Holiday pay

Holiday pay refers to compensation that employers provide to employees for time off during federal, state, or company-designated holidays.

Homebase Team

Min Read

What is holiday pay?

Holiday pay refers to compensation that employers provide to employees for time off during federal, state, or company-designated holidays. While federal law does not mandate holiday pay, many businesses offer it as part of their employee benefits package to attract and retain workers.

For small businesses, managing holiday pay policies correctly ensures compliance with labor laws, maintaining employee satisfaction, and keeping payroll operations organized. Homebase helps businesses track employee hours, automate holiday pay calculations, and provide accurate payroll processing.

How does holiday pay work?

Holiday pay policies vary by employer, but common structures include:

Paid holidays – Employees receive their regular wages for designated holidays without working.
Time-and-a-half or double pay – Employees who work on a holiday receive extra compensation (e.g., 1.5x or 2x their hourly rate).
Floating holidays – Employees can choose which holidays they take off instead of following a set schedule.
Compensatory time off – Instead of extra pay, employees get additional time off for working on a holiday.

Are employers required to offer holiday pay?

Under the Fair Labor Standards Act (FLSA), private employers are not required to provide paid holidays or extra compensation for working on holidays. However, many employers offer holiday pay as part of their company policy to remain competitive in hiring and improve employee morale.

Some state laws and union contracts may require holiday pay for specific industries, such as retail or healthcare, so businesses should check local labor laws.

Common paid holidays in the U.S.

Employers offering holiday pay typically cover these major federal holidays:

New Year’s Day (January 1)
Memorial Day (Last Monday in May)
Independence Day (July 4)
Labor Day (First Monday in September)
Thanksgiving Day (Fourth Thursday in November)
Christmas Day (December 25)

Some businesses also provide pay for additional holidays, such as Martin Luther King Jr. Day, Presidents’ Day, Veterans Day, and the day after Thanksgiving.

How to set up a holiday pay policy

Employers should create a clear holiday pay policy to maintain consistency and transparency. Key considerations include:

Which holidays are covered? Specify which holidays qualify for holiday pay.
Who is eligible? Define whether full-time, part-time, or seasonal employees receive holiday pay.
Is holiday work required? Outline if employees must work on holidays and if there is extra pay.
How is holiday pay calculated? State whether employees receive their regular rate, time-and-a-half, or double pay.

Try Homebase Payroll today to simplify payroll and holiday pay calculations.

How does holiday pay affect overtime calculations?

Holiday pay may impact overtime calculations under federal and state laws:

Holiday pay does not count toward overtime calculations – Overtime is based on actual hours worked, not holiday hours.
Employees working on holidays may receive overtime pay if their hours exceed 40 per week.
State laws may vary – Some states require overtime or premium pay for holiday shifts.

Employers should follow FLSA guidelines and state labor laws when calculating holiday pay and overtime.

How can businesses manage holiday pay efficiently?

Managing holiday pay can be challenging, especially for small businesses. To streamline the process:

Use a payroll system – Automate holiday pay calculations to prevent payroll errors.
Plan ahead – Determine staffing needs for holiday shifts in advance.
Clearly communicate policies – Employees should understand holiday pay eligibility and scheduling expectations.
Track employee time accurately – Use time-tracking tools to monitor holiday hours worked.

How Homebase helps businesses manage holiday pay

Tracking holiday pay manually can be time-consuming, but Homebase Payroll makes it easier by:

Automating holiday pay calculations based on company policies.
Tracking time worked on holidays for accurate payroll processing.
Ensuring compliance with labor laws regarding holiday pay.
Providing payroll reports to help businesses review holiday pay expenses.

Sign up for Homebase Payroll today to simplify payroll and holiday pay management.

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