What Is Holiday Pay?

Whether it comes at Christmas or on the Fourth of July, holiday pay is a gift from employers that makes it possible for full-time staff (and part-time employees, depending on company policy) to take time off during the workweek and still earn their regular pay. That’s because federal law—i.e., the Fair Labor Standards Act (FLSA)—does not require employers to pay for time not worked.

Still, many employers recognize the value of their employees’ contributions and reward them with paid time off (PTO) on federal holidays, during the holiday season, and sometimes also on other workdays of their choosing to help them balance their work schedule with some supported breaks.

Here’s an example of how holiday pay works: Let’s say your employee Seth usually earns $300 a day. If your company has a holiday pay policy and designates Thanksgiving as a paid holiday, then Seth would still make $300 on Thanksgiving even though he didn’t work that day.

This is on top of providing other time off, like vacation time and sick leave. Similarly, some employers choose to offer premium pay like a time-and-a-half rate or even double time when an employee works on holidays, although no employment laws require them to do so.

What are common paid holidays to give off?

You’re the boss, so since there are no legal requirements for you to offer holiday pay, you can pick and choose the specific holidays that qualify for holiday pay. Americans get an average of 7.6 paid holidays, and one in four of us don’t get any paid holidays, according to research conducted by Zippia, which also found that 74 percent of Americans think it’s very important employers provide paid holidays. So at the very least, follow the federal holidays list:

• New Year’s Day (January 1).

• Martin Luther King, Jr. Day (Third Monday in January)

• Washington’s Birthday/President’s Day (Third Monday in February)

• Memorial Day (Last Monday in May)

• Juneteenth National Independence Day (June 19)

• Independence Day (July 4)

• Labor Day (First Monday in September)

• Indigenous People’s Day/Columbus Day (Second Monday in October)

• Veterans Day (November 11)

• Thanksgiving Day (Fourth Thursday in November)

• Christmas Day (December 25)

You can also consider holidays recognized in the state where your business is located. This way, what you provide is on par with your geographic region. Zippia collectively cites the Northeastern states of Maine, New York, Delaware, Massachusetts, Rhode Island, New Hampshire, Vermont, Connecticut, New Jersey, and Pennsylvania as having the best paid holiday time. Zippia also shares this state-by-state breakdown:

What is the standard paid holiday policy for your industry?

If you’re in the manufacturing or information business, you’ll want to step it up with the number of paid holidays you provide. In fact, Zippia’s analysis reveals that 97 percent of employees in these sectors have access to an average of nine and eight paid holidays, respectively. The same goes for the financial industry, where 94 percent have access to 9 paid holidays.

Leisure and hospitality have a poor reputation for providing paid holidays (37% have access to only an average of 6 paid holidays), so be a leader and treat your employees better than other employers in your sector. That will give your company a good human-resources reputation, which will be valuable for recruiting and retention.

This chart from Zippia shows how several industries stack up against one another with the average number of paid holidays they offer and the percentage of workers from those industries who receive those paid days off:

How do I set up a holiday pay policy?

Once you use all the above reference points to help determine what could be the best fit for your business, and you nail down the specifics of your own holiday pay policy, be sure to communicate the details clearly to your company. One good practice is to put it in writing in your employee handbook.

Here are some considerations for specifics to include:

• Which employees are eligible—e.g., Are exempt salaried employees eligible? What about hourly employees?

• Which dates are designated as paid holidays? If you’re still not sure, here’s a quick guide to the paid holidays that most businesses give their teams.

• Are there any special pay rates or bonuses for employees who have to work on designated paid holidays?

• How should paid holidays be observed if they fall on a weekend?

• Do you want to add floating holidays as PTO? It’s a popular option. Zippia’s research revealed that 48 percent of companies actually provide floating holidays. For this, you could let employees choose any day throughout the year, or you could allow employees to choose from paid holidays that you don’t typically offer off, such as the day after Thanksgiving, Christmas Eve, New Year’s Eve, as some examples you may or may not already include as part of PTO. Floating holidays also provide an opportunity for workers to observe religious holidays that matter to them and may not be recognized as federal holidays.

Finally, keep in mind that employees who qualify for overtime pay still need to be paid that overtime rate if they work overtime hours during your company’s designated paid holidays, regardless of whether or not you institute a special holiday pay rate.

Frequently asked questions (FAQs)

Am I entitled to holiday pay if the holiday falls on my day off?

There aren’t any existing federal or state statutes that would entitle you to it. Even in Rhode Island, where holiday pay is mandated at a premium 1.5x rate, it only applies when someone actually works on a holiday, and not when they don’t. 

However, if an employer has a policy in place for offering holiday pay, particularly if it’s written, then it’s legally bound to honor it. Different common structures exist for these policies,  but what a business adopts or designs needs to be equitable for employees, as well as economically sustainable for an organization and culturally aligned with its values. 

When considering paid days off, the cost for paid leave benefits for full-time workers in June 2026 was $4.40 per hour worked, according to the US Bureau of Labor Statistics (BLS). For part-time workers, it was $0.90 for every hour of work. Those costs were inclusive of all paid leave, including vacation, sick, and personal time, as well as holidays. 

Should an employer provide paid holidays for employees when the holidays fall on their typical days off, it’s typically straight pay and not holiday premium pay at a higher rate. The latter is usually reserved for those who are working on the actual holidays. The paid holiday for when no work was performed also doesn’t count toward overtime. 

These are a few ways that companies might choose to compensate employees for recognized holidays whether they’re scheduled to work or not:

• Extra 8 hours of regular pay

• Flat holiday bonus

• Observed days off that are adjacent to the holidays (i.e., the day before or after)

• Floating holidays to take paid time off (PTO) later

If you work full time in a federal or state government job, you’ll receive “in lieu of” holidays in most cases. They typically fall on the day before the designated holiday you weren’t working.

Do part‑time employees get holiday pay?

With the exception of Rhode Island, there aren’t federal or state laws that require holiday pay for part-time employees. Not even in the case of government workers. But even though by and large, there aren’t legal requirements for it, many employers establish their own standards for providing it, such as if employees are paid premium rates of 1.5 or two times their regular hourly compensation.

A company may be weighing the price of providing paid holidays with the competitive cost of not doing that. But based on 2025 data, the BLS says that 81 percent of private industry workers have paid holidays. 

Showing employees that they’re valued could pay off with reduced turnover. Replacing employees is expensive: 50% to 200% of their annual salary, according to SHRM, not to mention what is spent in overtime hours when remaining colleagues have to make up for the workload of a reduced staff. 

How is holiday pay calculated for employees?

Paid holiday leave, so paid time off for a holiday, is generally calculated with an employee’s regular hourly rate for a standard 8-hour workday, and isn’t factored into overtime.

However holiday pay is when employees are given extra compensation for actually working on holidays. To understand how that is calculated, let’s first consider how regular rate is computed:

Total compensation in the workweek (except for statutory exclusions) ÷ Total hours worked in the workweek = Regular Rate for the workweek

Example: $880 / 40 hours = $22 per hour

Using that regular rate, let’s calculate holiday pay for time and a half and for double time:

Time and a half

$22 x 1.5 = $33

Double time

$22 x 2 =$44

If an employee works 8 hours on the holiday, then holiday pay would be:

Holiday pay for time-and-a-half example:

$33 x 8 = $264

Holiday pay for double time example:

$44 x 8 = $352

What if the holiday pay is less than time and a half? 

When the extra pay is at least 1.5x for the hours worked on the holiday, it’s considered holiday pay. So whether the multiplier is 1.5x or 2x, holiday pay isn’t calculated with overtime. 

But if an employer pays less than time and a half on those special days, so 1.25x, for example, then that’s technically not holiday pay and would be calculated with overtime, and would be subject to federal and state mandates for calculating overtime, whether a standard overtime 1.5x multiplier is used or it’s more based on local mandates. 

In those instances, then the extra holiday rate is stacked on top of the overtime multiplier for the extra hours worked:

(Hourly Rate x 1.25) x Overtime Multiplier x Overtime Hours

What is if a flat holiday bonus is provided instead?

If a flat bonus is provided for the holiday instead, then that would be added after regular hours are multiplied by hours worked on the holiday. The formula looks like this:

(Hourly Rate x Total Holiday Hours Worked) + Flat Holiday Bonus = Total Pay

How do shift differentials affect holiday pay?

When employees are already given extra pay for working the shifts other employees don’t want to take on, the additional premium holiday rate can either be applied to the combined base hourly wage and shift differential, or the shift differential amount could be added after the premium holiday rate has been applied to the base rate.  

Method 1 (typically used to meet FLSA requirements):

[(Base Hourly Rate + Differential) x Holiday Multiplier] x Hours Worked = Total Pay 

Method 2 (typically used with collective bargaining agreements for unions)

[(Base Hourly Rate x Holiday Multiplier) + Differential] x Hours Worked = Total Pay

Do I get extra pay if I work on a holiday?

Rhode Island is the only state that mandates private employers provide extra pay (at a 1.5x rate) when employees work on a holiday. It also issued new rules in 2025, requiring retail businesses to count holiday pay toward overtime. Otherwise, there aren’t any federal or other state laws that require it per se, aside from how earnings are protected as a whole by FLSA. 

If a business does implement holiday pay, it may or may not count toward employees’ regular rate calculation for overtime. This is based on a FLSA rule, which dictates that if the holiday pay on those special days is less than 1.5x the regular rate of pay, such as if it’s 1.3x or 1.25x, then it does not qualify as an overtime premium. 

In that instance, it’s calculated as part of the regular rate when figuring out overtime. Otherwise, if the pay on the holiday  is 1.5x or more (so time and a half or double time, which is 2x), then the holiday pay provided at that premium rate would not be included in the regular rate when calculating overtime.