PAID HOLIDAYS: What is it, How it Works & Law

Paid Holidays

Paid holidays are typically included in the benefits and compensation packages that employers offer to recruit and keep employees. These holidays are usually mentioned in a letter of employment offer and in an employee handbook. In this article, we will explain all you need to know about paid holidays and more.

Paid holidays are days off from work that is provided to employees and are customarily connected to federally recognized holidays. The law does not require them. Paid vacation days, sick days, and other paid time off are frequently included in larger compensation packages that also include paid holidays.

An employee who has paid holidays typically gets a paid holiday, usually one that is observed by the federal government. The U.S. Bureau of Labor Statistics estimates that 79% of American civilian employees will have access to paid holidays in 2021. 2 The average number of paid holidays for employees in the private sector is eight.

The Advantages of Paid Holidays

 Paid Holidays that are competitive with the market and other time-off benefits are increasingly important for a company’s ability to recruit top talent with the skills necessary to run the enterprise.

Giving employees holiday pay in any form has a number of advantages:

#1. It Might Improve the Output

Giving workers holiday pay can increase their sense of value, which generally boosts engagement. Additionally, paying overtime can encourage workers to put in more hours, increasing productivity throughout your entire company.

#2. It Might Increase Motivation

Employees might be greatly motivated by paid holidays off because they know they will be granted time off without losing pay.

Paid time off has been shown to reduce stress, enhance mental health, and boost productivity, all of which is advantageous for both your employees and your company.

Paid Holidays and automated time off is a really low-cost, logical fringe perk,” he told Business News Daily. In most circumstances, it is financially manageable to accept and exhibit goodwill, especially when compared to other sorts of fringe benefits that are available.

#3. It Encourages Working on Holidays

Offering special holiday compensation, such as time-and-a-half or overtime pay, is a terrific approach to make it worthwhile for your employees’ time since few workers are keen to work on holidays. This is crucial if you have to operate or conduct the majority of your business on holidays, which is often the case if your company is in the retail industry.

#4. Top Talent May be Drawn to it

The managing director of Lolly Co., Daniel Cooper, asserted that top talent will always seek out an employer with superior perks.

Time off is frequently included in these wonderful advantages, especially during the Christmas season. Giving employees holiday compensation demonstrates your appreciation for them and your concern for their time off, which can help you draw in quality job candidates.

How Paid Holidays Work

With the following three common exceptions, holiday pay normally functions the same as 

#1. Regular Pay for Employees

Overtime: The Fair Labor Standards Act states that nonexempt employees who work more than 40 hours a week are entitled to overtime compensation “at a rate not less than time and one-half their usual rates of pay” throughout the holiday season (but not on the actual holiday).

#2. Time-and-a-Half Compensation

 Whilst it is not required by law, as the employer, you are free to decide to provide employees time-and-a-half pay on specific holidays in order to encourage them to work or to raise morale.

#3. Bonuses

 You could decide to give your staff a bonus during the holidays, which is effectively present. Holiday bonuses are up to the company’s discretion and may be based on performance, basic pay, or service years.

You are merely obligated to abide by all applicable state and federal employment regulations, which do not specify any unique considerations for paying employees during holidays, with the exception of overtime for nonexempt employees. There are no special rules or laws governing holiday pay.

How to Create a Corporate Holiday Pay Policy

The most crucial aspect of creating a holiday pay policy is being explicit and detailed about what is permitted, what is not, and how any holiday pay is computed. This aids in preventing irate workers and probable legal action. 

These four components must be part of your vacation policy:

#1. Describe Floating Vacations

If you decide to provide your staff with floating holidays to cover any religious or cultural holidays, be sure to specify how and when they accrue (for instance, three days at the beginning of each calendar year) and whether any unused floating holidays can be carried over to the following year or cashed out when an employee quits.

#2. Clearly, the State who is Qualified

Your policy should specify which employees are qualified for holiday pay as well as the circumstances under which they are or are not. For instance, you could specify that in order to be eligible for holiday compensation, employees must be scheduled for at least 20 hours per week and maintain good standing with the business.

#3. Explain the Formula Used to Determine Time-and-a-Half Pay

Describe in detail how time-and-a-half compensation is computed and determined if you have hourly workers that qualify. The legal minimum wage must be paid for all hours performed on holidays. For hours worked on holidays, the FLSA does not mandate overtime, time-and-a-half, or double pay; but, it does mandate time-and-a-half compensation for any hours over 40 in a given workweek.

#4. Outline the Holiday Pay for Exempt Workers

If your company just employs salaried, exempt workers, be sure to spell out how holiday compensation will operate. Specify in the policy whether those days will be paid or unpaid, for instance, if your company closes for the week between Christmas and New Year’s. Workers must receive their full pay for each workweek during which they perform any labor. As company closures, including holidays, are not permitted FLSA deductions, exempt workers must still receive their full pay on holidays.

The 11 federal holidays observed in the US Year 2023 are listed below. If you want to close your office for extra time off, be sure to keep track of holidays that fall on weekdays.

  • Monday, January 2 is New Year’s Day (observed);
  •  Monday, January 16 is Martin Luther King, Jr., Day; 
  • Monday, February 20 is Presidents’ Day; 
  • Monday, June 19 is Juneteenth; 
  • Tuesday, July 4 is Independence Day; 
  • Monday, September 4 is Labor Day;
  •  Monday, October 9 is Columbus Day; and 
  • Friday, November 10 is Veterans Day.

Private employers are not required to pay overtime or holiday bonus pay to their staff. Paid holidays are also not taken into account for determining eligibility for the Family and Medical Leave Act or overtime pay. In any case, some private firms decide to follow the federal holiday list for paid days off. The industry has a significant impact on our capacity to do so. Many legal and religious holidays are observed by private firms because doing so aids in staff retention, raises morale, and draws in new workers.

Although there are no laws in the US requiring that workers be paid on holidays, the following holidays are frequently given off with pay:

  • Easter and New Year’s Day.
  • Christmas Eve, 
  • Christmas Day,
  •  Labor Day, 
  • Thanksgiving Day,
  •  Black Friday,
  •  Memorial Day, and
  •  Independence Day

It’s in your best interest to make sure that your employee handbook clearly states your policies once you’ve decided how you want to handle federally recognized holidays. This will proactively resolve any misunderstandings and guarantee that both you and your staff are in agreement regarding how you’ll handle holidays, vacations, and any other PTO or employee benefits.

How Many Paid Holidays do Most Companies Give?

The following paid holidays are provided by most employers:

  • New Year  Day__on January 1st
  • Memorial Day__ May 29th  
  • Fourth of July __ on July 4th.
  • Labor Day  ___     4 September 2023
  • Thanksgiving Day__ November 23, 2023, 
  • Thanksgiving Day__ November 28, 2024,
  •  Friday after Thanksgiving__ November 24, 2023, 
  • Thanksgiving Day__     December 25, Christmas Day

Easter is also mentioned on that list by some businesses. Since Easter always falls on a Sunday, that works for certain businesses (like retail), but not others (like an office).

Some organizations add several other holidays to their paid holiday schedule. Which holidays are added can depend on regional differences and employee feedback over time. The holidays will vary by company, based on the needs of the employees and the needs of the business.

These additional holidays often include: 

  • President’s Day Good Friday
  • Martin Luther King, Jr.’s Birthday 
  • Juneteenth Veterans’ Day 
  • Columbus Day (also observed as Indigenous Peoples Day) 
  • Christmas Eve New Year’s Eve

What are the 11 Holiday Per Year?

  • New Year’s Day is January 1st
  • Martin Luther King’s Birthday 3rd Monday, January 
  • Washington’s Birthday 3rd Monday in February 
  • Memorial Day last Monday in May 
  • Juneteenth National Independence Day is on June 19th
  •  Labor Day on July 4th 
  • Columbus Day on October 2nd
  •  Veterans Day on November 11th 
  • Thanksgiving Day on November 24th
  • President’s Day Good Friday and 
  • Christmas Day on December 25th

How Long is Paid Holiday?

According to state law, employees typically receive 12 to 15 days of paid holiday time each year.

The United States government observes several days as federal holidays. Small company owners and other private employers may choose to remain open on these days even though the majority of government offices are closed. Companies that are closed on federal holidays are not required to pay their staff for the day off, and those that are open are not compelled to pay staff extra during regular business hours. In general, holidays are treated as regular workdays, and employees are paid as usual for the hours they put in. The nearest weekday is often recognized if the federal holiday occurs on the weekend.

These days are listed by the American government as federal holidays:

  • Christmas Day
  • Washington’s Birthday Martin Luther King Jr.’s Birthday
  • Veterans Day
  • National Independence Day on Juneteenth
  • Memorial Day Labor Day
  • Indigenous Peoples’ Day, also known as Columbus Day
  • Memorial Day
  • Day of Thanksgiving
  • Thanksgiving Day

How is Paid Holiday Calculated?

If you give an employee time-and-a-half pay for working on a holiday, you simply multiply that amount by half. As an illustration, if an employee’s regular hourly wage is $12, their holiday pay would be $18. All of the computations will normally be taken care of for you if you use online payroll software.

Under federal law, overtime is determined weekly; therefore, if you provide nonexempt workers overtime compensation, they are entitled to time-and-a-half pay for any hours worked above 40 per week.


Holiday pay can vary from person to person because it is typically determined by the employer. Understanding holiday pay, how it’s calculated, and how to create a holiday pay policy are crucial when deciding how much, if anything, to pay employees who work or don’t work on holidays.


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