Holiday Pay: How It Works on Your Pay Stub

Explain how to determine holiday pay, record regular pay and overtime pay, and record specialty pay correctly on an advance pay stub.

The federal holidays as well as company holidays can sometimes be confusing to both employers and employees when it comes to compensation. Payroll compliance is essential whether you're processing payroll for a growing business, checking your payroll statement, or just looking at your own paycheck stub, it's important to understand how holiday pay works with regular pay, overtime pay, and accumulated vacation pay.

What is holiday pay and how is it paid?

Holiday pay is additional compensation for hours worked during recognized company, national or state holidays or hours for which paid time off is granted.

The Fair Labor Standards Act (FLSA) does not, in fact, require that a private employer pay non-exempt employees for time not worked on a holiday or require payment of premium rates (time and a half, for example) for time worked on a holiday. Most competitive companies, however, provide a standard employee benefit of some form of compensation for their holidays or through a collective bargaining agreement.

To understand the differences between the various types of pay, it is important to review the following concepts: Regular Pay, Overtime Pay, Vacation Pay, and Holiday Pay.

Types of Payroll Classifications

There are several types of payroll and each should be properly classified on the paycheck stub to maintain legible and compliant payroll records:

1. Regular Pay

Regular pay is the sum of regular hourly wages or the fixed salary earned in a regular pay period when both the number of hours worked and the pay period are normal.

2. Overtime Pay

Overtime pay is for non-exempt employees who work more than 40 hours in a single work week. Overtime is required to be paid at a rate of 1.5 times the employee's hourly rate, as per federal law. Note: Unworked holiday pay hours will not usually count towards the 40 hours needed to trigger overtime.

3. Vacation Pay

Vacation pay is a benefit paid for personal time off work when the employee has earned Paid Time Off (PTO). Typically paid out at the standard hourly rate and tracked independently of holiday balances.

4. Premium Holiday Pay

If an employee is physically performing work on a major holiday, such as Thanksgiving, Christmas or New Year's Day, then employers may provide additional incentive pay for those hours on the major holiday, which is usually 1.5 times or 2 times the regular rate of pay.

Earnings Comparison Summary

• Regular Pay: 1.0x Base Rate | Counts toward FLSA 40-Hr Overtime: Yes | Paycheck Stub Display: Regular Earnings
• Overtime Pay: 1.5x Base Rate | Counts toward FLSA 40-Hr Overtime: N/A (Exceeds 40 Hours) | Paycheck Stub Display: Overtime (OT)
• Vacation Pay: 1.0x Base Rate | Counts toward FLSA 40-Hr Overtime: No | Paycheck Stub Display: PTO / Vacation
• Unworked Holiday Pay: 1.0x Base Rate | Counts toward FLSA 40-Hr Overtime: No | Paycheck Stub Display: Holiday Earnings
• Worked Holiday Pay: 1.5x - 2.0x Premium | Counts toward FLSA 40-Hr Overtime: Varies by Company Policy | Paycheck Stub Display: Holiday Worked Premium

How to pay out Holiday Pay on an Advance Pay Stub

However, sometimes, its payroll statements will combine all earnings to a single line item, which can cause problems in disputes and payroll auditing. If you want to provide an advance pay stub showing individual rates of pay and deductions on separate line items, you can generate an advance pay stub.

If you're creating a professional pay stub with an advance pay stub generator, be sure to include the following:

• Clear Regular Pay, Holiday Pay and Overtime Pay with Itemized Earnings Lines: Allows employees to easily check their hours by the hour.
• Tax Withholdings: Withhold federal income tax, state withholding and FICA (Social Security and Medicare) taxes from total aggregate gross pay.
• Year-To-Date (YTD) Totals: Maintain accurate totals of regular wages and holiday benefits to ensure that financial records are accurate for annual tax reporting (Form W-2).

Frequently Asked Questions

Does the federal law in the United States require holiday pay?

No. Under the Fair Labor Standards Act (FLSA) private employers are not required to pay for overtime hours not worked on holidays unless specified in an employment contract or company agreement.

Does the amount of overtime change when holiday pay hours are included?

Holiday hours worked by an employee when he or she is not working do not count toward the 40-hour physical work requirement necessary to qualify for overtime compensation for that work week.

Can I create a pay stub that has defined holiday pay line items?

Yes. An advanced generator allows adding custom earnings items for holiday pay, vacation pay, overtime and bonuses with automatic tax withholding.

Generate Advanced Pay Stub with Custom Holiday Pay

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