Holiday Pay vs Overtime Pay: What's the Difference in 2026?

Holiday Pay vs Overtime Pay: The Key Difference

Under the federal Fair Labor Standards Act (FLSA), holiday pay is not required by law — it's a benefit your employer chooses to offer. Overtime pay, on the other hand, is legally mandated at 1.5× your regular rate after 40 hours in a workweek.

This is the single biggest misconception American workers have about holiday pay: working on Christmas, Thanksgiving, or July 4th does not automatically entitle you to time and a half under federal law.

What Is Holiday Pay?

Holiday pay is any premium (typically 1.5× or 2×) your employer voluntarily pays for working on a designated holiday. It's controlled by:

• Your employment contract or offer letter
• The company's employee handbook
• A collective bargaining agreement (union contract)
• State or local law in a handful of jurisdictions (e.g., Massachusetts retail "Blue Laws" — now phased out, Rhode Island Sunday/holiday premium)

What Is Overtime Pay?

Overtime pay is the federally required 1.5× premium for hours worked over 40 in a single workweek. Use our free overtime calculator to see exactly what you're owed for any week.

Do Holiday Hours Count Toward Overtime?

No — and this surprises a lot of workers. The FLSA only counts hours actually worked toward the 40-hour overtime threshold. Paid time off (holidays, vacation, sick days) does not count.

Example: You work 32 hours Monday–Thursday, take Friday off as a paid holiday (8 hours of holiday pay), then work 8 hours on Saturday.

• Total paid hours: 48
• Hours actually worked: 40
• Overtime owed: $0 — because you didn't physically work more than 40 hours.

When You DO Get Both Holiday Pay AND Overtime

If you work the holiday and exceed 40 actual hours that week, you can get both:

Example — Hourly retail worker at $20/hour, employer policy = 1.5× holiday premium:

• Mon–Fri: 40 hours at $20 = $800
• Saturday (Memorial Day): 8 hours at $30 (holiday rate) = $240
• Federal overtime: 8 hours over 40 × $10 OT premium = $80
• Total: $1,120

State Exceptions to Know

• Massachusetts: Premium pay for retail work on Sundays/holidays has been phased out as of 2023.
• Rhode Island: Retail employees still get 1.5× on Sundays and most holidays.
• California, New York, Illinois: No mandatory holiday premium — purely employer policy.

Common Holiday Pay Mistakes

• . Assuming federal law requires holiday premium — it doesn't.
• . Not reading the handbook — eligibility usually requires working the scheduled shift before/after the holiday.
• . Counting PTO toward overtime — only worked hours count.
• . Forgetting that holiday premium increases your regular rate for OT calculation purposes when it's a non-discretionary bonus.

Frequently Asked Questions

Is my employer required to pay me extra on Thanksgiving?

Not under federal law. Only if your contract, handbook, or state law requires it.

Do salaried employees get holiday pay?

Usually yes as paid time off, but they typically don't get a premium rate.

Can my employer make me work on a federal holiday?

Yes. Federal holidays are only mandatory days off for federal employees.

Does holiday pay affect my overtime rate?

If the premium is a contractual obligation (not discretionary), it must be included in your regular rate for OT calculation.

Compare your state's rules on our state-by-state overtime guide to see what applies where you work.

Run your own numbers

If your holiday week pushed you past 40 hours, the time and a half calculator will price those extra hours, and the FLSA overtime calculator shows which of them federal law actually requires a premium on.