Holiday pay is our favorite rhyming payroll term. It’s a paid holiday—a voluntary type of PTO where employees are paid the same wage as they’re normally paid throughout the year. There is no law that says employers have to pay for holidays not worked, but many do so regardless. It usually only includes government holidays, but in some cases, employers also group in sick days and longer stretches of leave like parental leave.
An example of holiday pay
- Let’s say an employee usually earns $200 a day. Even though your company closes on the Fourth of July, they’d still earn $200 in holiday pay despite the fact that they didn’t work.
Some employers may also use holiday pay as a way to pay their employees overtime for holidays worked. Another important detail to note is that you don’t have to force your employees to sit through a waiting period before becoming eligible, which is normally the case with vacation pay. Your team may be eligible to receive holiday pay on the first day they start work, depending on your company’s policy.Updated October 13, 2017
This article provides general information and shouldn’t be construed as tax advice. Since tax rules may change over time and can vary by location and industry, please consult a CPA or tax advisor for advice specific to your business.