Under federal law, you’re not required to pay employees extra for working holidays unless they exceed 40 hours in a workweek. However, state-specific regulations, particularly in Rhode Island, may mandate holiday premium pay.
With that said – about 78% of private sector employers do choose to offer paid holidays to their employees. Typically providing eight paid holidays annually with premium rates like time-and-a-half or double-time.
Understanding these nuances can help you create competitive, compliant holiday pay practices, and keep your employees happy through the holiday season.
Let’s explore further below.
Key Takeaways
- Federal law does not mandate extra holiday pay unless employees work over 40 hours in a workweek.
- Few require premium pay for certain holidays, while most states leave it to employer discretion.
- Employers must follow their established holiday pay policies once communicated to employees through handbooks or contracts.
- Different rules apply to exempt and non-exempt employees, with exempt employees receiving regular salary regardless of holiday work.
- While not legally required, offering holiday premium pay can improve employee retention and workplace morale.
Understanding Holiday Pay Laws
Confusion often surrounds holiday pay laws in the United States, but the rules are actually straightforward.
You’re not required by federal law to provide extra compensation for holiday work unless employees exceed 40 hours in a workweek.
For most states, any holiday premium pay is entirely at your company’s discretion.
Private Sector Holiday Pay and Policies
Again, while you’re not legally required to provide holiday pay in the private sector, many companies choose to offer it as a competitive benefit.
Currently, about 78% of civilian workers receive paid holidays, with most getting eight paid days annually.
A few reasons to put these policies in place are:
- 63% of employees state that paid holidays and time off are crucial for job satisfaction.
- Companies with strong holiday benefits experience up to 50% lower turnover rates than those without.
- 78% of employees say they are more likely to stay with a company that offers generous paid leave and holiday policies.
Federal and State Holidays
Throughout the year, you’ll need to navigate both federal and state holiday observances to maintain proper payroll and scheduling practices.
The federal calendar includes 11 recognized holidays, while states may add their own, like Texas Independence Day.
The 11 are listed below:
- New Year’s Day – January 1
- Martin Luther King Jr. Day – Third Monday in January
- Washington’s Birthday (Presidents’ Day) – Third Monday in February
- Memorial Day – Last Monday in May
- Juneteenth National Independence Day – June 19
- Independence Day – July 4
- Labor Day – First Monday in September
- Columbus Day (or Indigenous Peoples’ Day in some states) – Second Monday in October
- Veterans Day – November 11
- Thanksgiving Day – Fourth Thursday in November
- Christmas Day – December 25
Holiday Pay for Exempt vs. Non-Exempt Employees
When it comes to holiday pay, understanding the differences between exempt and non-exempt employees can save you from costly payroll mistakes.
For non-exempt employees, you’re only required to pay overtime when they exceed 40 hours in a workweek, even during holidays.
Exempt employees receive their regular salary regardless of holiday work.
Managing Holiday Pay at Your Company
Creating a sound holiday pay policy requires careful consideration of your company’s goals, budget, and employee expectations.
Even though you’re not legally required to offer holiday pay, establishing competitive benefits can boost your employee retention and their morale.
Document your policy clearly in your employee handbook, specifying eligibility requirements, payment rates, and which holidays are covered.
Here’s an example of what items should be documented:
- Purpose
- State the reason for the policy (e.g., promoting employee well-being and work-life balance).
- Eligibility
- Define which employees qualify for holiday pay (full-time, part-time, temporary, contract).
- Specify pro-rated pay for part-time employees, if applicable.
- Recognized Holidays
- List all holidays eligible for holiday pay.
- Address weekend holidays and observance on the nearest weekday.
- Holiday Pay Structure
- Detail how holiday pay is calculated (e.g., regular pay for standard hours).
- Explain additional pay for employees working on holidays (e.g., time and a half).
- Procedure
- Clarify requirements for receiving holiday pay (e.g., must be actively employed on the holiday).
- Address unpaid leave, unexcused absences, or attendance policies around holidays.
- Floating Holidays
- Specify the number of floating holidays allowed and how they can be used.
- Religious or Personal Holidays
- Outline the process for requesting time off for non-federal holidays.
- Note use of PTO or unpaid leave for these holidays.
- Exceptions and Modifications
- State management’s right to amend or modify the policy.
- Indicate that employees will receive written notice of any changes.
- Acknowledgment
- Include a section for employees to sign and confirm they have read and understood the policy.
Frequently Asked Questions
Do I Get Extra Pay if I Work on a Holiday?
Whether you’ll get extra pay for working on holidays depends on your employer’s policies.
Federal law doesn’t require companies to provide holiday premium pay, except when holiday hours push your workweek over 40 hours, qualifying for overtime.
While some employers voluntarily offer holiday bonuses like time-and-a-half or double pay, it’s not legally required unless it’s in your employment contract or company policy.
What States Require Employers to Pay Holiday Pay?
Only Rhode Island has state laws requiring employers to pay premium rates for holiday work. Rhode Island mandates time-and-a-half for specific holidays.
Massachusetts used to have premium pay requirements, but they were eliminated effective January 1, 2023.
Most other states don’t require holiday premium pay, though your employer may offer it through company policy or employment agreements.
What Are the Federal Rules for Holiday Pay?
Under federal law, you’re not required to provide holiday pay or holiday premium pay to your employees.
The Fair Labor Standards Act (FLSA) only requires that you pay non-exempt employees overtime when they work more than 40 hours in a workweek, regardless of holidays.
You don’t have to pay employees for holidays they don’t work, and any holiday pay policies are at your discretion as an employer.
Who Is Exempt From Holiday Pay?
Exempt employees, typically those in managerial, professional, or administrative roles who earn a salary, aren’t legally entitled to holiday pay.
You’ll find that these workers usually meet specific FLSA criteria: they earn at least $684 weekly, perform primarily intellectual work, and exercise independent judgment.
Common exempt positions include executives, administrators, outside sales representatives, and certain IT professionals who manage systems.
Conclusion
While you’re not legally required to offer premium holiday pay, creating a fair and competitive policy helps attract and retain valuable employees. Consider your industry standards, budget constraints, and workforce needs when developing your approach.
Whether you choose time-and-a-half, double-time, or floating holidays, document your policy clearly and apply it consistently.
Remember, investing in employee satisfaction during holidays often pays dividends in loyalty and productivity year-round.
If you’d like help developing your policy, get in touch with us here at Valor Payroll Solutions – we’re here to help!
