Is holiday pay mandatory? Complete guide by state

Understanding the intricacies of holiday pay helps employers tackle payroll, taxes, and headcount planning when employees take their well-earned time off.

Holiday PTO rules vary depending on federal and state laws, industries, and the discretion of individual companies. Some states have special rules for holiday pay and time off, while others leave it entirely up to business owners.

This holiday pay guide will unpack rules for different employees across different states—and help your business avoid costly payroll mistakes.

What is holiday pay?

Holiday pay is supplemental compensation employees receive during a federal holiday, typically paid out in the form of a higher hourly rate if the employee works that day or paid time off (PTO) if the employee doesn’t work. 

How many federal holidays are there?

According to the US Office of Personnel Management, there are eleven regular federal holidays:

• New Year’s Day

• Martin Luther King, Jr. Day

• George Washington’s Birthday

• Memorial Day

• Juneteenth National Independence Day

• Independence Day

• Labor Day

• Columbus Day

• Veterans Day

• Thanksgiving Day

• Christmas Day

Inauguration Day is an additional federal holiday celebrated every four years at the start of a new US presidential term. It typically falls on January 20. 

If a federal holiday happens on a Saturday, employees can observe it the day before, on a Friday. If it falls on a Sunday, they may observe it the following day, on a Monday. If employees aren’t scheduled to work on a holiday, they can observe it the day before the holiday.

Holiday pay rules and regulations by sector

The Fair Labor Standards Act (FLSA) doesn’t legally require employers to offer PTO for federal or other holidays. Because of this, holiday pay is typically customary, given upon mutual agreement between employers and employees.

However, labor laws recognize different worker categories, and for some of them, different holiday pay rules apply. Holiday pay rules also vary depending on different state laws. Read about these finer details below. 

Holiday pay for federal employees

Federal employees have a special set of job protections regarding pay, benefits, and PTO. In most cases, they’re entitled to holiday PTO during all eleven federal holidays. 

Holiday pay for private sector employees

Private companies aren’t required by federal law to offer any holiday pay to private employees.

Still, it’s customary to offer employees paid days off for major holidays. In most cases, private companies do offer holiday PTO to attract and retain talent. 

Private companies typically provide PTO for:

• New Year’s Day

• Easter

• Memorial Day

• Independence Day

• Labor Day

• Thanksgiving Day

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Holiday pay for exempt vs. non-exempt employees

Exempt employees—i.e., white collar workers paid annual salaries who are “exempt” from overtime pay and minimum wage requirements mandated by the FLSA—are legally entitled to their regular salary if their business is closed for less than a full workweek.

In some cases, exempt employees may need to put accrued PTO towards the holidays they’re taking off. But if they don’t have enough PTO accrued, the employer needs to pay for the difference.

Non-exempt employees—i.e., hourly workers who qualify for overtime pay and federal minimum wage protection under the FLSA—are typically not entitled to compensation for any day they don’t work. Rhode Island is the only state where employers need to pay non-exempt employees a premium rate if they work during the state’s public holidays or on Sundays.

Massachusetts “blue laws”

Massachusetts has special state laws that regulate certain activities during holidays and Sundays—called “blue laws.”

Blue laws sort businesses into separate categories—retail, non-retail, and manufacturing—and assign special holiday work rules for them.

Retailers: Retail employees can work on Sundays, but are prohibited from working on Christmas and Thanksgiving. On Columbus Day, retailers can open at noon. On Veteran’s Day employees can work after 1 p.m. Retail businesses can decide if they want employees to work during New Year’s Day, Memorial Day, Juneteenth, Independence Day, and Labor Day.

Non-retail and manufacturing businesses: These companies need to obtain a special permit from the local police department to operate during Sundays and the the following Massachusetts public holidays:

• Memorial Day

• Independence Day

• Labor Day

• Columbus Day

• Veteran’s Day

• Thanksgiving Day

• Christmas Day

Rhode Island premium pay

Rhode Island labor law states that employees must be paid time and a half for working on Sundays or public holidays. They also can’t be penalized for refusing to work on a Sunday or holiday unless their employer is a manufacturing company open everyday.

Rhode Island observes the following public holidays:

• Thanksgiving Day

• Christmas Day

• New Year’s Day

• Memorial Day

• Juneteenth

• Independence Day

• Labor Day

• Columbus Day (or Indigenous Peoples’ Day, as of 2024)

• Veteran’s Day

Additionally, Rhode Island is the only US state that observes Victory Day (the second Monday in August).

Additional holiday pay regulations by state

Since the FLSA leaves holiday pay regulations up to states and businesses, holiday PTO varies significantly from one state to another. 

While Rhode Island mandates employers pay extra on holidays, other states—like Massachusetts, Connecticut, Maryland, and Indiana—prohibit certain work activities with blue laws. And many states, like California and Texas, leave it completely up to individual employers.

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Holiday pay policy sample

If you’re looking to add a holiday pay policy to your employee handbook, here’s a sample you can customize:

(Company Name) Holiday Leave Policies

Full-time and part-time employees

Part-time and full-time employees are entitled to time off on the following holidays:

1. Thanksgiving Day

2. Christmas Eve and Christmas Day

3. December 31 and New Year’s Day

4. Easter Sunday

5. Memorial Day

6. Independence Day

7. Labor Day

Full-time employees can take these days as PTO and be fully compensated.

Part-time employees will be compensated proportionately to the hours they’d ordinarily work.

Freelancers and Independent Contractors

Freelancers and independent contractors aren’t eligible for paid holiday leave, and may arrange the working hours during holidays with respective managers and team-leaders.

Exempt Employees

Exempt employees are eligible for holiday PTO under the same conditions as full-time employees immediately upon signing an employment contract.

Non-exempt Employees

Non-exempt employees are eligible for the holiday PTO six months after signing an employment contract. They are to be compensated proportionately to hours worked.

FAQ

• Can I choose to work over holidays and “save” PTO for another date? 

Yes, but you must get approval from your supervisor or team leader, in accordance with established deadlines. You must confirm you won’t take your PTO during the holiday at least a month in advance. Your supervisor holds the right to decline your PTO request if it is not made in a timely manner.

• What if a holiday falls on a weekend or a day I’m not scheduled to work?

If the holiday falls on a Saturday, you may take the day before (Friday) off. For Sundays, you get the following day (Monday) off.

• What happens with unused holiday PTO?

Holiday PTO can’t be carried over to the next year; use all PTO before January 1 of the following year.

Easy payroll management with Rippling

Rippling offers full-service payroll software with features that make handling holiday PTO seamless.

It’s built on top of a single source of truth for employee data. That means your employee data isn’t tied to one specific app—it’s the same across payroll, time and attendance, onboarding, performance management, and any other apps you use within our unified platform. From changing security permissions to updating PTO policies, Rippling triggers automatic updates to employee information in a single flow. This is especially beneficial for small businesses. It allows you to do more with less—less money, less headcount, and less time. 

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Holiday pay FAQs

What are the most common paid holidays offered by employers?

These are the most common paid holiday employers provide:

• Christmas Day (sometimes with Christmas Eve)

• New Year’s Day

• Easter Sunday (sometimes including Good Friday or Holy Saturday)

• Memorial Day

• Independence Day

• Labor Day

• Thanksgiving Day

While it’s not legally required, most employers from the private sector provide these holidays off, with pay, as a perk.

What happens if a holiday falls on a weekend?

Employees are allowed to observe a holiday on Friday if it falls on Saturday, or on Monday if it falls on Sunday.

Can employers require employees to work on holidays?

The Fair Labor Standards Act doesn’t require employers to provide paid holiday leave, award days off, or pay higher rates during the holidays. In most cases, holiday pay is contractually arranged between employers and employees. Rhode Island, however, mandates that employees can refuse to work on any Sunday or holiday, unless they work for a manufacturer which continuously operates seven days per week.

Federal employers usually provide 11 paid federal holidays per year, or 12 if there’s an Inauguration Day.

Can part-time employees receive paid holiday benefits?

Part-time employees aren’t required by law to receive holiday pay. It’s up to part-time employees and employers to negotiate terms of PTO allowances during holidays.