Do Employers Have to Pay Holiday Pay?

Under federal law, private employers generally do not have to provide paid holidays or pay a premium just because an employee works on a holiday. The Fair Labor Standards Act (FLSA) treats holiday pay as a benefit that usually depends on an employer policy or an agreement rather than a general federal requirement. Employees who work on a holiday must be paid for the hours they work, but the date itself does not automatically entitle them to time-and-a-half. A policy, collective bargaining agreement, state rule, or certain government-contract requirements can create a different obligation. The key is to distinguish paid time off for a holiday from extra pay for working one, then check which rules and agreements apply to the employee.

What Does Federal Law Require?

The FLSA does not require employers to pay employees for time they do not work, including holidays. The U.S. Department of Labor explains that paid holiday benefits are generally a matter of agreement between an employer and employee or the employee's representative.

As a result, a private employer can generally choose whether to close for a holiday and pay employees, close without paying for the day, or remain open and pay employees their usual rates. An employer may also offer premium pay for holiday shifts or provide a floating holiday employees can use on another date. Eligibility can be limited by a written policy, subject to any other applicable requirement.

Federal law does not generally require an employer to treat a holiday differently from another workday simply because it appears on the calendar. This is the baseline, not the end of the inquiry: a contract, policy, state rule, or covered government contract may add requirements.

How Are Holiday Pay and Premium Pay Different?

Pay for a Holiday Off

Holiday pay can mean wages an employee receives when the business is closed or the employee does not work because of a holiday. For example, an employer might provide a paid day off for New Year's Day. Federal law does not generally require this benefit. It is usually offered through an employer policy or an employment or collective bargaining agreement.

Extra Pay for Working on a Holiday

Some employers pay a higher rate or provide a bonus to employees who work on a holiday. The FLSA does not generally require holiday premium pay. An employee must be paid for hours worked, but working on a holiday does not, by itself, create a federal right to a higher rate.

Employers may also offer a floating holiday as an alternative to observing only fixed dates on the calendar. The policy should explain whether it is paid time off and how employees can use it.

When Does Holiday Work Count Toward Overtime?

Federal overtime is generally based on the hours a non-exempt employee actually works in a workweek, not on whether a shift falls on a holiday. Under the FLSA, eligible employees generally receive overtime when their actual hours worked exceed 40 in a workweek. A holiday does not automatically trigger time-and-a-half.

Paid holiday hours when an employee does not work generally do not count as hours worked toward the federal overtime threshold. For instance, if an employee receives eight hours of holiday pay and works 40 hours during the same week, the employee has 40 hours worked for federal overtime purposes, even though payroll may show 48 paid hours. An employer policy or agreement may provide a more generous calculation.

Because the distinction affects pay calculations, employers should state clearly whether paid holiday hours count toward overtime under their policy. For more detail on this issue, see holiday pay and federal overtime.

What Can Make Holiday Pay an Employer Obligation?

Employer Policies and Agreements

A handbook, payroll policy, offer letter, employment agreement, or collective bargaining agreement may promise holiday pay or premium pay. If an agreement applies, its terms can establish which holidays are covered, who qualifies, and what rate applies to holiday work. The Department of Labor describes holiday benefits as a matter of agreement between employers and employees or their representatives.

A clear policy should explain which holidays are covered and which employees are eligible. It should also state whether employees must work their scheduled shifts before or after the holiday to qualify. Other useful details include treatment of part-time, temporary, seasonal, and remote employees, as well as what happens when a holiday falls on a weekend. The policy should specify whether paid holiday hours count toward overtime under the employer's rules.

Certain Government Contracts

Some government-contract work has holiday or vacation pay requirements. Under the Davis-Bacon and Related Acts, for example, holiday or vacation benefits may be required for particular worker classifications when the applicable wage determination includes them. Employers should check the specific contract and wage determination because the requirement depends on what applies to that work.

Can State Rules Change the Answer?

State law can add another layer, so employers should check the rules where employees work. California is one example: the California Department of Industrial Relations holiday FAQ says that state law does not require a special premium for work on holidays, Saturdays, or Sundays, apart from applicable overtime premiums. Without a policy, practice, or agreement that provides more, employers generally must pay for the hours actually worked.

That California example should not be assumed to apply everywhere. Employers with workers in multiple states should check the relevant state rules and any applicable agreements before applying one location's holiday-pay policy across the workforce.

How Can Employers Set Clear Holiday-Pay Rules?

Employers can start by deciding what benefits to offer, such as paid days off, premium pay for employees who must work, or floating holidays. They should then put eligibility and payment terms in writing instead of relying on vague language such as “holiday pay may be available.”

The policy should address how holiday pay is calculated and whether it counts toward overtime under the policy. Managers and payroll teams should use the same written rules, and employees should be able to find them before holiday schedules are set. Consistent communication and payroll coding can help prevent different interpretations of the same benefit.

What Should Employees Check?

Employees who are unsure whether holiday pay applies to them can review the handbook or paid-time-off policy, their employment agreement, and any collective bargaining agreement that covers their work. They can also compare prior payroll records with the written policy and check state labor guidance for the state where they work. Asking which policy applies to their role and the specific holiday can clarify whether the benefit is paid time off, premium pay, or neither.

*This article is for general informational purposes only and is not legal advice.