How to Calculate Holiday Pay for Salaried Employees

Holiday pay for salaried employees differs significantly from calculations for hourly workers. Determining this compensation involves navigating federal labor laws and specific company policies. The method depends on whether the holiday is worked or unworked, and the employee’s classification under federal regulations.

Understanding Holiday Pay for Salaried Employees

Holiday pay for salaried employees is influenced by their classification under the Fair Labor Standards Act (FLSA), which distinguishes between “exempt” and “non-exempt” employees. Exempt employees hold executive, administrative, or professional roles, meet a specific salary threshold, and are paid a predetermined amount regardless of hours worked.

Federal law does not mandate payment for time not worked, such as holidays, for exempt employees. Therefore, any holiday pay for unworked holidays is a benefit provided at the employer’s discretion and outlined in company policy.

Non-exempt salaried employees are entitled to minimum wage and overtime pay, receiving time and a half for hours worked over 40 in a workweek. While the FLSA does not require holiday pay for non-exempt employees, if an employer offers it, such pay must comply with company policy.

Employers must avoid reducing an exempt employee’s salary for an unworked holiday, as this could jeopardize their exempt status. An exempt salaried employee receives their regular salary without deduction for an unworked holiday.

Calculating Holiday Pay

Calculating holiday pay for salaried employees requires distinguishing between holidays not worked and those where work is performed.

For a salaried employee who does not work on a recognized holiday, their regular salary covers the unworked day. For example, if an exempt employee earns an annual salary of $60,000 paid bi-weekly, their gross pay per pay period is $2,307.69 ($60,000 / 26 pay periods). Even if a holiday falls within that pay period, the employee still receives the full $2,307.69, as their salary is a fixed amount.

When a salaried employee works on a holiday, the calculation becomes more nuanced, particularly for non-exempt individuals. For non-exempt salaried employees, any hours worked on a holiday count towards the 40-hour workweek threshold for overtime. If working on the holiday causes their total hours to exceed 40 in that workweek, they must receive time and a half their regular rate for those excess hours.

To determine an hourly rate for a non-exempt salaried employee, their weekly salary is divided by 40 hours. For instance, a non-exempt employee earning $800 weekly would have a regular hourly rate of $20 ($800 / 40 hours). If they work 8 hours on a holiday and their total for the week reaches 48 hours, they receive $20 for the first 40 hours and $30 per hour ($20 x 1.5) for the 8 hours of overtime.

For exempt salaried employees who work on a holiday, there is no federal requirement for additional or premium pay beyond their standard salary. Employers often offer premium pay, such as time and a half or double time, as an incentive.

If an employer offers premium pay, they calculate a daily or hourly equivalent of the employee’s salary. For an employee with an annual salary of $75,000 working 260 days a year (5 days a week x 52 weeks), their daily rate is approximately $288.46 ($75,000 / 260). If company policy offers double pay for a worked holiday, the employee receives an additional $288.46 for working that day, on top of their regular salary.

Special Scenarios for Salaried Holiday Pay

When only a portion of a holiday is observed, such as a half-day, an employer prorates the holiday benefit based on hours taken off. For example, if a company grants four hours for a holiday, the salaried employee’s regular pay covers those hours, and they are expected to work the remaining half of their scheduled day.

Some employers offer “floating holidays,” which are paid days off employees can use at their discretion, often in lieu of or in addition to fixed national holidays. These function similarly to paid time off (PTO) days and are accounted for within the employee’s existing salary structure, allowing flexibility while maintaining consistent compensation.

Company policies include stipulations, such as requiring an employee to work the day before and the day after a holiday to be eligible for holiday pay. This practice aims to prevent extended absences around holiday periods.

Holiday pay is prorated for employees who do not work a full schedule or for those starting or leaving employment mid-pay period. For a part-time salaried employee, their holiday pay is proportional to their reduced work schedule, reflecting their regular earning pattern. If an employee begins or terminates employment during a pay period that includes a holiday, their salary and holiday pay are adjusted to reflect only the days worked within that period.