The laws around holiday pay can be tricky, especially for growing businesses. Federal law doesn’t require organizations to offer paid holidays, even though the government recognizes several special days during the year.
What you’ll learn
What you’ll learn
Key takeaways
- A holiday policy describes an organization’s guidelines for holiday work, pay, and time off. It clarifies whether employees may earn extra pay or comp time if they work on an observed holiday
- Many organizations provide a fixed and floating holiday policy. Fixed holidays are specified by the business. Floating holidays give employees the flexibility to schedule time off on a day of their choice
- Businesses that stay open on holidays or require support can define minimum staffing levels for managers to follow. A holiday checklist that includes coverage requirements can help teams avoid understaffing
Some states and local jurisdictions require organizations to offer premium pay for holiday work. For example, local government workers may get extra pay for working on a major holiday. Labor unions may include holiday pay as part of their collective agreement. As a business owner, you’ll want to check with local counsel to see if any premium pay or retail rules apply to your organization.
Whether your business stays open or closes the doors during the holiday season, you’ll want a clear, inclusive policy that’s easy to run through payroll. That way, employees know what to expect when holiday time comes around.
Fixed vs. floating holidays: How to balance equity and flexibility
Whether you offer employees paid holiday leave or not, it’s good practice to outline your rules and annually review your guidelines. While there are a few standard holidays that most US workers participate in, such as Labor Day or Independence Day, others are tied to religious beliefs.
To avoid running afoul of religious discrimination laws, organizations may allow employees to take unpaid leave or a floating holiday for days they observe.
Here’s a look at sample text you might include in a fixed or floating holiday policy.
For those new to Widgets Inc. and those long-standing employees, please note how we deal with holidays throughout the year.
Fixed holidays
We observe eight holidays during the year. They include:
- New Year’s Day
- Martin Luther King, Jr. Day
- Good Friday
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving Day
- Christmas Day
On these days, our company will be closed. If a department must stay open on a standard holiday, we’ll notify the affected employees at least one week in advance.
We observe holidays that fall on a weekend on the closest workday. For example, if Independence Day occurs on a Saturday, we observe it on Friday.
All nonexempt employees who work on a holiday receive time and a half pay. Exempt employees who work on a holiday receive one and a half hours of paid vacation time for every hour they work. They must use accrued holiday vacation time within 12 months of earning it.
Exempt employees receive regular compensation for holidays without any deductions. Nonexempt workers who have been with the company for at least six months receive their regular pay for the hours they would have worked.
Floating holidays
We provide three floating holidays for all exempt and nonexempt employees. Floating days can be used on any day of the year. Exempt employees receive regular pay for floating days. Nonexempt employees receive regular pay for floating holidays if they have been with the organization for at least six months. Otherwise, floating holidays are unpaid.
If you have any questions, don’t hesitate to reach out to the human resources team!
Jane Doe
Human Resources Director
Though different companies take different approaches to this type of verbiage, it should give you an idea of what some employers include.
Fair access during high-demand periods (without chaos)
Many companies keep regular business hours during holidays. In fact, some even extend their schedule to accommodate high traffic. For example, hotels may stay open year-round without any closures. Restaurants and retail stores often continue to operate on holidays, too.
If your business stays open on major holidays, it’s a good idea to establish clear rules concerning time off requests so everyone is on the same page (and to make sure there’s enough staff for the season). You can even take a creative approach, so team members know you’re being fair across the board.
For example:
- Determine how far in advance employees must request time off and what the cutoff dates are
- Consider introducing a tie-break rule in case you have too many requests for the day off
- You could prioritize team members with the most seniority or who put their requests in first
- Try rotating holiday time off between employees
Additionally, outline your minimum staffing needs and levels for holiday work. Include minimums for each role, including managers and supervisors. If there are any blackout dates for which you don’t honor holiday time-off requests, list them. Also include any substitute or comp time options for essential roles that must be on-hand for working holidays. Whew! Yes, there’s a lot to account for, but this preparation should help keep schedules in order (and we also compiled these in the table below.)
| Strategy | Why it helps |
| Set advance deadlines | Prevents confusion about time-off requests. |
| Create tie-break rules | Ensures fairness if multiple employees request the same day off. |
| Rotate holiday coverage | Fairly distributes holiday work over time. |
| Define minimum staffing levels | Avoids understaffing during peak periods. |
A checklist is one tool that can help you avoid holiday scheduling mistakes. It gives managers clear guidelines for holiday scheduling and time off requests. A checklist may include:
- Coverage requirements: Clarifies which roles must be available during holiday shifts
- Communication requirements: Approved channels to authorize or deny holiday time off requests
- Log exceptions: Explains how managers should track holiday hours or overtime
Clear guidance keeps everyone informed, so there aren’t any unexpected or unwanted surprises when a holiday rolls around.
Write it clearly: Policy language, eligibility, and pay rules
All this said, an inclusive PTO policy offers straightforward guidelines on holiday pay and work. Explain who is eligible for holiday pay based on their employment status and minimum hours. For example, you might offer double-time pay for nonexempt employees who have worked at your firm for a minimum of 480 hours.
Share how you calculate holiday pay, especially for nonexempt employees. If they receive premium pay, define what the differential is and who qualifies. Exempt employees typically receive their standard paycheck whether they work on a holiday or not. If you offer exempt employees special benefits for holiday work, such as premium pay or comp time, list those in your holiday policy.
Holidays may fall on weekends when your business is usually closed. Explain how you’ll observe a weekend holiday, such as recognizing it on the next business day. Also, if the regular payday falls on a holiday, address holiday payroll schedules, so employees know when they’ll receive their paycheck.
Staff may wish to take off for religious or cultural days they observe. Detail your policy for special requests, such as allowing staff to take unpaid or accrued paid leave with advance notice.
Make it inclusive: Calendars, communications, and training
Most employees are familiar with standard US holidays but may not recognize different religious or cultural celebrations. Consider publishing an inclusive payroll calendar that highlights popular holidays across religious and cultural spectrums. Your calendar could alert managers and staff to days when employees may wish to take off that fall outside the fixed holiday schedule.
Share your holiday pay policy in the employee handbook, onboarding packet, and your company intranet. It should be readily accessible to staff so they can view it if they have questions about holiday pay and leave.
Train managers and supervisors to recognize accommodation requests. They should be routed to HR, while keeping medical and religious information confidential.
Bottom line: Employers should put a holiday policy into practice
Having a clear holiday policy prevents employees from wondering what the expectations are. It helps you keep the workflow moving by giving everyone a fair way to take time off. When your team knows the rules around holiday pay, time off requests, and coverage requirements, you reduce confusion and build trust. Plus, a well-documented policy protects your business from compliance issues and ensures payroll runs smoothly, even during the busiest times of year.
With OnPay, you get custom payroll reporting, including tools to track holiday hours and costs by period, team, and location. To explore our trusted HR software, start your free trial today.
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Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.