How does holiday pay work?

According to theFair Labor Standards Act, your business doesn’t have to offer pay for time not worked, including holidays. Even if you elect to give your workers holidays off, you don’t have to pay them for that time. Neither are you required to offer extra compensation to any employee who works on holidays unless their contract stipulates it.

As with most rules, there are a few exceptions. Holiday pay isrequiredon some government contracts. For employee contracts to which the labor standards of the McNamara O’Hara Service Contract Actor theDavis-Bacon and Related Acts apply, holiday pay may be mandatory.

Salaried workers generally don’t receive overtime or extra pay for working on a holiday. Hospitality and retail employees normally don’t earn a special holiday rate, either. Weekends and holidays are part of their normal work hours.

Must employersprovidetime off on holidays?

Currently, no federal law demands that employees receive holidays off, pay for time taken off or extra pay for working on holidays. However, providing this perk can make your company more appealing to prospective employees and help boost worker morale and loyalty. It’s important to discuss your company policy regarding holiday pay with employees before or immediately upon hire.

What is holiday pay commonly received for?

Many companies shut down operations to give all or most of their staff a break to celebrate major holidays. According to theU.S. Bureau of Labor Statistics, American employees in the private sector receive an average of eight paid holidays each year. Seventy-eight percent of civilian workers and 68% of local and state government workers hadaccess to paid holidaysin 2020.

The following table shows federally recognized holidays and the percentages of workers who receive holiday pay for each day listed. This may help youdeterminewhich holidays, if any, to negotiate with your team.

Percentage of Workers Receiving Paid Federal Holidays (as of March 2018)

Some businesses or employees may want to commemorate these other days too, but holiday pay is optional.

• Good Friday
• Juneteenth
• Columbus Day or Indigenous Peoples Day
• Election Day

Many employees receive paid time off for days preceding or following holidays as well. When a holiday falls on the weekend, some companies offer holiday pay for the Friday before or the Monday after the special day. Local and state laws may define “what is holiday pay” differently, so check with your Department of Labor for details on guidelines in your area.

Must employers pay for an employees’ religious holidays?

The federal lawdoesn’tstatethat you mustprovidepaid leave for religious holidays. It does say that employers mustreasonably accommodatethe religious practices of employees withsincerely heldreligious beliefs.You can refuse to honor an employee’s religious request if it creates an undue hardship such as:

• Imposing more than a minimal cost or impact to your business
• Compromising workplace safety
• Infringing on other employees’ rights
• Decreasing workplace efficiency

Bear in mind that individuals follow belief systems differently. Some people follow certain tenets but not others, or they change beliefs. Some workers may share a common faith yet not adhere to the same practices of their religion. If you offer holiday pay, your policy needs to be flexible in this regard.

How can employers accommodate nontraditional holidays?

Increasingly diverse workplaces call for enabling employees to celebrate special times besides the standard American holidays. This gesture can go far in attracting and keeping high quality talent from a variety of backgrounds. Consider how you can incorporate the following PTOs into your business:

Floating holidays

Allowing for one or twofloating holidays can make it easier to adapt to the religious,culturalor personal needs of your workforce without risking accusations of discrimination. For instance, a Muslim employee might want to use a floating holiday toobserveRamadan. A floating holiday would enable them to commemorate their religious holiday without taking a vacation day or other PTO.

If you want to offer a floating holiday, ensure that your policy lays out how and when the day can be taken.You’llneed to consider your staffing requirements and the way in which your employees will schedule the day. If possible, specifya time periodto avoid confusion or conflict.

Depending on your company’s policy, paid floating holidays could be considered earned wages like vacation days. You’ll need to determine if floating holidays will accrue or carry over.According to some state laws, you may have to cash out unused floating holidays upon termination.

Unlimited time off

Unlimited time off is a benefit that’s gaining traction among private businesses. It allows employees to take off as much time as they wish, as long as they still perform their job normally and company operations aren’t disrupted. This novel approach to paid leave makes it an attractive policy for prospective and current workers. Your employees wouldn’t miss out on forfeited vacation time like the 55% of American workers who gave up 768 million days of PTO—$64 billion in unused benefits—in 2018.

As with traditional paid leave, unlimited time off requires planning and open communication between you and your employees. In a healthy work culture, this can support autonomy, self-care and an effective work-life balance. Plus, any holiday can fall into this category.

Who qualifies for holiday pay?

For the most part, private employers can write their own rules for holiday pay. It’s up to you, the business owner, to decide which employees are eligible for paid holidays. The minimum wage laws are the same for permanent, temporary or seasonal workers.

Full-time, part-time and seasonal employees who work on a holiday must be paid according to negotiated rates. The pay rate doesn’t have to be higher than what the employees would normally earn, though. Many employers discuss holiday pay for part-time and seasonal workers before hire.

Employees who are full-time or have seniority are more likely to receive paid holidays than part-time or newer workers. Salaried workers usuallydon’tget extra compensation for working on a holiday. Some companies award paid holidays according to levels of tenure.

Here are some examples of criteria you can use:

• Workers in good standing with the company for a specified time
• Workers scheduled to work at least 20 hours per week
• Non-salaried workers who work their full shift the day before and the day after the holiday