Holiday Pay Practices: Do You Know Your Legal Requirements?

These are questions employers most frequently ask about holiday pay

This illustration includes quick facts about legal holiday pay practices including "An employer does not have to pay hourly employees for time off on a holiday," "No federal law requires employers to provide time off-paid or otherwise-to employees on nationally recognized holidays," and "Employer is obligated to provide reasonable accommodation for the religious practices of its employees (unless it can show that the accommodation would result in undue hardship for its business)

 Theresa Chiechi © The Balance

Holiday pay is an appreciated employee benefit that employers offer to recruit and retain the best employees. In competition with other employers who provide little or no paid holiday time, the employer that offers the most generous holiday pay package will often win the talent war. This need is increasing as the market for specialized skills and experience in areas such as artificial intelligence (AI) and advanced HR systems are skyrocketing. Provide excellent benefits for the win.

During the weeks leading up to a holiday, it is a good idea to review your company’s holiday pay practices.

You want to ensure your competitiveness with other employers.

Answers to the Most Frequently Asked Questions About Holiday Pay

Here are the answers to the most commonly asked employer questions regarding holiday pay issues in the U.S.

Must an Employer Provide Employees Time Off on Holidays?

No. There is no Federal law that requires an employer to provide time off, paid or otherwise, to employees on nationally recognized holidays. Holidays are also typically considered regular workdays. Employees receive their normal pay for the time they work on a holiday if the employer does not offer holiday pay.

On a state level, legislation, ballot initiatives, or court ruling can create new rules regarding employers and holiday pay.

Must an Employer Accommodate an Employee’s Observance of a Religious Holiday?

An employer is obligated to provide reasonable accommodation for the religious practices of its employees unless it can show that the accommodation would result in undue hardship for its business. To accommodate employees, many employers offer a floating holiday in addition to the regularly scheduled holidays. This allows employees to take time off for religious observances that are not covered by the established holiday schedule.

Courts addressing the issue of religious accommodation generally agree that unpaid time off can be a reasonable accommodation, as can allowing an employee to use a vacation day to observe a religious holiday.

Generally, employers require that floating holidays are taken in the same year they are granted and do not allow these days to carry over into the next year.

Employees are usually required to give adequate advance notice of their intention to take a floating holiday.

Must Holiday Time Off Be Paid?

For non-exempt hourly employees, no. An employer does not have to pay hourly employees for time off on a holiday. An employer is only required to pay hourly employees for the time they actually worked.

For exempt employees (i.e., salaried employees who don't receive overtime), if they are given the day off, employers must pay their full weekly salary if they work any hours during the week in which the holiday falls. 

May an Employer Attach Conditions to the Receipt of Holiday Pay?

Yes. For example, an employer may require that employees work—or be on an approved leave status—the day before and after a holiday in order to receive holiday pay. An employer may also require an employee to have worked for the company for a specified period of time before becoming eligible for holiday pay.

In addition, an employer may prorate the amount of holiday pay due to a part-time employee. Whatever conditions apply to the receipt of holiday pay should be documented in writing, generally in the employee handbook.

Are Employees Who Work on a Holiday Entitled to Premium Pay?

No. While it is common to pay a premium to an employee who works on a holiday, there is no legal requirement to do so. It's up to the employer who may view paying employees who work on a holiday as a part of their benefits package.

Must an Employer Provide the Same Holiday Benefits to All Employees?

No, as long as the basis for the different treatment is not discriminatory. For example, based on a protected classification, such as age, race, and so forth. For instance, an employer can provide holiday pay only to full-time and not to part-time employees, or to the office employees and not to employees who work in the field.

What If a Holiday Falls on an Employee’s Day Off or When the Business Is Closed?

While not required by law, many employers give an employee the option of taking off another day if a holiday falls on the employee’s day off. Similarly, many employers observe a holiday on the preceding Friday or the following Monday if a holiday falls on a Saturday or Sunday and the employer is closed on weekends.

What If an Employee Works a Compressed Workweek (e.g., Four 10-Hour Days a Week)?

As with employees who work a standard workweek, there is no requirement that an employer provides an employee on a compressed workweek schedule with paid or unpaid time off on a holiday. Employers who utilize a compressed workweek have generally taken one of three approaches to eligibility for holiday pay.

  • Some employers pay only for holidays occurring on the employee’s regularly scheduled workday.
  • Some employers allow the employee to take a substitute holiday on a day when they would otherwise have been required to work if the holiday falls on a day the employee is not scheduled to work.
  • Some employers prefer to give employees who work a compressed workweek (at least four days a week) pay for the holiday, even if the employee is not scheduled to work that day. This gives the employees an extra day of pay.

It's worth noting that as long as the employer follows its own written policy consistently, any approach selected by an employer is acceptable.

The information contained in this article is not legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current legal advice, please consult with an accountant or an attorney.