No, federal law does not require private employers to provide salaried employees with holiday pay for time off or premium pay for working on holidays. The Fair Labor Standards Act (FLSA) creates no legal obligation for companies to compensate employees for federal holidays or time not worked. However, salaried exempt employees face different rules than non-exempt workers because of the salary basis requirement that protects their weekly pay from most deductions.
The specific problem arises from 29 CFR § 541.602, which establishes the salary basis test. This federal regulation prohibits employers from reducing an exempt employee’s salary for absences caused by the employer or the operating requirements of the business, including holiday closures. The immediate consequence of violating this rule is that the employee loses their exempt status, which means the employer becomes liable for overtime pay and may face penalties including back wages, liquidated damages, and attorney fees for all affected employees in the same job classification.
According to the U.S. Bureau of Labor Statistics, approximately 77 percent of civilian workers had access to paid holidays in March 2018, averaging 8 paid holidays per year. However, this means that roughly 40 million Americans (about 1 in 4 employees) receive no paid holidays from their employers.
What You Will Learn:
🎯 The critical difference between exempt and non-exempt salaried employees and why it determines whether you must be paid during holiday closures
💰 How the salary basis test protects your weekly paycheck from improper deductions when your employer closes for holidays
📋 Which specific deductions employers can legally make from your salary and which violations could entitle you to overtime back pay
🏢 Real-world scenarios showing when companies must pay salaried employees during holidays versus when they have discretion
⚖️ State-specific exceptions in Rhode Island and Massachusetts where holiday pay laws differ from federal standards
Understanding Holiday Pay for Salaried Employees
Holiday pay refers to compensation provided to employees for recognized holidays. This compensation can take two distinct forms: paid time off when the business closes for a holiday, or premium pay (usually time-and-a-half or double time) for employees who work on a holiday. The distinction between these two types matters because they involve different legal obligations and employer practices.
The FLSA does not require private employers to provide payment for time not worked, which includes vacations and holidays. This means that holiday pay, in most cases, remains a discretionary benefit that employers choose to offer rather than a legal requirement they must fulfill. However, this general rule contains important exceptions for salaried exempt employees.
The Federal Landscape: No Mandatory Holiday Pay
At the federal level, the FLSA governs wage and hour requirements for most private employers. The statute makes clear that employers need not pay employees for holidays when the business remains closed and the employee performs no work. According to the Department of Labor, the FLSA does not require overtime pay for work on weekends, holidays, or regular days of rest, unless overtime hours are worked on such days.
This creates a baseline rule: private employers can choose whether to offer holiday pay. They can decide which holidays to observe, who qualifies for holiday pay, and how much to pay. These decisions typically appear in employee handbooks, employment contracts, or collective bargaining agreements.
When employers do offer holiday pay, it becomes a contractual obligation. If your employment contract or company policy promises holiday pay, you have a legal right to receive it. Employers who fail to honor these promises can face lawsuits for breach of contract or wage theft claims.
Exempt vs. Non-Exempt Salaried Employees: The Critical Distinction
Not all salaried employees are treated the same way under federal law. The FLSA divides workers into two categories: exempt and non-exempt. This classification determines whether an employee must receive overtime pay and whether their salary enjoys protection from certain deductions.
Exempt employees are those who meet three tests: the salary level test (earning at least $684 per week or $35,568 annually as of 2024), the salary basis test (receiving a predetermined salary not subject to reduction based on work quality or quantity), and the duties test (performing executive, administrative, professional, computer, or outside sales work). These employees are exempt from minimum wage and overtime requirements.
Non-exempt salaried employees receive a salary but do not meet all three exemption tests. These employees remain entitled to minimum wage and overtime pay. They are typically paid for hours actually worked, which means they have no legal entitlement to pay for holidays when they do not work, unless the employer provides it as a benefit.
The salary basis test creates the most significant difference in holiday pay treatment. For exempt employees, the employer must pay the full salary for any week in which the employee performs any work, without regard to the number of days or hours worked. This means if an employer closes for a holiday during a week when the exempt employee worked other days, the employer cannot reduce the salary for that holiday closure.
The Salary Basis Test and Holiday Closures
The salary basis test under 29 CFR § 541.602 establishes strict rules about when employers can reduce an exempt employee’s salary. The regulation states that an exempt employee must receive their full salary for any workweek in which they perform any work, regardless of the number of days or hours worked.
When an employer closes the business for a holiday, this creates an absence occasioned by the employer or by the operating requirements of the business. Federal regulations prohibit deductions from an exempt employee’s salary for such absences. The consequence is clear: if an exempt employee is ready, willing, and able to work, but the employer decides to close for a holiday, the employer must pay the full weekly salary as long as the employee worked any part of that week.
This rule exists because exempt status requires payment on a salary basis. A true salary is a predetermined amount that does not fluctuate based on the quantity or quality of work performed. If an employer makes improper deductions, it demonstrates that the employee is not truly being paid on a salary basis, which jeopardizes the employee’s exempt status.
Permissible Deductions from Exempt Employee Salaries
While the salary basis test is strict, federal regulations do allow certain deductions. Understanding these exceptions helps clarify when employers can legally reduce an exempt employee’s pay:
Full-day absences for personal reasons: Employers may deduct for absences of one or more full days for personal reasons, other than sickness or disability. For example, if an exempt employee takes two full days off to handle personal affairs, the employer can deduct for those two full days. However, partial-day deductions remain prohibited.
Full-day absences for sickness or disability: Deductions for full-day absences due to sickness or disability are permitted, but only if the employer has a bona fide sick leave plan that provides salary replacement, and either the employee has not yet qualified for benefits under the plan or has exhausted all available leave.
Family and Medical Leave Act (FMLA) leave: When exempt employees take unpaid leave under the FMLA, employers may pay a proportionate part of the full salary for time actually worked rather than the full weekly salary.
Initial or terminal week of employment: In the first or last week of employment when an employee does not work the full week, the employer may pay a proportional salary for the actual time worked.
Penalties for safety violations: Deductions may be made for penalties imposed in good faith for infractions of safety rules of major significance, such as rules prohibiting smoking in explosive plants.
Jury duty, witness duty, or military leave: While employers cannot make deductions for absences due to these reasons, they can offset amounts the employee receives as jury fees, witness fees, or military pay against the salary due for that week.
Notably absent from this list: deductions for employer-mandated holiday closures. This means if an employer closes the office for a holiday and the exempt employee is ready, willing, and able to work, the employer may not deduct salary for the holiday closure.
Consequences of Improper Deductions
Making improper deductions from exempt employees’ salaries carries serious consequences. If an employer has an actual practice of making improper deductions, the exemption is lost for the affected employees during the time period when the improper deductions were made.
The Department of Labor considers several factors when determining whether an employer has an “actual practice” of improper deductions: the number of improper deductions, the time period during which deductions were made, the number and geographic location of employees whose salaries were improperly reduced, the number and geographic location of managers responsible for the improper deductions, and whether the employer has a clearly communicated policy permitting or prohibiting improper deductions.
In the case of Yourman v. City of New York, the Second Circuit Court of Appeals examined whether the City of New York had an actual practice of making improper deductions from salaried employees’ pay. The court found that even a relatively small number of improper deductions could constitute an “actual practice” if other factors indicated the employer did not objectively intend to pay employees on a salary basis.
When an employer loses the exemption due to improper deductions, affected employees become entitled to overtime pay for all hours worked over 40 in a workweek. This can result in substantial back pay liability, plus liquidated damages equal to the amount of back pay, attorney fees, and court costs.
State-Specific Holiday Pay Laws
While federal law generally does not require holiday pay, some states have enacted their own requirements. As of 2026, only Rhode Island maintains mandatory premium pay for working on certain holidays, while Massachusetts eliminated its premium pay requirement in 2023.
Rhode Island: Premium Pay Required
Rhode Island law requires that nonexempt employees be paid one-and-a-half times their regular rate of pay for hours worked on Sundays and holidays. This premium pay requirement is separate from and in addition to overtime pay.
The holidays covered under Rhode Island law include New Year’s Day, Memorial Day, Independence Day, Victory Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day. Employees are also entitled to refuse to work on these holidays without facing retaliation.
However, certain employees are exempt from this requirement, including commercial fishermen, farmers, healthcare workers, lawyers, and many types of hospitality workers. The Rhode Island Department of Labor and Training issued new regulations in 2025 that define what qualifies as a “retail business” for purposes of calculating Sunday and holiday premium pay.
For most employers, overtime and Sunday/holiday premium pay are calculated separately. If an employee works 50 hours in a week for a non-retailer, including 8 hours on Sunday, the employer must pay 32 hours at straight-time, 8 hours at time-and-a-half for Sunday work, and 10 hours at time-and-a-half for hours worked over 40.
Retail businesses can count the Sunday/holiday premium towards their overtime pay obligation. For a retail employer, the same 50-hour workweek would be compensated as 40 hours at straight-time and 10 hours at time-and-a-half, covering both the Sunday work and the overtime.
Massachusetts: Premium Pay Eliminated
Massachusetts previously required certain retail establishments to provide premium pay for work on Sundays and holidays. However, as of January 1, 2023, “premium pay” for Sundays and holidays has been eliminated under the amended law. The requirement was phased out in exchange for a higher minimum wage.
While the mandatory premium pay no longer exists, Massachusetts law still provides that employees in certain retail establishments can refuse to work on Sundays without facing retaliation. Additionally, some municipalities may have their own regulations regarding Sunday and holiday work.
Employers in Massachusetts must still honor any contractual obligations regarding holiday pay. If an employment contract, collective bargaining agreement, or company policy provides for holiday pay, the employer must fulfill this commitment.
California and Other States
The majority of states, including California, have no laws requiring private employers to provide holiday pay. California law does not mandate that employers provide paid holidays or premium pay for working on holidays. However, if employers establish a policy or practice of providing holiday pay, they create a contractual obligation to honor it.
California’s rules for exempt employees remain consistent with federal law. If a salaried exempt employee performs any work during a workweek, they must receive their full salary for that week, even if the business closes for a holiday. Employers may not deduct salary for absences caused by the employer or by the operating requirements of the business, including holiday closures.
Common Scenarios: When Salaried Employees Get Holiday Pay
To understand how holiday pay works in practice, examining specific scenarios helps clarify the rules and their applications. These examples illustrate the most common situations salaried employees encounter.
Scenario 1: Exempt Employee, Company Closes for Holiday
Situation: Sarah works as a salaried exempt marketing manager earning $1,000 per week. Her company closes on Thanksgiving (Thursday) and the Friday after Thanksgiving. Sarah works Monday, Tuesday, and Wednesday that week, then the office is closed Thursday and Friday.
Action: The employer closes the business for two days during the workweek.
Consequence: Sarah must receive her full $1,000 weekly salary. The employer cannot reduce her salary for the two days the business was closed. Since Sarah worked Monday through Wednesday, she performed work during the workweek. The salary basis test prohibits deductions for absences occasioned by the employer.
Alternative Permitted Action: The employer can require Sarah to use paid time off (PTO) for Thursday and Friday, reducing her PTO bank by 16 hours (2 days × 8 hours). However, if Sarah lacks sufficient PTO, the employer still must pay the full $1,000 salary.
Scenario 2: Non-Exempt Salaried Employee, Company Closes for Holiday
Situation: Marcus works as a non-exempt salaried administrative assistant earning $600 per week ($15 per hour for a 40-hour week). His company closes on Christmas Day (Monday). Marcus would normally work Monday through Friday.
Action: The employer closes the business for one day.
Consequence: If the employer has no policy providing paid holidays, Marcus is entitled only to pay for the hours he actually works (32 hours Tuesday through Friday), which equals $480. Non-exempt employees are paid only for hours worked unless the employer provides paid holidays as a benefit.
Alternative with Holiday Pay Policy: If the employer’s policy provides paid holidays, Marcus would receive his full $600 weekly salary ($480 for 32 hours worked plus $120 for the 8-hour holiday).
Scenario 3: Exempt Employee Required to Work on Holiday
Situation: Jennifer is a salaried exempt IT director earning $2,000 per week. A critical system failure requires her to work on Christmas Day, which falls on a Wednesday. She works her normal schedule Monday through Friday that week.
Action: Jennifer works on a company-recognized holiday.
Consequence: Under federal law, Jennifer is entitled to her regular $2,000 weekly salary. The FLSA does not require premium pay for exempt employees who work on holidays. However, many employers choose to provide exempt employees with either an additional day off to be taken later or bonus compensation as recognition for working the holiday.
Company Policy Matters: If Jennifer’s employer has a policy stating that exempt employees who work on holidays receive an additional floating holiday, she would be entitled to take another day off. The employer must honor its own written policies.
Scenario 4: Salaried Employee in Rhode Island Works on Holiday
Situation: David is a non-exempt salaried warehouse supervisor in Rhode Island earning $800 per week ($20 per hour for 40 hours). He works on Labor Day (Monday) plus his normal Tuesday through Friday schedule, totaling 40 hours for the week.
Action: David works on a holiday covered by Rhode Island’s premium pay law.
Consequence: Rhode Island law requires time-and-a-half for working on Labor Day. David must receive $800 for his 40 regular hours plus $160 in premium pay (8 hours × $20 × 0.5), totaling $960 for the week. Rhode Island requires premium pay for hours worked on Sundays and certain holidays, which is calculated separately from overtime.
If David Worked 48 Hours: If David worked 8 hours on Labor Day plus 40 additional hours during the week (48 total), he would receive: 40 hours at his regular rate ($800), 8 hours of Labor Day premium pay ($160), and 8 hours of overtime pay ($240), totaling $1,200.
Part-Time Salaried Employees and Holiday Pay
Part-time salaried employees face unique considerations when it comes to holiday pay. The treatment depends on whether the employee is exempt or non-exempt and whether the employer provides holiday benefits.
Exempt Part-Time Employees
Part-time employees can be classified as exempt if they meet all three exemption tests, including the salary basis test. However, they must still receive at least $684 per week to maintain exempt status. The weekly salary threshold applies regardless of whether the employee works full-time or part-time.
If a part-time exempt employee works any portion of a workweek, they must receive their full predetermined salary for that week, even if a holiday occurs during the week. The same salary basis rules apply: employers cannot make deductions for holiday closures if the employee is ready, willing, and able to work.
Non-Exempt Part-Time Employees
Non-exempt part-time salaried employees are entitled to pay only for hours actually worked, unless the employer provides paid holiday benefits. Part-time employees may receive holiday pay, depending on company policy or hours worked.
Many employers structure their holiday pay policies to provide benefits based on hours worked or employment status. Common approaches include:
Prorated Holiday Pay: Some employers provide part-time employees with holiday pay prorated to their normal schedule. For example, if a part-time employee normally works 4 hours on Mondays and a holiday falls on Monday, they would receive 4 hours of holiday pay.
Minimum Hours Requirement: Other employers require employees to work a minimum number of hours per week (often 20 or 30 hours) to qualify for paid holidays. Part-time employees working fewer hours receive no holiday pay.
Full-Time Only: Some employers limit paid holidays to full-time employees, providing no holiday benefits to part-time workers. This approach is legally permissible under federal law, though it may not be competitive in attracting talent.
Calculating Holiday Pay for Salaried Employees
When employers choose to provide holiday pay, calculating the amount depends on whether the employee is paid on a salary or hourly basis and whether they work on the holiday.
Salaried Employees Not Working on Holiday
For a salaried employee who does not work on a holiday, calculate their daily rate by dividing their annual salary by the number of working days in the year (typically 260 days for full-time employees working 5 days per week).
Example: An employee earns an annual salary of $52,000. Their daily rate is $52,000 ÷ 260 days = $200 per day. If they receive one day of holiday pay, they would receive $200 for that holiday.
For weekly salaried employees, divide the weekly salary by the number of workdays in the week. An employee earning $1,000 per week who works 5 days per week has a daily rate of $1,000 ÷ 5 = $200 per day.
Salaried Employees Working on Holiday with Premium Pay
If an employer provides premium pay for salaried non-exempt employees who work on holidays, calculate the employee’s hourly rate and apply the premium multiplier.
Example: An employee earns $800 per week for a 40-hour workweek. Their hourly rate is $800 ÷ 40 = $20 per hour. If they work 8 hours on a holiday and the employer provides time-and-a-half, calculate the premium pay as the hourly rate multiplied by 1.5: $20 × 1.5 = $30 per hour.
The employee would receive their regular weekly salary ($800 for 40 hours worked) plus holiday premium pay. The holiday premium pay equals $20 × 0.5 × 8 hours = $80. Total compensation for the week: $880.
Double-Time Calculation: Federal employees who work on holidays receive double-time pay. For each hour of holiday work, employees receive holiday premium pay equal to their basic rate of pay, in addition to their regular pay. An employee earning $25 per hour would receive $50 per hour for holiday work ($25 basic pay + $25 holiday premium pay).
Important Considerations for Overtime
When calculating holiday pay for non-exempt employees, be careful about whether holiday hours count toward the 40-hour overtime threshold. Under federal law, paid holiday time off hours are credited as hours of work when determining whether an employee has worked over 40 hours in a week for overtime purposes.
However, the FLSA does not require premium pay for work on holidays, provided the employee has not worked overtime hours that week. Premium holiday pay (at least 1.5 times the regular rate) may be credited toward overtime compensation if it meets the FLSA’s requirements.
Mistakes to Avoid with Salaried Employee Holiday Pay
Employers and employees both make common mistakes when dealing with holiday pay. Understanding these errors helps prevent legal violations and ensures proper compensation.
Mistake 1: Docking Exempt Employees’ Salaries for Holiday Closures
The Error: An employer closes for a three-day holiday weekend (Thursday through Saturday). The exempt employee works Monday through Wednesday. The employer deducts two days’ pay from the employee’s salary because the office was closed Thursday and Friday.
Why It’s Wrong: Employers cannot make deductions from exempt employees’ salaries for absences occasioned by the employer or by the operating requirements of the business. Since the employee is ready, willing, and able to work but the employer chose to close, no deduction is permitted.
The Consequence: This improper deduction violates the salary basis test. If the employer has an actual practice of making such deductions, the affected employees lose their exempt status and become entitled to overtime pay.
The Correct Approach: Pay the full weekly salary. The employer may require the employee to use accrued PTO for the two days, but if the employee lacks sufficient PTO, the full salary is still owed.
Mistake 2: Requiring Exempt Employees to Work Before and After Holidays
The Error: An employer implements a policy requiring all employees to work their scheduled shifts the day before and after a holiday to receive holiday pay. An exempt employee calls in sick the day after Christmas. The employer denies holiday pay for Christmas Day.
Why It’s Wrong: Policies requiring employees to work before and after holidays can only be applied to non-exempt employees. Exempt employees must receive their full salary for any week in which they work, regardless of attendance on specific days.
The Consequence: The employer violates the salary basis test by making an improper partial-week deduction. This could jeopardize the employee’s exempt status.
The Correct Approach: Exempt employees must receive their full salary as long as they work any part of the workweek. Employers can apply before-and-after-holiday attendance requirements only to non-exempt employees.
Mistake 3: Assuming All Salaried Employees Are Exempt
The Error: An employer pays all its managers on a salary basis and assumes they are all exempt from overtime. The employer provides no holiday pay to these “salaried employees” when the business is closed.
Why It’s Wrong: Being paid a salary does not automatically make an employee exempt. An employee must satisfy the salary level test, salary basis test, and duties test to qualify for exemption. Non-exempt salaried employees exist and are entitled to overtime pay.
The Consequence: Non-exempt salaried employees who are not paid for holidays when they don’t work may have no legal claim (if the employer has no policy providing paid holidays). However, if the employer incorrectly classifies non-exempt employees as exempt and fails to pay overtime, significant liability can result.
The Correct Approach: Carefully evaluate each position using the three-part exemption test. Non-exempt salaried employees should be paid only for hours worked (unless the employer provides paid holidays as a benefit) and must receive overtime for hours over 40 in a workweek.
Mistake 4: Making Partial-Day Deductions for Personal Absences
The Error: An exempt employee leaves work three hours early on the Wednesday before Thanksgiving for personal reasons. The employer deducts three hours from the employee’s salary.
Why It’s Wrong: Under the FLSA, employers may make deductions for full-day absences for personal reasons, but partial-day deductions are prohibited.
The Consequence: The partial-day deduction violates the salary basis test and could cause the employee to lose exempt status.
The Correct Approach: The employer must pay the full weekly salary. However, the employer can require the employee to use PTO to cover the three hours, reducing the PTO bank without reducing the salary payment.
Mistake 5: Failing to Document Holiday Policies
The Error: An employer verbally tells employees they will receive holiday pay but never puts this promise in writing. When an employee is terminated, they claim they are owed pay for unused holiday time. The employer denies this because “holiday time doesn’t carry over.”
Why It’s Wrong: Oral promises can create contractual obligations. Without clear written policies, disputes arise about what was promised and what the terms of the benefit entail.
The Consequence: Employees may successfully claim breach of contract or wage theft. In some states, vague policies about holiday time may result in courts treating it as vested vacation time that must be paid out at termination.
The Correct Approach: Create clear, written holiday pay policies that specify which holidays are recognized, who is eligible, how pay is calculated, whether holidays are paid out at termination, and any conditions on receiving holiday pay.
Mistake 6: Not Understanding State-Specific Requirements
The Error: A Rhode Island employer pays non-exempt employees their regular rate for working on Thanksgiving, with no premium pay.
Why It’s Wrong: Rhode Island law requires time-and-a-half for work on specific holidays. This premium pay requirement exists regardless of federal law.
The Consequence: The employer violates Rhode Island labor law and owes affected employees back pay for the premium they should have received.
The Correct Approach: Employers must comply with both federal and state requirements. When state law provides greater protection or benefits than federal law, the employer must follow state law.
Mistake 7: Confusing Holiday Pay with Premium Pay
The Error: An employer uses the term “holiday pay” to mean both compensation for a day off on a holiday and extra pay for working on a holiday, creating confusion about what employees are entitled to receive.
Why It’s Wrong: These are distinct concepts. Holiday pay typically refers to compensation for time off on a holiday. Premium pay (or holiday premium pay) refers to extra compensation (like time-and-a-half) for working on a holiday.
The Consequence: Employees may misunderstand their entitlements and feel cheated when they don’t receive expected compensation.
The Correct Approach: Use precise terminology in written policies. Clearly distinguish between paid time off for holidays and premium rates for working on holidays.
Do’s and Don’ts for Employers
Do’s
Do create written holiday pay policies: Document all policies regarding holiday pay, including eligibility, recognized holidays, calculation methods, and any conditions. Written policies protect both employers and employees by setting clear expectations.
Do apply policies consistently: Once you establish a holiday pay policy, apply it uniformly to all employees in the same classification. Selective enforcement can lead to discrimination claims and create legal liability.
Do understand the exempt vs. non-exempt distinction: Properly classify employees as exempt or non-exempt and understand how this classification affects holiday pay obligations. Exempt employees must receive full salary for weeks in which they work, even when holidays occur.
Do comply with state-specific requirements: Research and follow your state’s holiday pay laws. Rhode Island requires premium pay for certain holiday work, while other states may have different requirements. When state and federal law differ, follow whichever provides greater employee protection.
Do communicate policies clearly to employees: Ensure all employees receive and understand your holiday pay policies. Include this information in employee handbooks, discuss it during onboarding, and make the information easily accessible throughout the year.
Do review policies annually: Labor laws change, and your business needs may evolve. Review your holiday pay policies at least once per year to ensure they remain compliant and competitive. Update policies as needed and communicate changes to employees.
Do consider offering floating holidays: Floating holidays provide flexibility for employees to observe cultural, religious, or personal holidays that the company doesn’t recognize. This supports diversity and inclusion while giving employees meaningful choices.
Do pay out earned benefits according to your policy: If your policy states that certain holiday benefits will be paid at termination, honor this commitment. Some states require payout of certain accrued time, so understand both your policy and legal obligations.
Don’ts
Don’t make improper deductions from exempt employees’ salaries: Never deduct from an exempt employee’s salary for partial-day absences or for absences caused by employer-mandated closures, including holiday closures. These deductions violate the salary basis test and can eliminate exempt status.
Don’t assume holiday pay is required: Under federal law, private employers are not required to provide paid holidays. However, if you promise holiday pay through a policy or contract, you create a legal obligation to provide it.
Don’t apply before-and-after-holiday work requirements to exempt employees: Policies requiring employees to work the day before and after a holiday to receive holiday pay can only apply to non-exempt employees. These policies cannot be used for exempt employees without violating salary basis requirements.
Don’t change policies retroactively: If you decide to change your holiday pay policy, provide adequate notice to employees and apply changes prospectively, not retroactively. You cannot take away holiday pay already earned for work performed under the previous policy.
Don’t confuse floating holidays with vacation time: Clearly distinguish in your policy whether floating holidays are conditional (tied to specific events or dates) or unconditional (usable any time for any reason). If floating holidays are available any time for any reason, they may be treated as vacation and require payout at termination in some states.
Don’t forget to track when non-exempt employees work on holidays: If non-exempt employees work on a holiday and those hours push them over 40 hours for the week, overtime pay is required. Track all hours worked carefully to ensure compliance with overtime requirements.
Don’t discriminate in providing holiday benefits: Apply your holiday pay policy without regard to protected characteristics like race, gender, age, religion, or national origin. Discriminatory application of benefits violates federal and state anti-discrimination laws.
Don’t neglect to address religious accommodations: Federal law requires employers to reasonably accommodate employees’ sincerely held religious beliefs unless doing so creates an undue hardship. Floating holidays and flexible scheduling can help satisfy this obligation.
Pros and Cons of Providing Holiday Pay
Pros
Attracts and retains quality employees: Offering paid holidays makes your company more competitive in the job market. According to the Bureau of Labor Statistics, 81 percent of private industry workers had access to paid holidays in 2024. Companies that fail to offer this benefit may struggle to attract top talent.
Boosts employee morale and satisfaction: Employees who receive holiday pay feel valued and appreciated. This recognition of their need for rest and time with family increases job satisfaction. Eighty-two percent of employers reported that holiday bonuses help boost morale, and paid holidays serve a similar function.
Reduces employee stress and burnout: Time away from work, particularly during culturally significant holidays, helps employees recharge. This rest period can improve productivity when employees return to work and reduces the risk of burnout.
Demonstrates company culture and values: Providing holiday pay signals that your organization values work-life balance and recognizes employees’ personal time. This cultural message can strengthen your employer brand and improve your reputation.
Simplifies payroll during holidays: Providing paid holidays to all eligible employees can simplify payroll processing compared to requiring employees to work on holidays or managing complex premium pay calculations. Everyone receives their regular compensation, making the process straightforward.
Complies with collective bargaining agreements: Many unionized workplaces have negotiated holiday pay as part of their contracts. Providing this benefit maintains positive labor relations and complies with contractual obligations.
Aligns with legal requirements for exempt employees: For salaried exempt employees, holiday pay often aligns with what the law requires anyway. If an exempt employee works any part of a week containing a holiday, they must receive full salary. Providing holiday pay meets this obligation.
Cons
Increases labor costs: Providing paid holidays adds to overall compensation expenses. If you provide eight paid holidays per year to an employee earning $50,000 annually, this represents approximately $1,538 in additional cost (8 days ÷ 260 working days × $50,000).
May create operational challenges: When the entire business closes for holidays, customer service, production, or critical operations may be disrupted. Industries that operate 24/7, such as healthcare, hospitality, and public safety, face particular challenges in providing holiday time off.
Requires careful policy management: Creating and maintaining compliant holiday pay policies requires effort and expertise. Employers must track which employees are eligible, ensure proper payment calculations, and update policies as laws change.
Can lead to disputes about eligibility: Part-time employees, new hires, and employees on leave may question whether they qualify for holiday pay. These disputes can create HR headaches and potential legal claims if not handled properly.
Creates complexity with premium pay obligations: If you offer both paid time off for holidays and premium pay for employees who work on holidays, the interactions between these benefits and overtime requirements can become complex. Careful calculation is needed to ensure compliance with the FLSA.
May not align with diverse workforce needs: Standard holiday schedules often reflect Christian holidays like Christmas and Easter. Employees who observe other religious or cultural holidays may feel these benefits don’t serve them equally, even when floating holidays are offered.
Requires payout at termination in some cases: Depending on how your policy is written and state law, unused holiday pay may need to be paid out when employment ends. This can create unexpected costs when employees leave.
Company Policy Best Practices
Creating effective holiday pay policies requires attention to both legal requirements and employee needs. Well-crafted policies benefit everyone by setting clear expectations and preventing disputes.
Essential Policy Elements
List of recognized holidays: Clearly specify which holidays the company observes. Common holidays include New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Some employers add additional holidays such as Martin Luther King Jr. Day, Presidents’ Day, or the day after Thanksgiving.
Eligibility requirements: Define who qualifies for holiday pay. Consider factors such as employment status (full-time, part-time, temporary), length of service (immediate eligibility or after a probationary period), and job classification (exempt vs. non-exempt).
Holiday pay calculation: Explain how holiday pay is calculated for different employee types. For hourly employees, specify whether they receive their regular hourly rate or a premium rate. For salaried employees, clarify that they receive their regular salary.
Holidays falling on weekends: State how the company handles holidays that fall on Saturdays or Sundays. Common approaches include observing the holiday on the preceding Friday (for Saturday holidays) or following Monday (for Sunday holidays).
Working on holidays: Address what happens when employees work on recognized holidays. Specify whether employees receive their regular pay plus a day off, premium pay (time-and-a-half or double-time), or their regular pay only.
Floating holidays: If offered, explain how many floating holidays employees receive, when they become available, how to request them, and whether they carry over or are paid out at termination.
Religious accommodations: Describe how employees can request time off for religious holidays not recognized by the company. Many employers allow use of floating holidays, PTO, or unpaid time off for these observances.
Part-time and temporary employees: Clarify whether part-time and temporary workers receive holiday pay and, if so, how it is calculated (often prorated based on normal hours worked).
New hire eligibility: Specify when new employees become eligible for holiday pay (immediately upon hire, after 30 days, after 90 days, etc.).
Payment timing: State when holiday pay will be issued. Most employers pay holiday time on the next regularly scheduled payday. If payday falls on a holiday, specify whether employees will be paid early.
Interaction with PTO: Explain whether employees can combine holidays with PTO to create extended time off and any requirements for advance approval.
Conditions on receiving holiday pay: If applicable, state any conditions such as working the scheduled shift before and after the holiday (for non-exempt employees only), being in good standing with the company, or being on the active payroll.
Final paycheck treatment: Clarify whether earned but unused holiday time is paid out when employment ends. This may vary by state law and the nature of the holiday benefit.
Sample Policy Language
The following example demonstrates clear, specific policy language:
“Purpose: This policy establishes which holidays ABC Company recognizes and explains eligibility for holiday pay.
Recognized Holidays: ABC Company observes the following paid holidays:
- New Year’s Day
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving Day
- Day After Thanksgiving
- Christmas Eve
- Christmas Day
Weekend Holidays: When a holiday falls on Saturday, it will be observed on the preceding Friday. When a holiday falls on Sunday, it will be observed on the following Monday.
Eligibility – Full-Time Employees: All full-time employees (those scheduled to work at least 30 hours per week) are eligible for holiday pay immediately upon hire.
Eligibility – Part-Time Employees: Part-time employees (those scheduled to work 20-29 hours per week) are eligible for prorated holiday pay after 90 days of employment.
Eligibility – Exempt Employees: Exempt employees who work any part of a workweek containing a company-recognized holiday will receive their full weekly salary, consistent with federal salary basis requirements.
Eligibility – Non-Exempt Employees: Non-exempt employees who are scheduled to work on a company-recognized holiday will receive 8 hours of holiday pay (or prorated for part-time employees). To receive holiday pay, employees must work their full scheduled shift on the day before and after the holiday unless the absence is pre-approved or covered by paid leave.
Working on a Holiday – Non-Exempt: Non-exempt employees required to work on a recognized company holiday will receive both their holiday pay and their regular hourly rate for all hours worked. For example, an employee who works 8 hours on Independence Day would receive 8 hours of holiday pay plus 8 hours at their regular rate.
Working on a Holiday – Exempt: Exempt employees who work on a recognized company holiday will receive their regular salary. They may request one floating day to be taken within 30 days of the holiday, subject to manager approval.
Floating Holidays: All eligible employees receive two floating holidays per calendar year, available on January 1. These may be taken for religious observances, birthdays, or other personally significant dates. Floating holidays must be requested and approved at least 5 business days in advance. Unused floating holidays do not carry over to the next year and are not paid out at termination.
Final Pay: Since company-recognized holidays do not accrue and must be taken on specific dates, no payout for future holidays occurs at termination.”
Collective Bargaining Agreements and Holiday Pay
Unionized workplaces often have specific holiday pay provisions negotiated through collective bargaining agreements (CBAs). These contracts can create obligations that differ from general company policy or statutory minimums.
CBA Provisions Override General Policy
When employees are covered by a CBA, the terms of the agreement govern holiday pay rather than general company policy. The CBA may provide for more generous benefits than the company offers non-union employees, such as additional recognized holidays, higher premium rates for working on holidays, or guaranteed time off.
CBAs commonly address several holiday-related issues:
List of recognized holidays: Union contracts typically specify which holidays are recognized, often including more days than the company provides to non-union workers.
Premium rates: Many CBAs require double-time or even higher rates for work performed on holidays, exceeding the federal minimum (which requires no premium for holiday work at all).
Guaranteed time off: Some agreements guarantee that employees will not be required to work on certain holidays or that employees can refuse holiday work without penalty.
Holiday pay eligibility: Union contracts often define eligibility differently than company policy, potentially covering part-time or probationary employees who wouldn’t otherwise qualify.
Seniority preferences: CBAs may grant senior employees preference in scheduling around holidays, allowing them first choice of time off or premium work opportunities.
Holiday scheduling procedures: Contracts often establish detailed procedures for how management assigns holiday work, including rotation systems, volunteer opportunities, and notice requirements.
Enforcement Through Grievance Procedures
Unlike general company policies, which employees typically enforce through lawsuits or regulatory complaints, CBA violations are usually resolved through the grievance and arbitration procedures established in the contract. If an employer fails to provide holiday pay as required by the CBA, the union can file a grievance on behalf of the affected employee.
The National Labor Relations Act provides that CBAs are legally enforceable contracts. Employers must honor all provisions, including those related to holiday pay. Failure to do so can result in arbitration awards requiring back pay, reinstatement, or other remedies.
Interaction with Statutory Requirements
CBAs cannot provide less than what federal or state law requires, but they can provide more. For example, while federal law requires no holiday pay at all, a CBA can require it. In Rhode Island, state law requires time-and-a-half for holiday work; a CBA cannot reduce this to straight time, but it could increase it to double-time.
When both a statute and a CBA apply, employers must comply with whichever provides greater protection to employees. This means carefully reviewing both sources of obligation to determine the actual requirements.
Federal Employee Holiday Pay
Federal government employees receive substantially more generous holiday benefits than most private sector workers. Understanding these benefits helps contextualize what is legally required versus what is discretionary.
Federal Holidays and Pay
Federal employees are entitled to paid time off for 11 federal holidays each year: New Year’s Day, Martin Luther King Jr. Day, Washington’s Birthday (Presidents’ Day), Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Columbus Day (Indigenous Peoples’ Day), Veterans Day, Thanksgiving Day, and Christmas Day.
When a federal holiday falls on a Saturday, most federal employees observe it on the preceding Friday. When it falls on a Sunday, they observe it on the following Monday. This ensures that employees actually receive a day off from work.
Holiday Premium Pay for Federal Employees
Federal employees who are required to work on a designated holiday receive holiday premium pay equal to their rate of basic pay, in addition to their regular pay. This means they effectively receive double-time (200 percent of their regular rate).
For example, a federal employee earning $25 per hour who works 8 hours on Christmas Day would receive:
- Basic pay: $25 × 8 hours = $200
- Holiday premium pay: $25 × 8 hours = $200
- Total: $400
Employees who are required to perform any work during basic (non-overtime) holiday hours are entitled to a minimum of 2 hours of holiday premium pay, even if they work less than 2 hours.
Differences from Private Sector
The generous holiday benefits provided to federal employees contrast sharply with private sector practices. While public employers must provide these benefits by statute, private employers face no such requirement under federal law. This creates a significant disparity in benefits between government and private sector workers.
The contrast demonstrates that holiday pay is a policy choice rather than an inherent feature of employment law. Congress has chosen to provide these benefits to federal employees through specific legislation, but has not extended the same requirements to private employers.
Final Paycheck Requirements for Holiday Pay
When employment ends, questions often arise about whether unused holiday pay must be included in the final paycheck. The answer depends on state law, how your employer’s policy characterizes the benefit, and whether the holidays have already accrued or are future benefits.
Accrued vs. Future Holiday Pay
Most holiday pay is not “accrued” in the same way vacation time accrues. Holidays are specific dates tied to specific calendar days. If your employment ends before a recognized holiday arrives, you typically have no entitlement to pay for that future holiday because you won’t be employed on that date.
For example, if your last day of work is November 1 and your employer recognizes Thanksgiving (the fourth Thursday in November) as a paid holiday, you would not be entitled to Thanksgiving pay in your final check because you won’t be employed on Thanksgiving Day.
However, if you work on a recognized holiday and your employer’s policy provides that you will receive an additional day off to be taken later, and your employment ends before you take that day, the treatment depends on how the policy characterizes this benefit and state law.
State-Specific Final Pay Requirements
States have different requirements for final paychecks. California law requires that all accrued vacation time be included in the final paycheck, regardless of the reason for separation. However, there is no requirement under California law that employers pay accrued sick leave upon termination.
The critical question becomes: Is the benefit considered “vacation” or wages that have been earned, or is it a contingent benefit tied to future employment?
The California DLSE has stated that leave time provided without condition is presumed to be vacation, no matter what name the employer gives to the leave. This means if your employer offers “floating holidays” that you can use any time for any reason, these may be treated as vacation that must be paid out at termination.
Conversely, if the policy clearly states that floating holidays must be used for specific events (like a birthday, religious observance, or anniversary), and any unused days are forfeited at termination, this condition may allow the employer to avoid payout.
Best Practices for Employers
Employers should clearly state in their holiday policies whether unused holiday time (particularly floating holidays) will be paid out at termination. Clear written policies prevent disputes and ensure both parties understand their obligations.
If you want to avoid paying out floating holidays at termination, your policy should:
- Clearly connect floating holidays to specific events or dates
- State that floating holidays must be used during the calendar year
- Explicitly provide that unused floating holidays are forfeited and not paid out at termination
- Ensure the policy complies with state law requirements
FAQs About Holiday Pay for Salaried Employees
Do exempt salaried employees get paid for holidays?
Yes, if they work any part of the workweek containing the holiday. Under the salary basis test, exempt employees must receive their full salary for any week in which they perform work, regardless of holiday closures.
Can employers require salaried employees to work on holidays?
Yes, employers can require salaried employees to work on holidays. Federal law does not prohibit holiday work. However, some state laws and union contracts may provide employees the right to refuse holiday work.
Is holiday pay mandatory in the United States?
No, federal law does not require private employers to provide holiday pay. Only Rhode Island mandates premium pay for working on certain holidays. Massachusetts eliminated its premium pay requirement in 2023.
Can part-time salaried employees receive holiday pay?
Yes, if the employer’s policy provides it. Many employers prorate holiday pay for part-time employees based on their normal work schedule, though some employers limit holiday pay to full-time employees only.
Must employers pay double-time for holiday work?
No, federal law requires no premium pay for holiday work in the private sector. Some employers voluntarily provide time-and-a-half or double-time, and Rhode Island law requires time-and-a-half for certain employees.
Can employers deduct from exempt employees’ pay for holidays?
No, employers cannot deduct from exempt employees’ salaries for holiday closures when the employee is ready, willing, and able to work. Such deductions violate the salary basis test and jeopardize exempt status.
Do non-exempt salaried employees get holiday pay?
It depends on company policy. Non-exempt employees are entitled only to pay for hours worked unless the employer provides paid holidays as a benefit through policy or contract.
Are floating holidays paid out when you quit?
It depends on state law and policy wording. If floating holidays can be used any time for any reason, they may be treated as vacation requiring payout upon termination in states like California.
Can employers require PTO use for holidays?
Yes for exempt employees, though the full salary is still owed regardless of PTO availability. Employers can require exempt employees to use PTO for holiday closures but must pay the full salary even if PTO is insufficient.
Does working on a holiday count toward overtime?
It depends. For federal law purposes, hours actually worked on a holiday count toward the 40-hour overtime threshold. However, paid holiday time off (when not working) also counts toward determining whether overtime has occurred.
Are temporary employees entitled to holiday pay?
It depends on company policy. Federal law does not require holiday pay for any employees, including temporary workers. Many employers exclude temporary employees from holiday benefits, which is legally permissible.
Can employers change their holiday pay policies?
Yes, but changes must apply prospectively with adequate notice. Employers cannot retroactively eliminate holiday pay already earned or promised for past work periods. Clear communication of changes is essential to avoid breach of contract claims.
Is Juneteenth a paid holiday?
It depends on company policy. Juneteenth became a federal holiday in 2021, meaning federal employees receive it as paid time off. Private employers can choose whether to recognize it, and many have added it.
Do you get holiday pay if you call in sick?
It depends on company policy. Some employers require employees to work their scheduled shifts before and after a holiday to receive holiday pay. This requirement can apply to non-exempt employees but not exempt employees.
Can salaried employees be required to use vacation for holidays?
Yes, employers can require exempt employees to use accrued vacation or PTO for holiday closures. However, if the employee lacks sufficient accrued time, the employer must still pay the full weekly salary for exempt employees.