Holiday Pay

Holiday Pay Meaning

Holiday Pay is a type of bonus for employees as they are getting paid with standard wages even for the day off such as Christmas or Thanksgiving, by the employer. It isn’t necessary to be paid, however, some employers may offer it as a reward for the contribution of their workers towards the company.

Explanation

Holiday pay is a kind of reward for the employees as it enables them to receive wages even for the day off. The day off can be New year’s eve, Washington’s birthday, Thanksgiving Day, Christmas Day, Martin Luther King Jr.’s birthday, Labor Day, etc. It is not required for the employer to pay for the days off but still, some employers provide holiday pay to its employees as a reward for their toil and contribution to the company. Some employers also offer the employees the opportunity to earn more by working on holidays.

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For eg:
Source: Holiday Pay (wallstreetmojo.com)

How to Calculate Holiday Pay?

For employees getting paid for the day off

The first step is to calculate the hourly pay for the employee. The last month’s salary and the number of hours worked in the last month can be taken as the base to calculate hourly pay. The hourly pay for the last month can be calculated by dividing the last month’s salary by the number of hours the employee worked.

Hourly Pay = Last Month’s Salary as an Employee/Number of Hours Worked.

Once, the hourly pay of the worker is calculated, the next step is to calculate the number of hours not worked on a day-off and then arriving at the pay based on such hours.

Holiday Pay = Hourly Pay × Number of Hours not Worked on day-off

Many companies opt to pay their employees on day-offs normally without having to work them on the day-off. The above calculation is for such companies or employers.

For employees getting rewarded for working on the day off

The worker can also get extra holiday pay by working on holidays for which he or she can earn double or pay time-and-a-half. Following are the steps to calculate it:

The first step of calculating holiday payCalculating Holiday PayAn hourly paycheck calculator determines the wage received in hand after deducting an adequate amount of taxes such as social security taxes and fed taxes.read more is to find out the normal pay a worker earns per hour worked. The normal per hour pay can find out by dividing the last month’s salary by the number of hours worked last month.

Normal Per Hour Pay = Last Month’s Salary/ Hours Worked Last Month.

The next step is to take a note of the hours worked on the day-off so that it can be calculated.

After you know the eligible hours, i.e. the hours worked on the day-off and the hourly pay, holiday pay can be calculated. The pay for total eligible hours can be multiplied by 1.5 (time and a half) or 2 (double time) according to the employer or as agreed upon to get it as a reward.

Holiday Pay = Normal Per Hour Pay × Hours Worked on Day-Off × 1.5 or 2

Example

In July 2019, Sam got $8,000 as his monthly salary in an automobile company. He worked for almost 6 hours a day there. In August 2019, there is a government holiday in the third week of the month, but the employer provides holiday pay to his employees on that particular day.

Holiday Pay Example

What shall be the value of holiday pay?

Solution

Let us calculate normal per hour pay first. Before that, let us see how many work hours are there in the last month.

Holiday Pay Example 1
  • Number of Work Hours in July 2019 = 31 days × 6 hours/day
  • = 186 hours

Now,

Normal per hour pay = Last month’s salary/ Hours worked last month Holiday pay.

Holiday Pay Example 1.1
  • Normal Per Hour Pay = 8,000/ 186
  • = $43.01 Per Hour

Number of hours not worked on day-off = 6 hours

Therefore,

Holiday Pay Example 1.2

Holiday Pay = Hourly Pay × Number of Hours not Worked on day-off

  • = 43.01× 6 = 258.06

Benefits

  • The opportunity of Overtime: Employee can do overtime on the holidays for which they can earn one-and-a-half or even double the normal pay rate.
  • Payment for the Day-Offs: Employees will get paid even on the day off
  • Vacation Flexibility: Employees can spend quality time with their family and go on vacations.
  • The reward for Hard Work: Employees will get a reward for their hard work and consideration for the company in the form of holiday pay. It will encourage them to work with great enthusiasm.

This article has been a guide to Holiday Pay and its meaning. Here we discuss how to calculate it along with examples and benefits. You may learn more about financing from the following articles –