What are Paid Holidays?

Paid holidays are religious, national, or state holidays for which employees receive a paid day off from their employer. There are numerous holidays observed in the U.S., but there is no legal requirement to provide paid holidays. Instead, paid holidays are provided as an employment benefit by an employer. Most workplaces offer at least some paid holidays to meet employee expectations. 

Paid Holiday Laws

There are no U.S. laws that require the provision of paid holidays. According to the U.S. Department of Labor, the Fair Labor Standards Act (FLSA) does not require payment for time not worked, including for holidays. 

Although private employers are not legally mandated to provide paid holidays, Massachusetts and Rhode Island do require employers to pay a premium pay rate to employees who are required to work on designated holidays such as Thanksgiving Day.  

Employee Expectations for Paid Holidays

Despite it not being required by law, most employers do offer some paid holidays. This is in part because employees expect to receive some holidays off with pay. Offering paid holidays is an important part of creating an attractive compensation package. 

According to a Bureau of Labor Statistics release, the average number of paid holidays for full-time employees is 7.6 per year. However, the type of employment can impact expectations. Professional-level employees in the same report had an average of 8.5 paid holiday days, while service employees averaged only 7. 

Benefits of Offering Paid Holidays

Taking time away from work has benefits for the employee even when they return to work. According to the Society for Human Resource Management, these benefits include lower stress, better productivity, and better overall mental health. Paid holidays offer an opportunity for employees to disconnect during times when business is slow, making it less likely that they will be pulled into work during their time off. At a time when almost half of Americans admit working while on vacation, paid holidays provide a needed break when the whole business takes a pause. 

Employers can also benefit by establishing a corporate culture that demonstrates a commitment to employee wellbeing. This type of culture can make it easier to attract and retain qualified employees. Paid holidays are a small gesture that companies can make to demonstrate that they value their employees as individuals. 

How To Decide How Many Paid Holidays to Offer

If you’ve decided that your business will offer paid holidays, how do you decide how many to offer? To get started, consider which are the most common paid holidays.

• New Year’s Day
• Memorial Day
• Independence Day
• Labor Day
• Thanksgiving Day
• Day after Thanksgiving Day
• Christmas Day

The U.S. federal government designates days off during which all government agencies and banks close. There is no requirement that private businesses close on these days as well, but it is not uncommon to include some or all of them in paid holiday offerings. 

• Martin Luther King Jr. Day
• Presidents Day
• Juneteenth
• Columbus Day
• Veterans Day

You should also consider whether any state holidays are commonly paid holidays in your area. 

Finally, conduct some competitor research to determine what other companies in your area or industry are offering. This information is often available on company websites through the careers pages. 

Other Paid Holiday Considerations

Once you’ve decided on how many holidays to offer and designated which holidays you want to recognize, make sure to craft a written policy that clearly outlines your expectations for paid holidays. As you put that policy together, keep a few more things in mind.

Holiday pay for working

Will your business be closed for the designated paid holidays, or will it sometimes be operating during a holiday? If you anticipate requiring some employees to work during the holiday, then you will want to consider offering holiday pay for that day. An employee is more likely to be willing to work on a paid holiday if they anticipate earning more from that day than they would by staying home. Additional pay for working on a holiday can be set at any rate you’d like, but the most common offer is to pay one and one-half the employee’s normal pay rate for time worked on that day. 

Note that additional pay for working a holiday is most often offered to hourly wage employees. Salaried employees are not usually paid holiday pay for working on a holiday, but may instead be offered floating holidays. 

Paying a higher rate for working a holiday is required by two U.S. states. Massachusetts and Rhode Island both require extra pay for employees that work on holidays designated by the state government. Keep in mind that this additional pay is required in these states even if your company does not acknowledge the holiday. 

Floating holidays

A floating holiday is a paid day off selected by the employee. These are separate from other forms of paid time off, such as vacation or sick leave. Floating holidays may be offered in addition to designated paid holidays, or can be used to provide an alternative day off when an employee is required to work on a designated paid holiday. Floating holidays should require employer approval before they are taken. This will avoid staffing problems from too many employees seeking to take the same day off.

Companies sometimes choose to offer 1-2 floating holidays per year so that employees have the opportunity to celebrate dates of personal or religious significance that the company does not designate as a holiday. This can also avoid arguments over why one day is a paid holiday and another is not on the list. 

Unpaid holidays

Finally, consider whether you want your policy to outline how employees may request unpaid time off to celebrate a holiday. If one of your employees requests unpaid time off to celebrate a religious holiday, this should be accommodated so long as it does not cause undue hardship to your business. Employees have legal protections for their sincerely held religious beliefs under Title VII of the Civil Rights Act. These protections extend to taking time off to observe religious holidays. You are not required to offer a paid holiday in this circumstance but you should allow an employee to take unpaid time off. 

Conclusion

Paid holidays provide an important part of HR strategy and compensation plans. While you are not required to offer paid holidays, doing so improves your ability to attract and retain employees. Once you decide what you want to offer in terms of paid holidays, be sure to create a written policy making your expectations clear to your employees.