Paid Holidays: A Comprehensive Guide

Deciding which paid holidays to offer your team isn't just about picking dates off a calendar. It's a strategic decision that affects your budget, your ability to compete for talent, and your team's work-life balance.

Most small businesses offer between 6-11 paid holidays per year, but the right number depends on your industry, team size, and what competitors are doing. A restaurant might close for just the major 6 holidays, while a tech startup might offer 12+ days to attract top talent.

This guide breaks down which holidays are most common, how to decide what works for your business, and how to build a competitive paid holiday package without breaking the bank.

TL;DR: Paid holidays guide for small business owners

If you're a new business owner wondering about paid holidays, here's what you need to know right now:

The basics you need to understand:

• Paid holidays aren't required by law – The Fair Labor Standards Act doesn't mandate holiday pay, but most employers offer it to stay competitive
• Average is 11 paid holidays per year after one year of service (according to BLS data)
• Six core holidays are most common: New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas

Three types of paid holidays to consider:

• Federal holidays – National observances like MLK Jr. Day, Presidents' Day, and Veterans Day
• Company-specific holidays – Custom days like Good Friday, Christmas Eve, or the day after Thanksgiving
• Floating holidays – Flexible time off for personal, cultural, or religious reasons

Why offering paid holidays helps your business:

• Attracts better talent by improving your benefits package
• Reduces turnover by supporting employee work-life balance
• Increases productivity when employees return refreshed
• Builds morale by showing you value your team's well-being

Key considerations for your policy:

• Start with the six most common holidays to stay competitive
• Consider your industry's norms for which holidays to offer
• Plan for holiday pay in your annual budget
• Use tools like Homebase to manage holiday schedules and payroll accurately

What are paid holidays?

Let's face it, managing a team means juggling a lot of responsibilities, and ensuring your employees are happy is a big one. One way is to offer a paid holiday, meaning days off from work where employees receive their regular pay.

These holidays allow employees to take a break without losing income, providing a financial cushion during times when they might otherwise have to work.

Employers offer paid holidays as a benefit to attract and retain talent. Many potential hires may ask you, what holidays do you get paid for? In a competitive job market, having a generous paid holiday policy can make a company more appealing to potential hires. It also helps keep current employees satisfied, reducing turnover and fostering a more stable workforce.

Do hourly employees get paid holidays?

While the Fair Labor Standards Act (FLSA) does not require does not require payment for time not worked, such as vacations or holidays (federal or otherwise), it is typically something that employers will offer as a benefit.

How many paid holidays in a year should you offer? To keep morale high for your hourly team and add incentive when hiring, you may want to offer regular paid holidays. 

Types of holidays that are paid

Understanding the types of paid holidays can help you create a more attractive benefits package for your team. Knowing what to offer and how it fits into your company's culture can make a big difference, and help you plan for holiday scheduling.

Federal holidays

Federal holidays are nationally recognized days off that most businesses observe. If you're wondering what holidays do people usually get paid for, these are likely the ones that come to mind.

Federal holidays include New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Memorial Day, Juneteenth, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving, and Christmas.

On these days, employees typically receive their regular pay without needing to work. Observing federal holidays helps standardize time off across various industries and ensures that employees can celebrate significant national events and traditions.

Which federal holidays do different industries observe?

Not every business closes for all 11 federal holidays. Here's how it typically breaks down:

Banks and government offices: Observe all 11 federal holidays. This is the gold standard, but it's not realistic for most small businesses.

Professional offices and corporate environments: Typically observe 9-10 federal holidays. They often skip Columbus Day but include the day after Thanksgiving.

Retail and hospitality: Usually observe only 3-5 federal holidays, focusing on the major ones: New Year's Day, Independence Day, Thanksgiving, and Christmas. Many retail businesses stay open for Memorial Day, Labor Day, and Columbus Day due to shopping traffic.

Restaurants and food service: Typically close for only 2-4 federal holidays—usually Thanksgiving and Christmas, sometimes New Year's Day and Independence Day. Many restaurants see their busiest days on holidays like Mother's Day, Valentine's Day, and Easter.

Healthcare facilities: May observe 6-8 federal holidays with skeleton crews on duty. Emergency services never fully close but may offer premium pay for holiday shifts.

Manufacturing and warehouses: Often observe 8-10 federal holidays, closing for production but keeping essential maintenance staff on call.

Company-specific holidays

Company-specific holidays are additional days off that vary by employer. These can include days like Good Friday, the day after Thanksgiving, or Christmas Eve. Employers choose these holidays based on their company culture, industry practices, or employee preferences.

For example, a company might offer a paid day off for a local festival or a significant date relevant to the business. These holidays provide flexibility and can reflect the unique values and needs of the organization. By looking at the calendar, you can find a way to set paid holidays that aligns with your company culture.

Popular company-specific holidays and when to offer them:

Black Friday (day after Thanksgiving): Common in professional offices and corporate settings. Retail and hospitality businesses typically require staff to work this day, often with premium pay.

Christmas Eve: Many businesses close early (half-day) or offer a full day off. This is especially common when Christmas falls midweek.

New Year's Eve: Similar to Christmas Eve, often offered as a half-day or full day off, particularly in professional settings.

Day after Thanksgiving: One of the most popular company-specific holidays. About 40% of employers offer this as a paid day off.

Good Friday: Common in regions with strong Christian populations or faith-based organizations. About 25% of employers offer this.

Easter Monday: Less common in the U.S. but observed by some companies, particularly those with international operations.

Juneteenth: Increasingly common since becoming a federal holiday in 2021. Many companies added this to their calendar starting in 2022.

Employee birthday: An emerging trend, particularly in tech and creative industries. Employees get their birthday off as a personal day.

Company anniversary or Founders Day: Some businesses close on their founding date to celebrate company history.

Local observances: Businesses may recognize regional holidays like Mardi Gras in New Orleans, Patriots Day in Boston, or Cesar Chavez Day in California.

Mental Health Day: Some progressive employers offer one designated mental health day per year, separate from PTO.

Community service day: Companies with strong corporate social responsibility programs may offer a paid day for volunteering.

Industry-specific days: Fashion retailers might close during Fashion Week, sports venues on Championship parade days, or local businesses during hometown celebrations.

Floating holidays

Floating holidays are paid days off that employees can use at their discretion. Unlike fixed holidays, floating holidays allow employees to choose when to take time off, accommodating personal, cultural, or religious events that may not be covered by standard holidays.

This flexibility helps employees balance their work and personal lives more effectively. For instance, an employee might use a floating holiday to observe a religious festival, attend a family event, or simply take a personal day. Floating holidays can enhance job satisfaction by giving employees more control over their time off.

How many floating holidays should you offer?

Most employers offer 2-3 floating holidays per year. This gives employees flexibility without making scheduling too unpredictable. Some companies offer just 1, while more generous employers might offer 4-5.

How to implement floating holidays:

Set clear advance notice requirements: Require employees to request floating holidays at least 1-2 weeks in advance (except for emergencies or religious observances).

Establish blackout periods: Define busy periods when floating holidays can't be used. For retail, this might be November-December. For restaurants, weekend evenings. For accounting firms, tax season.

Decide if they roll over or expire: Most companies make floating holidays "use it or lose it" by December 31. This prevents administrative headaches and encourages employees to actually take time off.

Track them separately from PTO: Use your scheduling or HR system to track floating holidays as a separate bucket from vacation or sick time.

Create an approval process: Decide who approves requests and what happens if multiple people request the same day.

Common uses for floating holidays:

Floating holidays are particularly valuable for employees who observe:

• Religious holidays: Diwali, Eid al-Fitr, Eid al-Adha, Rosh Hashanah, Yom Kippur, Ramadan, Lunar New Year
• Cultural celebrations: Holi, Vesak, Orthodox Christmas (January 7)
• Personal milestones: Birthdays, anniversaries, children's school events
• Extended weekends: Bridge days between holidays and weekends
• Mental health days: Personal rest and recovery days

How to decide which holidays to offer

Building your paid holiday calendar is one of the most important decisions in your benefits package. Here's a strategic framework to help you decide.

Start with the "Big 6" core holidays

If you're just starting out or have a tight budget, begin with these six holidays that are nearly universal across all industries:

1. New Year's Day
2. Memorial Day
3. Independence Day
4. Labor Day
5. Thanksgiving
6. Christmas

These six cover the absolute baseline. Offering fewer than this will put you at a competitive disadvantage in hiring.

Expand based on your budget and priorities

Once you've locked in the core six, consider adding holidays in this order based on what matters most to your business:

If you want to improve work-life balance: Add the day after Thanksgiving and Christmas Eve (or make them half-days). This gives employees extended time with family during the biggest holiday season.

If you want to support diversity and inclusion: Add Martin Luther King Jr. Day and Juneteenth, plus 2-3 floating holidays for personal observances.

If you're competing for professional talent: Add Presidents' Day and Veterans Day to reach 10 holidays total, which is the professional services standard.

If you want to be a top-tier employer: Offer all 11 federal holidays plus 2-3 floating holidays, putting you in the top 25% of employers.

Consider your industry norms

Retail (6-7 holidays): Focus on days when shopping traffic is lowest. Most retailers stay open for Memorial Day, Labor Day, and Columbus Day sales but close for Thanksgiving and Christmas.

Restaurants and hospitality (5-6 holidays): Prioritize the holidays when customer traffic is truly dead. Many restaurants make their best money on Mother's Day, Valentine's Day, and New Year's Eve.

Healthcare (6-8 holidays): Balance patient care needs with staff wellbeing. Offer competitive holiday pay or shift differentials for those who must work.

Professional services (9-11 holidays): Match corporate standards to attract professional talent. This industry typically leads in paid holiday offerings.

Manufacturing (8-10 holidays): Coordinate with production schedules. Some manufacturers close for a full week between Christmas and New Year's rather than offering scattered holidays.

Ask your team what matters to them

Survey your employees about which holidays matter most to them. You might discover:

• A significant portion celebrates non-Christian religious holidays
• Most would prefer the day after Thanksgiving over Columbus Day
• Everyone would rather have Christmas Eve off than Presidents' Day

Budget for what you can sustain

Calculate the cost: If you have 10 employees averaging $18/hour working 8-hour shifts, each paid holiday costs you $1,440. Six holidays = $8,640/year. Ten holidays = $14,400/year.

Factor this into your annual budget and don't over-promise. It's better to start with 6-7 holidays and add more as you grow than to offer 10 and have to take them away.

Use a phased approach

Year 1: Start with the Big 6 core holidays
Year 2: Add day after Thanksgiving and MLK Jr. Day (8 total)
Year 3: Add Juneteenth and Veterans Day (10 total)
Year 4: Add 2 floating holidays

This shows your commitment to improving benefits as the company grows, which boosts morale and retention.

Benefits of offering holiday pay

You’re probably wondering if the investment in paid holidays is worth it. Here’s why offering these days off can benefit both your employees and your bottom line.

Improved employee morale

Paid holidays show that you value your employees' well-being and work-life balance. When employees know they have guaranteed days off, they feel appreciated and respected. This recognition can boost their overall happiness and job satisfaction.

Offering paid holidays can also reduce burnout, as employees get the necessary breaks to recharge and spend time with their loved ones.

Increased productivity

Employees who take time off during paid holidays often return to work refreshed and recharged. This break from daily tasks allows them to relax and reset, which can lead to increased focus and efficiency when they return. A well-rested employee is more likely to be productive and less prone to errors.

Enhanced recruitment and retention

Competitive paid holiday packages can attract top talent and reduce turnover. In a competitive job market, offering a robust paid holiday policy can set your company apart from others. Potential hires often look for benefits that support their work-life balance, and paid holidays are a significant part of that equation. 

Once hired, employees are more likely to stay with a company that offers generous paid holidays, reducing the costs and disruptions associated with high turnover. This stability benefits both the employees and the organization, fostering a loyal and committed team.

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What are the paid holidays?

Wondering which holidays employees may expect to get off? Here are the most commonly observed paid holidays in the U.S. New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas are the most widely observed paid holidays in the United States. 

These holidays are recognized by most employers, giving employees a chance to celebrate significant national events and traditions without losing pay. Many employers also offer paid time off for Martin Luther King Jr. Day, Presidents' Day, and Veterans Day. Offering these holidays as paid time off helps you show appreciation for their employees' hard work and dedication.

How many paid holidays do most companies give?

Curious about how your business’ paid holiday package stacks up? Here’s a look at what’s typical in the industry. The number of paid holidays varies by employer, but the average in the United States is around 11 days per year  after 1 year of service. This range provides a baseline for what you might expect when considering job offers or evaluating your current benefits package. 

Some companies offer more generous paid holiday packages, while others provide fewer days off. For example, tech companies and large corporations often include additional holidays to attract top talent. These might include extra days around major holidays or company-specific holidays that align with corporate culture and values. 

On the other hand, smaller businesses or those in industries with tighter margins may offer fewer paid holidays. These companies might focus on providing other benefits, such as flexible work hours or performance bonuses, to compensate for the fewer days off. Whether you’re actively hiring or evaluating your current team, consider how the number of paid holidays fits into your overall compensation package. 

What to include in your paid holiday policy

Once you've decided which holidays to offer, you need to document your policy clearly. Here's what to include in your employee handbook and onboarding materials:

Specific dates recognized: List each holiday by name and specify how you handle holidays that fall on weekends. For example: "When a holiday falls on a Saturday, we observe it on Friday. When it falls on Sunday, we observe it on Monday."

Eligibility requirements: Clarify who qualifies for paid holidays. Do new employees need to complete a probationary period (30, 60, or 90 days)? Are part-time employees eligible for prorated holiday pay? Do contractors receive holiday pay?

Pay calculation: State clearly that eligible employees receive their regular pay for the holiday. If someone works variable hours, explain how you calculate their holiday pay (e.g., average of hours worked over the previous 4 weeks).

What happens if an employee works the holiday: If your business stays open on holidays, explain what employees receive for working. Do they get the holiday off at another time? Do they receive premium pay (time-and-a-half or double time)? Both?

Floating holiday rules: If you offer floating holidays, specify how many employees receive, how far in advance they must request them, any blackout periods, and whether unused floating holidays expire or roll over.

Holidays during other leave: Clarify whether holidays count against other leave balances. If an employee is on vacation and a holiday falls during that week, do they get the vacation day back?

Required work: If your business requires certain roles to work on holidays, state this clearly and explain how those employees are selected (rotation, volunteer basis, seniority, etc.).

Part-time and variable schedules: Explain how holiday pay works for employees who don't work every day. If someone normally works Monday, Wednesday, Friday and the holiday falls on Tuesday, do they get paid?

Termination and unused holidays: State what happens to unused floating holidays if someone quits or is terminated. Most companies have a "use it or lose it" policy, but clarify this upfront.

Manage paying your team on holidays with Homebase

When you’re running a small business, scheduling, tracking time, and ensuring payroll runs smoothly is complex enough without factoring in paid holidays. That’s why Homebase is an all-in-one app that supports you with managing your hourly team.

From sharing your paid holiday policy with your team using our hiring and onboarding tools, to sharing updates and reminders about holidays in the team communications app, Homebase has you covered.Sign up now to make managing your team a breeze!