What Is Holiday Pay? A Comprehensive Guide for Employers and Employees in the USA

Holiday pay is a key part of employee benefits, allowing workers to take time off during holidays without financial stress. Although not federally mandated in the USA, holiday pay is widely offered by employers to attract and retain talent while fostering a positive workplace culture.

This guide focuses on how holiday pay works in the USA, offers practical advice for businesses, and includes an overview of practices in a few other countries for global perspective.

What Is Holiday Pay?

Holiday pay is compensation employees receive for holidays, either as:

• Paid time off (PTO): Regular wages for taking the day off.
• Premium pay: An increased rate, like time-and-a-half, for working on a holiday.

Unlike some benefits, holiday pay is not legally required for most employees in the USA, making it a voluntary perk that depends on an employer’s policy.

Is Holiday Pay Mandatory in the USA?

No, holiday pay is not mandatory under federal law. The Fair Labor Standards Act (FLSA) only requires that employees be compensated for hours worked, including overtime for non-exempt employees. There is no federal obligation for employers to:

• Pay extra for work performed on holidays.
• Offer paid time off for holidays.

Holiday pay is instead a matter of agreement between the employer and the employee or their representative. You can read more on this topic directly on the U.S. Department of Labor’s website.

Common Holiday Pay Practices in the USA

While not required by law, many businesses voluntarily implement holiday pay to remain competitive and improve employee satisfaction. Here are some common practices:

1. Paid Time Off (PTO)

Employees receive their regular pay for taking time off on designated holidays. This is typically provided for federally recognized holidays like:

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

2. Premium Pay for Holiday Work

Some businesses offer a higher rate, such as time-and-a-half or double pay, to employees who work on holidays. This is common in industries like retail, hospitality, and healthcare, where businesses remain operational during holidays.

3. Floating Holidays

Employers may allow employees to choose specific holidays to take off, accommodating personal or cultural preferences.

4. No Holiday Pay

In some cases, employers offer no special holiday pay but allow unpaid leave for holidays. This often depends on the nature of the business and the employment contract.

State-Specific Holiday Pay Rules

Certain states have additional regulations regarding holiday pay for specific situations:

• Rhode Island: Requires employers to provide extra pay for employees working on Sundays and certain holidays.
• Massachusetts: Under “Blue Laws,” non-retail businesses operating on holidays must pay employees a premium rate unless exempt.

How Do Major Companies Handle Holiday Pay?

Here’s how some well-known companies approach holiday pay:

Amazon

• Recognizes seven paid federal holidays for full-time employees, including Christmas Day, New Year’s Day, and Independence Day.
• Employees working on holidays are paid 1.5x their hourly rate.

Starbucks

• Partners (employees) who work on holidays receive time-and-a-half pay.
• Offers bonuses and additional paid time off to eligible employees during holiday seasons.

Netflix

• Offers unlimited PTO, allowing employees to take time off for holidays at their discretion without impacting pay.
• The policy emphasizes flexibility and employee autonomy.

Walmart

• Provides premium pay for employees working on holidays.
• Offers specific paid holidays depending on employee eligibility and position.

Legal Considerations for Employers

If you choose to implement holiday pay, keep these legal points in mind:

1. Fair Labor Standards Act (FLSA): You are only required to pay employees for hours worked, including overtime, unless otherwise stated in your company policy.
2. Religious Accommodation: Title VII of the Civil Rights Act requires employers to accommodate religious holidays unless it imposes undue hardship.
3. State Laws: Check for additional holiday pay requirements in the states where your business operates.

How Does Holiday Pay Work in Other Countries?

For a global perspective, here’s a brief look at holiday pay in other countries:

• United Kingdom: Holiday pay is mandatory under the Working Time Regulations. Full-time employees are entitled to 28 days of paid leave per year, which includes public holidays.
• Canada: Most provinces mandate paid public holidays (e.g., Canada Day, Christmas). Employees working on these days often receive premium pay.
• Australia: Employees are entitled to paid public holidays. Working on a holiday usually results in penalty rates, often double pay.
• Japan: There is no mandatory holiday pay, but many employers voluntarily offer paid leave for public holidays to improve employee satisfaction.

How to Set Up a Holiday Pay Policy

If you’re an employer, here’s how to create a clear and effective holiday pay policy:

1. Identify Eligible Employees: Define which employees qualify for holiday pay (e.g., full-time, part-time, hourly).
2. Determine Recognized Holidays: List holidays your business observes, specifying whether they are paid or unpaid.
3. Choose Your Payment Structure: Decide whether to offer PTO, premium pay, or unpaid leave.
4. Set Clear Guidelines: Include how employees can request time off or choose floating holidays.
5. Document and Communicate: Add the policy to your employee handbook and ensure all staff understand their benefits.

Final Thoughts

Holiday pay in the USA is a voluntary benefit, but it plays a significant role in employee satisfaction and retention. By offering competitive holiday pay practices, businesses can build a motivated workforce while enhancing their employer brand.

For detailed legal information on holiday pay in the USA, visit the U.S. Department of Labor’s official guide.