When running a business, holidays add extra work for payroll. Paying employees for holidays affects the company’s budget and labor costs, so planning is important. Once the business is stable, offering holiday pay rewards employees and keeps them motivated.

Employers need to know how to calculate holiday pay the right way. Calculating it correctly ensures employees receive fair pay while the business keeps payroll costs under control. So, how is it calculated, and what rules should employers follow? Let’s take a closer look.

What is holiday pay? 

Holiday pay is any form of pay an employee receives for working, or not working, during a holiday. In the United States, employers are not required to provide paid time off for holidays, as stated by the Fair Labor Standards Act (FLSA). Instead, these benefits are generally decided between the employer and the employee, or the employee’s representative.

The Bureau of Labor Statistics (BLS) once reported that, on average, employers pay employees for 8 holidays each year. These holidays are commonly:

• New Year’s Day

• Easter

• Memorial Day

• Independence Day

• Labor Day

• Thanksgiving Day

• The Day After Thanksgiving

• Christmas Day

Organizations setting up or reviewing holiday pay policies can get guidance from Salary.com consultants, who provide data-driven solutions and bring over 70 years of experience in compensation and total rewards.

Federal holidays 2025

In the United States, federal holidays are days officially recognized by the government. While private employers are not required to provide paid time off on these days, many choose to include them as part of their employee benefits.

For 2025, the United States Court of Appeals lists the following federal holidays:

Date	Holiday
Wednesday, January 1, 2025	New Year's Day
Monday, January 20, 2025	Birthday of Martin Luther King, Jr.
Monday, January 20, 2025	Inauguration Day
Monday, February 17, 2025	Washington's Birthday
Monday, May 26, 2025	Memorial Day
Thursday, June 19, 2025	Juneteenth National Independence Day
Friday, July 4, 2025	Independence Day
Monday, September 1, 2025	Labor Day
Monday, October 13, 2025	Columbus Day
Tuesday, November 11, 2025	Veterans Day
Thursday, November 27, 2025	Thanksgiving Day
Thursday, December 25, 2025	Christmas Day

For federal employees, these holidays are observed automatically. If a holiday falls on a Saturday, it is typically observed on Friday; if it falls on a Sunday, it is observed on Monday.

How to calculate holiday pay

In the United States, holiday compensation can be structured in different ways depending on company policy. The most common approaches include:

1. Take the day (or week) off

   Some employers provide regular pay while giving employees the holiday off. For example, Buffer closes during the final week of the year to allow employees to rest and return more productive, without requiring them to use paid time off.

   Calculation: Normal pay per day not worked × 1 = holiday compensation.

   Example: If an employee’s regular daily pay is $200 and they take Christmas Day off, they still receive holiday pay of $200.

2. Work and get paid more

   Some employers pay time-and-a-half or double-time for holiday shifts. While not legally required, this practice encourages employees to work during certain holidays, boosts morale, and makes holiday shifts more appealing.

   Calculation: Normal pay per day worked × 1.5 (for time-and-a-half), or × 2 (for double-time) = holiday pay.

   Example: If an hourly employee earns $20 per hour, working 8 hours on a holiday at time-and-a-half would pay $240 (8 × $20 × 1.5). At double-time, the same 8 hours would pay $320 (8 × $20 × 2).

3. Work like normal

   As mentioned earlier, federal law does not require extra pay for working on a holiday. If an employer chooses not to provide additional compensation, the holiday is treated like any other workday, and employees receive their regular pay.

   Example: If an employee earns $200 per day, working on a holiday would still result in $200 in pay, even though it falls on a holiday.

Providing holiday compensation is one way to support employees, and Salary.com consultants can help you build competitive yet budget-conscious benefit and compensation programs.

Exempt vs non-exempt employees in holiday pay

Federal law treats holidays as regular business days. The Fair Labor Standards Act (FLSA) requires employers to pay only for time worked, so there is no federal requirement for holiday compensation.

Non-exempt employees are entitled to overtime under federal and state laws when they exceed applicable work hour limits, while exempt employees are not entitled to overtime pay.

If an employee opts to take a day off over a holiday (e.g., sick or vacation time), employers are not obligated to pay for that day. The Fair Labor Standards Act (FLSA) requires employers to pay only for time worked. This means that if an employee chooses to take off Christmas Day and New Year’s Day (both federal holidays), the employer is not required to give any amount of pay for those days.

For religious observances, employers are required to handle requests in a consistent and nondiscriminatory manner. However, the Equal Employment Opportunity Commission (EEOC) clarifies that employers are not forced to accommodate all requests if doing so would cause undue hardship to the company.

With the help of Salary.com experts, you can create benefits programs, including holiday pay, that balance cost, industry benchmarks, and employee expectations.

FAQs

Here are some common questions related to the topic

How does the holiday pay work?

Holiday pay works by compensating employees either for taking a holiday off with regular pay or receiving premium pay, such as time-and-a-half or double-time for working on a holiday. Since federal law does not require extra compensation for holidays, employees may simply receive their normal rate if the employer treats the holiday as a regular workday.

Are employers required to pay time and a half on holidays?

No, employers are not required to pay time and a half on holidays. In fact, such compensation is not mandated by law. However, some organizations choose to include it in their compensation package. Under the Fair Labor Standards Act (FLSA), employers are not required to pay for designated holidays or for time when employees do not work.

Is holiday pay mandatory?

No, holiday pay is not required by U.S. federal law and is usually determined by employer policy, employment contracts, or union agreements.

How much is holiday pay for $16 an hour?

It depends. If the employee takes the holiday off with regular pay, they earn $16 per hour. If they work on the holiday and the employer offers time-and-a-half, they earn $24 per hour. If the employer provides double-time, they earn $32 per hour.

What is the rule for holiday pay in California?

Similar to federal law, California does not require employers to provide holiday pay. Holidays are treated as regular business days, and employers are only obligated to pay employees for hours worked.

However, California has stricter overtime rules. Employees are entitled to time and a half for hours worked beyond 8 in a single day and double time for hours worked beyond 12 or for working more than seven consecutive days. This means that if an employee works on a holiday such as Christmas Day, they are paid according to California’s daily overtime standards rather than receiving automatic holiday pay.

Is holiday pay a holiday bonus?

No, holiday pay is not the same as a holiday bonus. Holiday bonuses are discretionary and are generally described as a gift expressing gratitude, given equally to all salaried employees. A holiday bonus could be a small recognition, such as $100 or a company gift, or something more substantial like a week’s pay.

Holiday bonuses are also different from year-end bonuses, which are closely tied to performance and typically vary by employee.

Is holiday pay the same as PTO?

Holiday compensation is not the same as paid time off (PTO). Employee holiday pay covers specific holidays like Christmas or Labor Day that are fixed on the calendar, while PTO is a flexible pool of paid time employees can use for vacation, sick days, or personal needs.