With the holidays right around the corner, you may be wondering if your small business is legally required to provide holiday pay for your employees on federally recognized holidays. Most businesses will close for at least some of the federally recognized holidays, and many companies will provide their employees with pay on some of the holidays, but many employers are unsure if they are required to pay their employees on those days.

There is no law stating that businesses have to pay their employees extra for working on a holiday, or for a holiday where the business is closed, nor is there a law requiring an employer to give employees time off on a holiday unless it is for religious reasons. The only exception to this is if someone is a federal employee, in which case they will get paid holidays off. However, many employers will give their employees extra pay as an incentive to keep them happy during the holidays.

Federal Holidays

If you decide to give your employees holiday pay, the most common paid holidays are:

  •         New Year’s Day
  •         Easter
  •         Memorial Day
  •         Independence Day
  •         Labor Day
  •         Thanksgiving Day
  •         The Friday after Thanksgiving
  •         Christmas Day

Some companies will also choose to give their employees holiday pay for these other federal holidays:

  •         New Year’s Eve
  •         President’s Day
  •         Martin Luther King, Jr. Birthday
  •         Veterans’ Day
  •         Christmas Eve

Holiday Pay with Conditions

Sometimes an employer will choose to give holiday pay with certain conditions for employees to receive it. A common condition is for an employee to have to work the day before and the day after the holiday in order to receive the extra pay, unless they are already on approved leave time. Some employers will require an employee work there for a certain length of time before providing holiday pay.

No matter what conditions you choose to attach to the holiday pay, make sure the policy is clearly spelled out in writing. You are not required to give the same holiday pay to all employees, so long as the reasons are not discriminatory.

Overtime

It is possible for an employee to earn both holiday pay and overtime in the same week, but only if they spend over 40 hours actually working. If they only work 38 hours during the week, then get eight hours of holiday pay, this technically would not fall under overtime. Of course, you can choose to count it as overtime if you want to, but the overlap is not required.

Conclusion

Even though you are not legally required to provide holiday pay to your employees, it is a good incentive that many businesses will offer as a courtesy to their employees. Usually, it is given as time and a half, which means if they were making $10 per hour normally, they would instead be getting paid $15 per hour during holiday pay. Giving your employees holiday pay will make them happy and help you retain them, which is important for a small business competing against larger corporations.