HOW TO CALCULATE HOLIDAY PAY
FOR HOURLY AND SALARIED EMPLOYEES
The holidays are fast approaching and you want to stay on top of payments and remittances. But holidays aren't just limited to the winter season. Inevitably, if you're managing a sizable amount of staff, you're going to have to worry about compensating them.
But there are different kinds of employees depending on how often you need them, how extensive their work is and what their pay grade is.
What are the Most Common Holidays in the United States?
- New Year’s Day
- Martin Luther King, Jr. Day
- Presidents’ Day
- Memorial Day
- Independence Day
- Labor Day
What are examples of Paid Holidays in the United States?
- Good Friday
- The Friday after Thanksgiving
- Christmas Eve
- The day after Christmas (also known as Boxing Day)
- New Year’s Eve
8 TIPS FOR CALCULATING HOLIDAY PAY FOR HOURLY EMPLOYEES
Determine the number of holiday hours worked
Employees who work eight-hour days receive eight hours of holiday pay in most cases. But if the employee is on a salaried basis, he or she should be paid for all accrued hours. Also, make sure to include overtime in these calculations.
Calculate the holiday wages due
For hourly employees, calculate how many hours of holiday pay are due based on the regular rate of pay and the number of holiday hours worked by the employee during that week (based on his or her work schedule throughout the year).
For salaried employees, calculate based on straight time for each day worked. For example, if an employee earns $10 per hour and worked a half-day on a statutory holiday, he or she is entitled to $5 per hour for half a day's work (or $2.50) plus one additional hour at his or her regular rate ($10), which equals $12.50 total.
Set up a payroll schedule to remit payments and avoid penalties
Set up your payroll schedule so you can remit payments in time to avoid penalties. If you have employees who work on a non-calendar system like 12/60, you will have to manually recalculate their regular pay and make sure that they have been compensated accordingly before December 31st. Remember that you will need to file your taxes at the end of the year. We'll discuss that further down below.
Proofread the deductions and remittances
Make sure that all deductions and remittances are correct before submitting them to your payroll department. Here are a few things you can look out for:
- Make sure that the pay period includes the holiday. If not, adjust it so you can include the statutory holiday in your calculations
- Make sure that any overtime hours are included in the total calculation of holiday wages due
- Double-check that you have included any other deductions like vacation pay, benefits and union dues
Make sure to prepare W-2 forms for January
W-2 forms are typically issued by an employer to employees and the IRS. The IRS uses the information on W-2 forms to ensure that employees have been properly taxed from each paycheck and to build tax liability reports for businesses.
W-2s are usually mailed in January after a company has filed its year-end tax return with the IRS. However, since not every company issues W-2s, paperless companies may provide them electronically or through the mail at an earlier date.
You must keep track of all payroll data
As the employer, you must keep track of all the data regarding staff who are not compensated for statutory holidays as well as any other applicable deductions.
For example, if your staff work on a non-calendar system such as 12/60, you need to compute their holiday pay at the end of each year and provide them with a T4 Summary containing information about any other withholdings that were made during that year.
If your business is audited, you will have to provide this information to the CRA.
Time and a half pay
An employer must pay an eligible employee, other than a manager, who works on a statutory holiday at least time and a half the employee's regular rate. If an eligible employee is required to work on a statutory holiday that falls on a day that would normally be a working day for him or her, the employer must pay the employee double time for all hours worked.
Many businesses find it hard to compensate their staff who are not paid for statutory holidays. Make sure you're prepared by planning ahead and setting up payrolls in advance so you can avoid penalties and give your staff proper compensation during the holidays. For more information regarding holidays and the various rules that apply to them, check out the Wages and the Fair Labor Standards Act (FLSA) and its regulations.
8. Calculate Holiday pay for Hourly vs. Salaried Employees
Holiday pay can apply to both hourly and salaried employees, the difference for holiday between hourly vs. salaried employees comes in the form of adding onto an employee's regular pay.
Hourly employees must be paid premium wages for each hour worked on a holiday, plus an additional amount as holiday pay equal to 1/2 of the regular rate of pay for each hour of work performed up to 40 hours in a given week. In other words, if an employee works 30 hours one week and four hours on a holiday, they should make at least 10 times their normal hourly wages.
If you add this to their normal weekly paycheck, it will equal more than what they would earn on any other day.
In addition to paying your hourly employees overtime for working on a holiday, you must also pay them for any holidays that fall during their workweek that are not regularly scheduled days off.
For example, if your company gave employees Monday and Tuesday off each week, but you make everyone come in on Wednesday as it is Christmas Eve and the office will be closed on Thursday and Friday for Christmas, you must still pay your employees for Wednesday.
You can either adjust their next paycheck or make up the difference between what they made from working Wednesday and what they would have made had they stayed home that day.
How PaystubDirect Can Help You
If you haven't already been using an online pay stub generator, then now might be the time to start. If you're paying hourly employees, you can use your paystub maker to make calculations automatically and the deductions will be made for you. Simply choose your State and fill in your employee's information correctly.
We have various pay periods on our paystub generator and you can choose the templates you want. Staying on top of payroll during regular pay periods and holidays can ensure that you won't have to backtrack and that making changes will not be a hassle at all.