Holiday Pay Practices: Do You Know Your Legal Requirements?

Questions and Answers About Holiday Pay Practices in the US

Family on Christmas eve
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Holiday pay is an appreciated employee benefit that employers offer to recruit and retain their 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. Employees appreciate holiday pay as a part of a comprehensive employee benefits package.

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. Here are the answers to common employer questions regarding holiday pay-related issues in the United States.

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 as regular workdays. Employees receive their normal pay for the time they work on a holiday if the employer does not offer holiday pay.

Please note though that state laws are always subject to change. Legislation, ballot initiatives, or a court ruling can make new rules regarding employers and holiday pay. So, contact an employment law attorney in your state or conduct your own legal research to verify your state laws regarding 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.

Many employers offer a floating holiday in addition to the regularly scheduled holidays. This allows an employee to take time off for religious observances that are not covered by the employer’s 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.

On the other hand, for exempt employees (salaried employees who do not 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. This requirement for exempt employees did not change under changing federal overtime regulations.

Must employers count the paid time off as hours an employee worked in determining whether an employee is entitled to overtime?

No. If an employer provides paid holidays, it does not have to count the paid hours as hours worked for purposes of determining whether an employee is entitled to overtime compensation.

An employee must actually work 40 hours in a week before he or she is eligible for overtime.

Paid time off (holidays, vacation, sick leave, etc.) is not considered time worked. Note, however, that in a union-represented workplace, many collective bargaining agreements include additional provisions for determining overtime.

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 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. This is up to the employer who may view paying employees who work on a holiday as a part of his 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 not open for business on the weekend.

What if an employee works a compressed work week (for example, four 10-hour days per week)?

As with employees who work a standard work week, there is no requirement that an employer provides an employee on a compressed work week schedule with paid or unpaid time off on a holiday.

Employers who utilize a compressed work week 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.
  • On the other hand, some employers allow the employee to take a substitute holiday on a day when he or she would otherwise have been required to work if the holiday falls on a day the employee is not scheduled to work.
  • Finally, other employers prefer to have employees who work a compressed work week on the job at least four days a week pay for the holiday even if the employee is not scheduled to work that day, thus giving the employees an extra day of pay.

As long as the employer follows its own written policy consistently, any approach selected by an employer is acceptable.

Related to the Holidays

Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment laws and regulations vary from state to state and country to country.

Please seek legal assistance, or assistance from State, Federal, or International governmental resources, to make certain your legal interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.