Holiday pay is any compensation that your employees receive on a holiday. It may be extra compensation for working during a holiday or paid time off that allows employees to get paid without working during a holiday.
On holidays during which a business is closed, holiday pay typically comes in the form of paid time off on that day. On holidays during which at least some employees must work, holiday pay typically comes in the form of bonus pay.
Is holiday pay required by law?
In the US, holiday pay is not required by any state or federal law for either FLSA-exempt or FLSA-non-exempt employees. Even if state laws require your business to close on certain holidays, there is no requirement that you compensate employees for those days.
Some union contracts, however, do stipulate holiday pay for certain holidays, and if you contract with the US government you may have to comply with some holiday pay requirements. Some European countries also require a certain number of paid holidays, so check local regulations if your company has branches outside the US.
Reasons to offer holiday pay
Even though holiday pay is not required by law, offering holiday pay may make sense for your business.
Holiday pay is a benefit that many companies offer, so employers often see it as essential to remaining competitive in the market for talented employees. For employees, receiving holiday pay enables them to take time off to spend with their families without using up their allotment of flexible paid time off or worrying about losing money, so it can certainly make the difference in choosing one job over another.
Holiday pay can also provide an incentive for employees to come to work on holidays when your business is operating. If, for example, your business offers time-and-a-half pay on holidays, employees are more likely to come to work. Otherwise, you may find that many employees request paid time off on holidays, leaving your business short-staffed.
Having to work holidays when most of their friends and family are out celebrating can also lower employee morale. While offering holiday pay can’t fix this, it can help make workers who clock in on holidays feel appreciated, which will benefit your business’s employee satisfaction and motivation.
How to offer holiday pay
If your company decides to offer holiday pay to one full-time or part-time employee, you are not required to offer it to all employees, although it’s generally a good practice to do so in the interest of fairness. Part-time employees, full-time employees, salaried employees, and hourly employees may all be eligible for holiday pay, depending on your company’s preferences.
If your company offers holiday pay to some employees but not others, the basis for who receives holiday pay must not be discriminatory on the basis of protected characteristics like race, sex, or religion.
To avoid confusion and incentivize employees, holiday pay should be specified in your company’s benefits package and communicated to employees when they are hired.
Most businesses that offer holiday pay do so for some or all of the 11 federal holidays in the US.
- New Year’s Day
- Martin Luther King, Jr. Day
- President’s Day
- Memorial Day
- Juneteenth National Independence Day
- Independence Day
- Labor Day
- Columbus Day
- Veteran’s Day
- Thanksgiving Day
- Christmas Day
Businesses are free to choose which of these holidays for which to offer holiday pay, to offer holiday pay on any other day of the year, or not to offer holiday pay at all.
Holiday pay is paid time off or extra compensation that employees receive on holidays. There is no requirement for businesses to offer holiday pay, but offering holiday pay can make your company more competitive when it comes to hiring and retaining employees. Businesses commonly offer holiday pay on some or all of the 11 US federal holidays.