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How to Calculate Holiday Pay?

how to calculate holiday pay

If you are not on a system that shows your hours worked, it can get tricky to ensure that you are paid what you are owed. Some large companies have systems that handle leave requests and hours worked electronically. This gives you, your HR department, your manager, and the payroll person access to all of the necessary info to create full transparency.

However, not all companies can afford these systems, and as we know, systems can malfunction. Therefore, it is always best to manually work it out yourself and keep track in a hard copy file as a backup.

So, let’s take a look at How to Calculate Holiday Pay and overtime…

how to calculate holiday pay

Basics: Labor Laws Regarding Overtime

Every state is different, and depending on whether you are a minor or an adult, you will have to ensure that you are clear on how much overtime you can legally work. In addition to this, many states have a margin where only a certain number of hours can be enforceable.

This means that although you are allowed to work 60 hours per week, your boss can only require up to 45 hours. Any hours beyond that are with your permission, and your boss may not insist on it (these numbers are an example, every state has its own specific hours).

If you have exceeded your weekly “enforceable” hours, or your work schedule for the next week or month shows that you will, it will be better for you to speak to your manager about how to navigate that by either moving a shift or giving you some time off.

Read more: Bed Bath & Beyond Holiday Hours

Not everyone gets overtime…

There are also certain positions that will disqualify you from receiving payment for overtime. These are usually in management or if you earn a salary above a certain threshold regardless of working hours. An example of this is a service provider or employee that is on standby for an additional amount on top of their monthly salary.

Where a holiday is concerned, you could be refused overtime for a normal shift. However, you may be compensated for the hours worked beyond your normal shift.

What Am I Entitled To?

There are some holidays that you will be entitled to and others that are given at the discretion of the employer. For example, some industries such as restaurants, retail, transportation, and vacation destinations may require you to work on holidays just like any other business day.

There are a few ways this can be approached; as your contract may state any of the following

  • Holidays are included in paid time off (mandatory that you take those days)
  • It will be given as bonus time off
  • Holidays are unpaid, so you have to either use a leave day, not be paid, or work to still be paid and not lose an annual leave day

The differences between federal and non-federal holidays

Federal holidays refer to the classic holidays where the anniversary of a significant historical event in time is celebrated, sometimes in the US only, other times globally. These are the big ones like Christmas Day, New Year’s Day, Memorial Day, Juneteenth, Independence Day, and Thanksgiving. These are more likely to be given as paid time off.

Additional holidays are the ones like the day before Christmas and New Year’s Eve, etc. These are less likely given as paid time off, although many companies will.

There are also bonus days that can be either paid or unpaid, or companies will ask that you use your annual leave in that time, as they are either using skeleton staff only or completely closing the business. For example, the week period between Christmas and New Year is commonly a time when many companies shut down all operations.

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When calculating holiday pay

The majority of companies will likely give a full-paid day off, as this keeps their employees happy. However, if they were not planning on closing for the day, they will still need employees to come in. Some companies may offer another day off along the way, but most will simply pay 1.5 or 2x the hourly rate, to sweeten the pot.

This is where you will have to keep track of your hours. As this is not an industry standard, make sure to enquire about what is offered before you decide to take the day off, or put in the hours hoping to earn something extra beyond a normal day’s pay.

You also have to ensure that you subtract your holiday bonus (if applicable) from your month’s salary, as it is not supposed to be regarded as holiday pay or paid time off.

Looking for Some Great Resources to Ensure You Are Paid What You Should Be?

If so, check out J.K. Lasser’s Guide to Self-Employment: Taxes, Strategies, & Money-Saving Tips for Schedule C Filers, or Working for Yourself: Law & Taxes for Independent Contractors, Freelancers & Gig Workers of All Types to keep everything exactly as it should be!

Or, how about 475 Tax Deductions for Businesses & Self-Employed Individuals: An A-to-Z Guide to Hundreds of Tax Write-Offs, or The Tax & Legal Playbook: Game-Changing Solutions To Your Small Business Questions, as well as the Taxpayer’s Comprehensive Guide.

I also recommend Working With Independent Contractors and the Tax Accounting: A Guide for Small Business Owners Wanting to Understand Tax Deductions, & Taxes Related to Payroll, LLCs, Self-Employment, available online in 2023.

Final Thoughts

Always scrutinize your company policy, and calculate your holiday pay accordingly. If you have a paper trail or a record of your hours worked, you can compare it to what you are paid.

Human error is unavoidable, especially during the time they call the “silly season” and when those in charge of crunching numbers are suffering seasonal depression and mental fatigue. If you can prove an error by your own meticulous records, the matter can often be resolved quickly and painlessly.

Good luck, concentrate and let’s get Calculating!

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