New York Holiday Pay: A Guide to Better Policies

Holiday pay seems like a simple employee benefit. An employer identifies several paid holidays, closes for the day, and pays employees as though they had worked. But the policy becomes more complicated when the workplace does not close or when employees work schedules other than five 8-hour days.

Consider an employer that operates every day because it provides emergency, healthcare, residential, manufacturing, hospitality, or other continuous services. Its employees may work:

• five 8-hour shifts;
• four 10-hour shifts;
• three 12-hour shifts;
• rotating schedules;
• weekend shifts; or
• schedules that vary substantially from week to week.

When a holiday falls on a Saturday or Sunday, or on an employee’s regular day off, how much holiday pay should the employee receive? Should an employee scheduled for a 16-hour shift receive twice as much holiday pay as an employee scheduled for eight hours? What happens when an employee works on the holiday?

New York law generally leaves these questions to the employer. But that makes careful policy drafting especially important.

New York Generally Does Not Require Holiday Pay

New York employers generally are not legally required to provide employees with paid holidays. Federal law likewise does not require most private employers to pay employees for holidays on which they do not work.

Nor must employers generally pay employees a premium merely because they work on a holiday. Subject to limited exceptions for particular employees or industries, working on Thanksgiving, Christmas, or another holiday does not automatically entitle an employee to time-and-a-half or double-time pay.

Instead, holiday benefits ordinarily arise from:

• an employer’s written policy;
• an employment agreement;
• a collective bargaining agreement; or
• an established employer practice.

Once an employer promises holiday pay, however, it should administer the benefit consistently with that promise. The fact that New York law did not require the employer to establish the benefit does not necessarily allow the employer to disregard its own policy.

Employers should address holiday pay in a carefully drafted employee handbook or written policy rather than relying on informal practices or assumptions.

Holiday Pay and Overtime Are Different

Employers should distinguish between holiday pay and overtime pay.

Most non-exempt employees must receive overtime pay for hours actually worked over 40 in a workweek. Merely working on a holiday does not trigger overtime. An employee who works eight hours on a holiday but only 32 hours during the entire workweek generally has not earned statutory overtime.

Likewise, holiday pay for time the employee did not actually work ordinarily does not count as hours worked when determining whether the employee exceeded 40 hours.

For example, suppose an employee receives eight hours of holiday pay for Monday but actually works eight hours per day from Tuesday through Saturday. The employee has been paid for 48 hours but worked only 40 hours. The federal and New York overtime laws generally would not require overtime compensation in that situation.

An employer may adopt a more generous policy. It might count paid holiday hours toward its internal overtime calculation or pay a premium to employees who work on designated holidays. But the policy should make clear when those additional benefits apply.

What Does a “Paid Holiday” Mean?

Traditional holiday policies often assume that every full-time employee works eight hours per day, Monday through Friday. A policy may simply state that employees will receive their “regular pay” for each recognized holiday. That language can become ambiguous when employees work alternative schedules.

For example, suppose one employee normally works five 8-hour shifts, while another normally works four 10-hour shifts. If both employees receive a paid holiday:

• Does the first receive eight hours and the second ten?
• Do all full-time employees receive eight hours?
• Does the employee receive whatever hours the employee was scheduled to work that day?
• Does an employee receive nothing if the holiday falls on a regular day off?
• Is a substitute paid day provided instead?

None of those approaches is inherently required for most private employers. The important point is to choose an approach and state it clearly.

Paying Based on the Scheduled Shift

One approach is to provide holiday pay based on the number of hours the employee was scheduled to work on the holiday. Under this approach, an employee scheduled for an eight-hour shift would receive eight hours of holiday pay. An employee scheduled for ten hours would receive ten hours.

This method has intuitive appeal. The employee receives the pay that the employee would have earned if the employer had not treated the day as a holiday. But the approach can produce significant differences among employees. An employee scheduled for a 16-hour shift could receive twice as much holiday pay as an employee scheduled for an 8-hour shift. An employee who was not scheduled to work might receive nothing.

Employers using this approach should consider placing a reasonable cap on the number of holiday hours. Otherwise, unusual or variable schedules may produce results the employer did not anticipate.

The policy should also explain how holiday pay is determined when schedules change shortly before the holiday. Without a clear cutoff, supervisors may manipulate schedules—or appear to manipulate them—to increase or reduce holiday benefits.

Providing a Standard Number of Holiday Hours

Another approach is to provide all eligible full-time employees with a fixed number of holiday hours, such as eight hours, regardless of their schedule.

This approach is easy to administer and treats the holiday benefit as a standard annual benefit rather than compensation for a particular missed shift. But employees working longer shifts may object that the fixed payment does not replace the wages they lose when the employer closes for the holiday. An employee normally scheduled for ten hours may have to use paid time off, make up the additional hours, or simply receive less pay for the week.

Employers using a fixed-hour approach should explain what happens to employees whose scheduled shift is longer or shorter than the standard holiday allotment.

Using an Annual Holiday Bank

Employers with highly variable schedules may consider creating an annual holiday bank.

For example, instead of promising pay for a specific number of hours on each holiday, the employer could credit eligible employees with a defined annual number of holiday hours. Employees could then apply those hours to recognized holidays according to scheduling and operational rules.

This approach can promote consistency across different schedules. But it starts to resemble a separate paid-time-off bank and therefore requires rules addressing:

• when hours are credited;
• whether unused hours carry over or are paid at separation;
• whether employees may use hours on dates other than the recognized holiday;
• how part-time employees are treated; and
• whether supervisors must approve usage.

Employers should not adopt a holiday bank without considering how it interacts with existing vacation and paid-time-off policies.

Holidays Falling on an Employee’s Regular Day Off

Another common issue arises when a recognized holiday falls on a day the employee was not scheduled to work.

An employer might:

• provide no additional benefit;
• provide a fixed amount of holiday pay;
• permit the employee to take another day off;
• credit hours to a holiday bank; or
• observe the holiday on the preceding Friday or following Monday.

Businesses that operate continuously may not be able to close on an alternative weekday. They may therefore prefer holiday pay over a substitute day off.

Again, the law generally does not dictate the answer. The policy should.

Employees Who Work on the Holiday

Employers should separately address employees who actually work on a recognized holiday.

Possible approaches include:

• regular pay for the hours worked, with no additional holiday benefit;
• regular pay plus a separate holiday payment;
• time-and-a-half or double time for hours worked;
• regular pay plus a substitute paid day off; or
• a combination of premium pay and holiday hours.

The policy should clarify whether an employee who works on a holiday receives both the holiday benefit and compensation for the hours worked.

It should also distinguish any contractual holiday premium from statutory overtime. If an employee works more than 40 hours in the workweek, the employer must still calculate overtime correctly. Extra compensation paid at a qualifying premium rate for working on a holiday may be excluded from the regular rate and credited toward the employer’s statutory overtime obligation. But ordinary holiday pay, including pay for hours the employee did not work, does not necessarily qualify for that treatment. Employers should not assume that every payment labeled “holiday pay” can offset overtime.

Employers must also determine whether holiday payments or premiums affect the employee’s regular rate for overtime purposes.

Salaried Employees Require Different Holiday Pay Treatment

Holiday policies should distinguish between hourly and salaried employees.

A properly classified salaried exempt employee generally must receive the employee’s full salary for any week in which the employee performs work, subject to limited exceptions. If the employer closes for a holiday, it generally cannot reduce an exempt employee’s salary merely because no work was available that day.

Accordingly, “holiday pay” often does not produce additional compensation for salaried exempt employees. The employee simply receives the regular salary. The employer may still offer additional benefits, such as a substitute day off or premium compensation for working on a holiday. But the policy should avoid suggesting that an exempt employee’s normal salary depends on the number of hours scheduled on the holiday.

Non-exempt salaried employees present a different issue. Employers must still track their working time and calculate overtime based on the applicable regular rate.

Part-Time and Variable-Schedule Employees

Employers should decide whether part-time employees are eligible for holiday pay.

Common approaches include:

• excluding part-time employees;
• requiring a minimum regular schedule;
• prorating holiday hours based on full-time equivalency;
• paying only employees scheduled to work on the holiday; or
• requiring a minimum length of service.

A policy that merely states that “employees receive holiday pay” may unintentionally extend the benefit more broadly than intended.

Variable schedules create an additional challenge. If holiday pay is based on “regularly scheduled hours,” the policy should explain how those hours are identified. Employers might use:

• the published schedule for the holiday;
• the employee’s average daily hours over a defined period;
• the employee’s regular full-time equivalent;
• the shift assigned as of a stated scheduling deadline; or
• a fixed number of hours.

Most employers should avoid a standard that depends entirely on after-the-fact supervisory discretion.

Attendance Conditions

Many employers condition holiday pay on the employee working the scheduled shift immediately before and after the holiday. Such conditions should be clearly stated and applied consistently. Employers must also account for legally protected leave and other protected absences. A policy should not deny holiday pay based on an absence when doing so would conflict with applicable leave law, a collective bargaining agreement, or the employer’s treatment of comparable forms of leave.

Employers should also consider how the requirement applies when employees trade shifts, are sent home early, or are not scheduled on one of the adjacent days.

Unionized Employers Must Review the Collective Bargaining Agreement

Unionized employers may have less flexibility. Collective bargaining agreements often specify:

• recognized holidays;
• employee eligibility;
• premium rates;
• substitute holidays;
• qualifying attendance rules;
• holiday scheduling;
• pyramiding or duplication of premiums; and
• the treatment of employees on leave.

Past practice may also affect how unclear language must be applied.

A unionized employer should not unilaterally revise its holiday practices without first reviewing the collective bargaining agreement and considering any bargaining obligations.

A Better Holiday Pay Policy

There is no single holiday-pay formula that works for every New York employer. A sound policy should reflect the employer’s actual operation.

At minimum, it should answer:

1. Which holidays does the employer recognize?
2. Which employees are eligible?
3. How many hours of holiday pay will an employee receive?
4. What happens when the holiday falls on a regular day off?
5. What happens when an employee works on the holiday?
6. Does holiday pay count toward an internal overtime calculation?
7. Are there attendance requirements?
8. How are part-time and variable-schedule employees treated?
9. Is there a maximum number of holiday hours?
10. Who resolves unusual scheduling situations?

The most common mistake is not choosing the “wrong” holiday benefit. It is using a policy written for a conventional Monday-through-Friday workplace when the employer actually operates around the clock or with multiple shift lengths.

New York employers have substantial flexibility in designing holiday benefits. They should use that flexibility deliberately and describe the chosen benefit precisely enough that employees, supervisors, payroll staff, and HR personnel all reach the same result.

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