What Is Holiday Pay? A Guide to Holiday Pay and Employee Compensation
Holiday pay is compensation an employee may receive for eligible holidays or time away from work, depending on the applicable employment laws, employment terms, and company policies. It can include pay during statutory holidays, annual leave, or additional compensation when employees work on a public holiday.
For companies with employees across multiple countries, managing holiday pay requires more than maintaining a holiday calendar. Employers may need to account for different statutory holidays, eligibility rules, leave entitlements, payroll calculations, and payment requirements in each jurisdiction.
Let’s explore how you can process holiday pay in the best possible way!
How Does Holiday Pay Work?
The treatment of a holiday generally depends on whether the employee:
| Situation | Potential treatment |
|---|---|
| Does not work on an eligible public holiday | May receive their applicable holiday entitlement |
| Takes annual leave | May receive the applicable leave payment |
| Works on a public holiday | May receive additional pay, a premium, substitute leave, or another entitlement |
| Holiday falls during another period of leave | Treatment depends on local rules and the type of leave |
| Receives additional contractual holidays | Entitlement depends on the employment agreement or company policy |
What Is the Difference Between Holiday Pay and Paid Holidays?
The terms holiday pay and paid holidays are related but are not always interchangeable.
| Term | Meaning |
|---|---|
| Holiday pay | Compensation associated with an eligible holiday or period of leave |
| Paid holiday | A holiday during which an eligible employee receives pay |
| Annual leave/PTO | Paid time away from work that an employee may use according to applicable rules |
| Holiday premium pay | Additional compensation that may apply when an employee works on a public holiday |
How Does Holiday Pay Work for Employees?
Holiday pay can be administered differently depending on the type of holiday and the employee’s circumstances.
Paid Time Off for a Holiday
Where local law provides paid public holidays or annual leave, eligible employees may receive compensation while away from work.
The calculation may depend on factors such as:
- Employee status
- Ordinary working hours
- Base salary or wage
- Length of service
- Applicable statutory rules
- Employment agreement
- Collective or workplace agreements
Working on a Public Holiday
Employees who work on a public holiday may be entitled to additional compensation, premium rates, substitute leave, or other statutory benefits, depending on local requirements.
For example, Australian employment standards provide different entitlements for employees who work or do not work on public holidays, with awards and agreements potentially providing additional benefits.
Source: Fair Work
Substitute or Alternative Holidays
Some jurisdictions allow or require an alternative day off when a public holiday falls on a particular day or when an employee works on a holiday.
The availability and conditions of substitute holidays depend on local legislation and employment arrangements.
Company-Provided Holidays
Employers may also provide holidays beyond statutory requirements.
These may be defined through:
- Employment contracts
- Employee handbooks
- Company policies
- Collective agreements
- Local benefits policies
Need Help With Holiday Pay? Simplify leave and holiday administration across your international workforce.
Simplify Leave and Holiday Administration →Is Holiday Pay Required by Law?
Holiday pay and paid-leave requirements are jurisdiction-specific. International employers need to consider the applicable employment rules in each country where employees are engaged.
Key Holiday Pay Requirements
International employers may need to consider a range of statutory and contractual requirements when administering public holidays and paid leave.
Important Considerations
The ILO’s international framework on paid annual leave establishes principles around paid leave and remuneration, while the actual entitlement and implementation are determined through national laws and regulations.
International Employers May Need to Consider
Statutory public holidays
Minimum annual leave entitlements
Eligibility requirements
Payment calculations
Premium or penalty rates
Substitute holidays
Leave accrual and carryover
Employment contracts
Collective agreements
Employee classification
Why Do Holiday Pay Requirements Differ by Country?
There is no single global holiday-pay rule. Public holiday arrangements, payment requirements, substitute holidays, and paid-leave entitlements can vary between jurisdictions.
Local Rules Matter
Holiday pay requirements should be assessed according to the employee’s employing jurisdiction, including applicable legislation, employment agreements, and other relevant workplace arrangements.
Example: Australia
Australia’s public holidays can vary between states and territories, and different payment or substitution rules may apply depending on the applicable circumstances.
How Is Holiday Pay Calculated?
There is no universal global holiday-pay formula. The appropriate calculation depends on local law, employee classification, compensation structure, and the reason for the payment.
Holiday Pay Calculation Formula
A simplified calculation can be represented using the employee’s applicable pay rate and the number of eligible holiday hours.
Where additional statutory or contractual premiums apply, the calculation may instead be represented as:
These formulas are illustrative only. Actual calculations may include different statutory rules, average-pay requirements, allowances, overtime treatment, or other components.
Example of Holiday Pay Calculation
- Regular hourly rate: $25
- Eligible holiday hours: 8
- Applicable premium: 1.5×
Factors That May Affect the Calculation
Applicable Legal Requirements
National, regional, or local employment rules may determine holiday pay and applicable premiums.
Employee Classification
Employee status and classification may affect eligibility, payment rules, and how holiday hours are treated.
Employment Agreement
Contractual terms, awards, or collective agreements may establish additional payment requirements.
Applicable Premiums
Premium or penalty rates may apply when employees work during qualifying public holidays.
Important Calculation Consideration: The $300 example is a simplified illustration only. Actual holiday-pay entitlement may differ depending on the employee’s country, employment agreement, award, collective agreement, or applicable statutory requirements.
Discuss Your Global Employment Requirements →How Should Companies Manage Holiday Pay Across Countries?
Managing holiday pay becomes more complex when employees work in multiple jurisdictions.
A scalable approach should combine local compliance with consistent global processes.
1
Country-Specific Holiday Calendars
Maintain an accurate calendar for each country and, where relevant, regional or state-level holidays.
2
Payroll Alignment
Ensure public holidays, leave, working hours, and applicable premiums are correctly reflected in payroll.
3
Leave Tracking
Track employee leave balances, accruals, approved leave, public holidays, and substitute holidays where applicable.
4
Employment Policies
Make holiday and leave entitlements clear in employment agreements and company policies while ensuring they meet local minimum requirements.
What Happens When Employees Work on a Public Holiday?
Working on a public holiday does not automatically mean the same payment applies in every country. Requirements can vary depending on the jurisdiction and employment arrangement.
What Employees May Receive
Depending on the applicable local requirements and employment arrangement, employees who work on a public holiday may receive different forms of compensation or statutory benefits.
Requirements Depend on Local Rules
Public holiday compensation should be assessed based on the applicable country’s employment laws, the employee’s classification, and the relevant employment agreement or collective arrangement.
Holiday Pay vs Holiday Premium Pay
Holiday Pay
Holiday pay generally refers to compensation associated with an eligible holiday or leave period.
Holiday Premium Pay
Holiday premium pay refers to additional compensation that may apply when an employee works on a public holiday.
Do Not Treat Them as Interchangeable
Holiday pay and holiday premium pay can refer to different types of compensation. The applicable treatment depends on local law and the employee’s specific employment arrangement.
Country-Specific Example: Australia
Australian workplace rules can provide additional payment, an extra day off, or extra annual leave depending on the applicable award, agreement, or employment arrangement.
Source: Fair Work Ombudsman
How Can an EOR Help Manage Holiday Pay?
An Employer of Record (EOR) can provide the local employment structure and administrative support needed to employ workers in countries where a business may not have its own local entity.
Support depends on the country and agreed service scope. An EOR can help coordinate employment, payroll, holiday and leave administration, and other applicable employment processes while the client continues to manage the employee’s day-to-day work and business responsibilities.
Local Employment Administration
The EOR employs the worker under a locally compliant employment arrangement while the client retains responsibility for the employee’s day-to-day work and business management.
Payroll Processing
The EOR can support payroll administration, including applicable salary payments, statutory deductions, and employment-related payments.
Holiday and Leave Administration
An EOR can help administer applicable leave and holiday entitlements and incorporate relevant information into payroll processes.
Statutory Requirements
Local employment administration may include support with applicable statutory contributions, filings, and employment requirements.
Employee Records
Maintaining accurate employment, payroll, leave, and compensation records helps support consistent workforce administration.
Manage Holiday Pay and Leave With FastLaneRecruit
Managing holiday pay, leave entitlements, and payroll across multiple countries can create unnecessary administrative and compliance complexity.
FastLaneRecruit provides EOR and global employment support to help businesses employ international talent while managing local employment administration, payroll, leave, and applicable statutory requirements.
Whether you are hiring your first international employee or managing a distributed workforce, FastLaneRecruit can help you establish a more structured approach to global employment and workforce administration.
Book a Free Consultation with an Expert →How FastLaneRecruit Can Support
- Payroll Administration: We help manage payroll processes for employees employed through our EOR structure, including applicable salary payments and statutory payroll requirements.
- Leave and Holiday Administration: We support the administration of applicable leave and holiday entitlements and help coordinate employee leave information with payroll processes.
- Local Employment Compliance Support: We provide a local employment structure designed around the applicable employment requirements of the employee’s jurisdiction, helping businesses manage country-specific employment administration.
- Employee Benefits Administration: Where included within the agreed service scope, we can support the administration of applicable employee benefits and employment-related programs.
Countries We Support
Malaysia · Singapore · Hong Kong · China · India · Philippines · Taiwan · Vietnam · Australia · United Kingdom · Switzerland · UAE · Saudi Arabia · Qatar
Because holiday pay, public holidays, and leave requirements vary between jurisdictions, the applicable treatment should be assessed based on the employee’s country, employment arrangement, and relevant statutory requirements.
Frequently Asked Questions About Holiday Pay
What is holiday pay?
Holiday pay is compensation associated with an eligible holiday or period of leave. Its meaning and calculation vary according to local employment laws, employee status, and employment terms.
Is holiday pay required by law?
Holiday pay and paid-leave requirements vary by jurisdiction. Employers should check the applicable local employment legislation and contractual requirements.
How is holiday pay calculated?
There is no universal formula. Calculations may depend on the employee’s pay rate, eligible hours, employment status, local legislation, and applicable premiums or allowances.
Do employees get paid for public holidays?
In many jurisdictions, eligible employees receive some form of statutory public holiday entitlement. However, eligibility and payment rules vary by country.
What happens when employees work on public holidays?
Depending on local requirements, an employee may receive a premium rate, additional pay, substitute leave, or another entitlement.
Is holiday pay the same as PTO?
Not necessarily. PTO or annual leave generally refers to paid time away from work, while holiday pay can refer to compensation associated with a statutory or contractual holiday.
Does holiday pay vary by country?
Yes. Public holidays, annual leave, eligibility, payment calculations, substitute holidays, and premium rates can vary significantly between jurisdictions.
Can an EOR manage holiday pay?
An EOR can support the local employment and payroll administration associated with holiday and leave entitlements, subject to the applicable country rules and agreed service scope.
How does holiday pay affect payroll?
Holiday pay can affect payroll calculations, leave balances, working hours, statutory deductions, premiums, and employee records. Accurate local rules and holiday calendars are therefore important.
