction to another. While some countries have laws requiring that employees be paid on holidays, many don't.
1. Holiday pay in the US
In the United States, employees are not required to be paid during holidays. However, it's common for US companies to give holiday pay. Holiday pay is often associated with time-and-a-half pay — companies pay 150 percent of regular hourly wages to employees who work on holidays.
HR tip: To calculate time-and-a-half pay, take the employee's regular hourly pay rate and add half of that.
2. Holiday pay in the UK
In the UK, bank or public holidays do not have to be given as paid leave. Additionally, workers have no legal right to higher rates if they work on any bank or public holiday. But, like in the US, many UK employers still offer additional compensation for work performed during bank or public holidays.
3. Holiday pay in Europe
Holiday pay laws vary significantly across Europe, even within the EU. Some countries have very generous government-mandated holiday entitlements. For instance, if an employee works on a public holiday in Luxembourg, they are entitled to three times their standard salary for that day.
4. Holiday pay in Australia
In Australia, employees don't have to work on public holidays. However, an employer can ask an employee to work on a public holiday. Employees are legally entitled to at least their base pay rate for all hours worked on public holidays, but most employers offer special public holiday rates.
Developing a holiday pay policy: Considerations for HR
As an HR professional, there are a few considerations you need to make when developing a holiday pay policy for your company. These include:
- Eligibility. State which employees are eligible and outline the eligibility criteria for holiday pay in the policy.
- Hourly rates. If you have hourly employees eligible for time-and-a-half pay, outline how that pay is calculated.
- Exempt employees. If your company only has salaried, exempt employees, explain how holiday pay will work in detail.
- Floating holidays. Clearly define how and when floating holidays accrue and whether unused ones roll over to the following year.