Holiday pay can be defined as any form of paid time off, such as a government-declared holiday, maternity leave, or sick time off. However, it is more customarily defined as paid time off for a holiday that is declared by a governing entity, such as the federal government or a state government.
Examples of holidays are Martin Luther King Day, Labor Day, Thanksgiving, and Christmas. Employees are eligible to receive holiday pay as soon as they become employees - there is no waiting period, as is commonly the case with vacation pay.
Holiday pay is at the same pay rate that a person is normally paid. Thus, if you are paid $20 per hour on a regular work day, then you will be paid the same amount per hour in holiday pay during a holiday.
Holiday pay is rarely itemized on a paycheck remittance advice. Instead, it is considered to be part of normal pay, and so is not segregated in any way, either in the accounting system or on the paycheck. Employees are assumed to understand that this pay is aggregated with their normal pay.
In some cases, companies allow their employees to work on holidays and be paid in cash for the missed day off. This situation usually arises in a services industry where someone must be present at all times, or when the work load is so high that it cannot be completed without working through the holiday. This provision does not apply to salaried employees, who are paid the same amount in every pay period, irrespective of the presence of any holidays.
Organizations do not typically attempt to accrue holiday pay, since employees are paid in the normal course of the month for holidays that arise during the month. Thus, there is no unpaid expense related to a holiday that rolls over into the following reporting period.