The holidays are a busy time for everyone, especially business owners trying to figure out if they have to pay employees for days off. You might be asking:
- Is holiday pay required?
- Does an employer have to pay holiday pay?
- What about hourly workers?
If you don’t have a clear answer, it can lead to confusion, upset employees, or even problems with how pay is handled, especially in states like Massachusetts or Rhode Island, where the rules are different. And if you manage hourly workers, the pressure to offer holiday pay can feel even stronger.
In this blog, we’ll break down what the law says, when holiday pay is required (and when it’s not), and how to create a policy that’s fair and easy to explain, whether your team is full of hourly workers, salaried staff, or both.
What Is Holiday Pay?
Before deciding how to handle holiday pay, it's helpful to understand what it entails. Holiday pay is any form of compensation provided to employees in connection with a holiday. This can take two forms:
Paid Time Off (PTO): Employees are paid for a designated holiday, even though they do not work.Premium Pay: Employees who work on a holiday are paid at a higher rate. This is often time-and-a-half or double time.
It's important to note that holiday pay is not mandated by federal law for private employers. However, many businesses offer it as a benefit to attract and retain employees.
Understanding these distinctions is crucial for developing a holiday pay policy that aligns with your company's goals and values.
Are Employers Required to Pay Holiday Pay?
A question employers often ask is: “Is it mandatory to pay holiday pay?”
Under the Fair Labor Standards Act (FLSA), private employers are not required to provide paid holidays or premium pay for work performed on holidays. These benefits are typically determined by the employer's policies or collective bargaining agreements.
So, if you're wondering, "Is holiday pay required?" or "Does an employer have to pay holiday pay?" the answer is generally no, unless specified by state laws or company policies.
However, offering holiday pay can be a valuable tool for enhancing employee satisfaction and competitiveness in the job market.
What Are the Federal Holidays in the United States?
While private employers are not obligated to observe federal holidays, knowing which ones are recognized helps with planning.
The U.S. government recognizes the following 11 federal holidays:
- New Year's Day
- Martin Luther King Jr. Day
- Presidents Day
- Memorial Day
- Juneteenth National Independence Day
- Independence Day
- Labor Day
- Columbus Day
- Veterans Day
- Thanksgiving Day
- Christmas Day
Federal employees get these holidays off with pay. However, private employers are not required to observe these holidays or provide holiday pay.
Being aware of these holidays can help employers plan work schedules and communicate expectations to employees effectively.
Holiday Pay Rules and Regulations by Sector
Holiday pay rules can vary depending on whether you’re a government employer or a private business.
Holiday Pay for Federal Employees
If federal employees are required to work on a holiday, they typically receive holiday premium pay, which is equal to their base pay, effectively doubling their hourly rate. In many cases, they’re guaranteed a minimum of two hours of premium pay even if they work less than that.
Holiday Pay for Private Sector Employees
Private employers are not required to provide holiday pay under the FLSA. However, many offer it as a competitive benefit to attract and retain talent. Policies are usually detailed in employment agreements or employee handbooks.
What About Religious Holidays?
Employers are not required to pay employees for religious holidays. However, under Title VII of the Civil Rights Act, they must make reasonable accommodations for religious observances, such as unpaid leave or allowing the use of PTO, unless it causes undue hardship to the business.
Holiday Pay for Exempt vs. Non-Exempt Employees
Different types of employees may be treated differently when it comes to holiday pay. That’s why it’s important to know the distinction between exempt and non-exempt workers.
Exempt Employees
Exempt employees, typically salaried workers, are not entitled to overtime pay. If they work any part of a workweek, they must receive their full salary for that week, even if the business is closed for a holiday. If the business is closed for an entire workweek and the employee performs no work, the employer is not required to pay the salary for that week.
Non-Exempt Employees
Non-exempt employees, often hourly workers, are only paid for the hours they work. If they do not work on a holiday, they are not entitled to pay for that day unless the employer offers paid holidays. If they work on a holiday, there is no federal requirement for premium pay, but employers may choose to offer it as an incentive.
Keeping these classifications in mind can help you apply holiday pay rules fairly and legally.
Holiday Pay for Hourly Workers
Holiday pay for hourly workers is one of the most common concerns. The FLSA does not require employers to pay hourly employees extra for working holidays, or to pay them if they don’t work.
Still, many companies voluntarily offer:
- Time off with regular pay
- Time-and-a-half or double time for working a holiday
- Holiday bonuses or floating holidays
Providing these benefits can help reduce absenteeism, increase morale, and improve retention, especially for shift-based teams or industries with tight labor markets.
State Requirements
While federal law does not require holiday pay, some states have specific rules:
Massachusetts “Blue Laws”
Certain Massachusetts retail employers must pay premium rates (typically 1.5x pay) on select holidays like New Year's Day, Memorial Day, Independence Day, and Labor Day. Some businesses must also apply for special permits to open.
Rhode Island
Employers must pay time-and-a-half on holidays, including Victory Day, Thanksgiving, and Christmas. There are a few industry exemptions. Some of these exemptions include:
- Hospitals, nursing homes, and public utilities (continuous operations)
- Restaurants and hospitality businesses
- Retailers with fewer than 6 employees
- Transportation and fueling services at airports
- Certain manufacturers requiring 24/7 operations
Employers not automatically exempt can petition the state for an exemption based on operational necessity.
Connecticut
Connecticut restricts business operations on holidays like Thanksgiving and Christmas. Employers aren’t required to pay premium rates but must comply with closures.
Indiana
Indiana’s “blue laws” restrict certain Sunday and holiday sales, mostly for retail items. While these laws primarily affect retail operations, employers should be aware of any restrictions that may impact their business activities on these days.
Maryland
Retailers with 25+ employees must provide premium pay and cannot retaliate against employees who choose not to work on certain holidays.
Tip: Always check with your state labor department to stay compliant. Laws change often, and some cities have their own rules.
The Benefits of Holiday Pay (for the Employer)
Even if holiday pay isn’t required, many businesses choose to offer it because of the return on investment.
Here’s how it pays off:
Improved morale: Recognizing holidays shows you value employee time.
Higher retention: Employees are more likely to stay with companies that offer thoughtful benefits.
Stronger recruiting: Top talent often expects paid holidays or premium pay.
Greater productivity: Happy teams are more motivated and engaged.
How Much Is Holiday Pay?
There’s no federal standard for how much holiday pay must be, so that’s up to you. Many companies choose to offer premium pay rates such as:
- Regular rate for a paid day off
- 1.5x or 2x pay for working a holiday
- Holiday bonuses or floating holidays
Some employers offer flexible options, like letting employees take holidays off at different times due to their schedules or beliefs. Whatever your approach, make sure it's fair, consistent, and easy to understand.
By setting a clear structure for holiday pay, you show employees that their time and effort, especially during the holidays, are respected.
Setting Your Holiday Pay Policy
Creating a holiday pay policy doesn’t have to be difficult, but it does require clarity and consistency. A well-structured policy ensures fairness for your employees and helps your managers and payroll team handle the holidays with confidence.
Start by outlining which holidays your company will observe. Then, define who is eligible for holiday pay. For example, full-time employees only, or anyone who has been employed for at least 90 days. Next, explain how much employees will be paid for holidays: regular rate, time-and-a-half, or double time. If holidays fall on weekends, clarify how that will be handled. Will you give a floating holiday, move it to a weekday, or count it as a regular non-workday?
Some employers choose to make holiday pay contingent on employees working their scheduled shifts before and after the holiday. This is generally acceptable for non-exempt employees, if it’s clearly stated in company policy and doesn’t conflict with protected leave laws like FMLA or paid sick leave. For exempt employees, employers cannot reduce their weekly pay if they worked any part of that week, even if they miss a day before or after the holiday, though employers may choose not to offer holiday pay if the absence is unexcused and the policy allows it. Clear, consistent policies are key to staying compliant.
When setting your holiday pay policy, don’t forget to include how holiday time off requests will be managed, especially for essential positions where coverage is needed. All of this should be clearly communicated in your employee handbook and reviewed during onboarding. A clear and fair policy builds trust and helps avoid misunderstandings.
Manage Holiday Pay with FrankCrum
Holiday pay isn’t always simple, especially if your company operates in multiple states or has a mix of exempt and non-exempt employees. With varying work schedules, state laws, and PTO requests to manage, things can get complicated quickly.
That’s where FrankCrum comes in. We help businesses manage payroll, benefits, and HR support so you can stay focused on growth, even during the busy holiday season. Our experts help ensure you’re compliant with state and federal laws, so you don’t have to worry about missing something important.
Let us help you create a holiday pay policy that fits your business and makes life easier for everyone.
Smarter Payroll & HR for Small Business
Expert help for payroll, policies, and compliance.
Article updated May 23, 2025. Originally published November 5, 2015.
