When Do I Have to Pay Employees “Holiday Pay”?

Well – never. There is no state or federal law that requires employers either to observe any holidays or pay employees differently because of them.

This means it is entirely up to the policies and procedures of the employer to determine time off and/or pay for recognized holidays.

Misconceptions About Holiday Pay

Sound too easy? It really is pretty simple. However, there are many misconceptions about holiday pay so let’s summarize the general guidelines:

• While it is certainly a common practice, employers are not required to close their businesses or offer time off for holidays.
  
  
• If they do close the business or otherwise provide time off to observe certain holidays, non-exempt employees are not entitled to pay for any time spent not working. (see note below about exempt employees’ pay).
  
  
• If employees work on a holiday (regardless of whether or not the employer observes it), they are not entitled to additional pay (i.e. double time); only their regular pay for working.
  
  
• If they do provide additional pay for working on a holiday, be sure the employees understand that while the time spent working is counted as total hours worked for overtime purposes, the extra pay will be excluded from the rate of pay for overtime (Just like when they get paid for not working on a holiday – that holiday pay does not change the rate for overtime purposes).
  
  
• You are permitted to have a clause that states if an employee is absent (unscheduled/unexcused) the day before or after a holiday in which the business is closed, they are not entitled to the usual holiday pay the company offers under its policy for holidays.

An Exception to The Rule

There is an exception to providing pay for time spent not working (but not because it’s a “holiday”). Exempt employees – those employees who are paid a salary and are exempt from the overtime provisions of the law because of their specific duties – are entitled to their full weekly salary if they work any day during a week (with very limited exceptions).

So employers are required to pay exempt employees for days the company is closed for a holiday. Of course if the business is closed for an entire week, no pay would be required.

Other Holiday Pay Considerations 

For employers where closing the business is not feasible (businesses that operate 24/7 or that it's busy season is during the holidays), you might consider offering “floating holidays” to provide for extra paid time off, just for employees to schedule at different times (and upon approval), so your staffing needs are still met during business operations.

Offering paid time off for holidays is certainly a nice perk and helps with employee recruiting and retention. However, since there are quite a few misconceptions about how holidays are treated in employment, it is a good idea to have very clear, written policy language that explains how your organization handles holidays to avoid any surprises or discord with your employees.