What are the laws of holiday pay?

Managing holidays can be a complex matter when figuring out paid time off, determining which holidays are included as vacation time, and how much focused work time you can expect around those key dates. Having a better understanding of holiday laws can help bring clarity and direction to your holiday pay plan.

What is holiday pay and is it required?

Holiday pay generally refers to paid time off for holidays, and it might surprise you to learn that it is not required. It is a common misconception that employees are entitled to a certain amount of federal or religious holidays as paid time off. However, in the United States, paid holidays are viewed legally as another business day. Whether or not you receive holiday pay is completely up to the employer’s discretion. (Hence why federal holidays are titled “federal.” If you work for the federal government, then you have those days off. However, while many organizations follow federal holiday schedule it’s not strictly guaranteed.)

Regardless of if you are offering federally recognized holidays off, it’s important to communicate this up front with your employees. Are holidays considered paid or unpaid time off? Which holidays are recognized by the organization? Will they have to request time off? Will they be paid time and a half if they choose to work holidays? The answers are determined by the employer. Holidays recognized by the company are often listed in an employment offer letter and in the employee handbook.

How to calculate holiday pay

If you’re an employer offering holiday pay to your employees, here are three key ways to calculate holiday pay.

  1. Normal pay day = Holiday pay: Some organizations opt to give employees the day off while paying them what they would normally receive to work. This can be beneficial for retention and even productivity, giving employees a chance to rest without having to take unpaid time off or use personal vacation time. Some companies will close during the final week of the year so that employees can feel rejuvenated and see an increase in productivity when they return in the new year.
  2. Time-and-a-half/Double pay = Holiday pay: To create an extra incentive for working during holidays, especially for companies that experience a busy season during this time, some employers will pay time-and-a-half or double-time for working on a holiday. While not legally required, providing extra pay can incent more employees to work over a holiday, making it more bearable, profitable, or appealing. To break it down: Normal pay per day worked x 1.5 (for time-and-a-half), or x 2 (for double-time) = Holiday Pay.
  3. Normal workday, normal pay: As an employer, you can determine if a holiday is or isn’t recognized by the organization. Some holidays are treated as any other normal workday. You are not legally required to pay employees extra or give them paid time-off.

Note: Keep in mind, many compensation packages and benefits packages include paid holidays as a means of attracting and retaining employees.

Common paid holidays

Contrary to popular belief (or what many employees would prefer), private companies are not legally obligated to provide any holidays off for their employees. That said, the Bureau of Labor Statistics (BLS) found that most workers in the private industry averaged eight holidays off each year. Here are some of the most common holidays recognized by the private industry:

  • New Year’s Day
  • Easter
  • Memorial Day
  • Independence Day
  • Labor Day
  • Thanksgiving Day
  • Day After Thanksgiving
  • Christmas Day

In addition to these commonly paid holidays, here are other federal holidays and special days that you might find offered a paid time off:

  • Martin Luther King, Jr. Birthday
  • Washington’s Birthday
  • President’s Day
  • Veterans’ Day
  • Floating holidays (some companies offer a handful of days per year for employees to use at their convenience)
  • Employee’s birthday
  • Good Friday
  • Christmas Eve
  • New Year’s Eve

According to the U.S. Bureau of Labor Statistics, 79% of U.S. civilian workers had access to paid holidays in 2021.

Holiday pay law FAQs

Do you have to give employees time off on holidays?

Employers are not legally required to give employees time off on holidays.

Do you have to pay employees holiday pay?

Employers can determine if they want to pay employees a normal work pay day or incentivize holiday work by offering time-and-a-half or double pay.

Is it federal law to pay time-and-a-half on holidays?

The amount paid on holidays is determined by the employer.

Does an employer need to allow an employee’s religious holidays off?

Not necessarily, but this one can be tricky. Employees who wish to recognize or have time off for certain religious holidays can ask for a “reasonable accommodation,” which lets the employer know if there is a conflict between their religious observances and their work schedule. As an employer, you must find a way to eliminate that conflict between the religious and work obligations, provided this doesn’t impose an undue hardship on the business. An undue hardship is defined as “an accommodation that is too costly or difficult to provide.” In the past it has been interpreted to mean anything from an increase in administrative costs, to a reduction in workplace efficiency.

Note: Instances of religious discrimination are typically determined by the Equal Employment Opportunity Commission on a case-by-case basis. If undue hardship is proven, this is not considered religious discrimination.

Are there conditions for employees to receive holiday pay?

This is up to the employer’s discretion. There are best practices and recommended strategies in using holiday pay for retention or showing appreciation for your employees, as mentioned above. However, in the end it is up to the company leadership’s decision.

How does holiday pay affect overtime pay?

If an employer offers paid holidays, those paid hours don’t count towards the total hours worked. When it comes to determining whether an employee qualifies for overtime compensation, they can subtract the holiday paid hours which may affect if the employee qualifies for overtime pay or not.