Employer’s Guide to Holiday Pay and Time Off

Everything you need to know about holiday pay, leave policy, time off rules and best practices.
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The holiday season is the most awaited time of the year. It’s the time when people plan to take time off work and spend more time with their family and friends. But, how can organizations support employees when most of them want to take their paid time off without breaking compliance rules and continue functioning at their best? This guide has all the answers.

Should employers have a holiday leave policy in place?

That’s a definite yes. Depending on the region your business is based, you need to comply with the local rules and regulations for paid holiday time off. However, not all employees are entitled to take all of the listed time off. Therefore, organizations should make an effort to reconcile employees’ expectations with their company’s needs.

Unlike the UK and other European countries, the United States of America does not have any laws that govern holiday leave policies. For example, in the UK, most employees are entitled to at least 20 days of paid vacation time a year. However, in the US, employers have the flexibility to determine how many paid holidays they want to offer to their employees. Typically, organizations offer a few days to a month of fully paid holidays to be competitive and meet industry standards.

Which Country Has the Most Public Holidays?

This map was created with data gathered from the World Policy Analysis Center, the International Labour Organization (ILO) and Globalization Partners.

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How Does Holiday Time Off Work and Who Determines Holiday Time Off?

Holiday leaves allow employees to take time off on a few specific occasions for fulfilling certain religious or traditional obligations. Typically, the federal and state government predetermine certain days as holidays. Employees can take either paid or unpaid time off on the predefined days based on the company policy.

The United States currently recognizes eleven national public holidays. These federal holidays apply to all federal government entities. State and city holidays may be observed concurrently with federal holidays. Juneteenth National Independence Day is the latest addition to the list of federal holidays.

Columbus day is another federal holiday observed in the USA. Columbus Day celebration honors the legacy of Christopher Columbus – the man credited with “discovering” the New World. However, since the 1990s, a growing number of states including California, Alaska, and Naveda have begun to replace Columbus Day with Indigenous Peoples Day to honor the culture and history of the people living in America both before and after Columbus’ arrival.

Here is the list of federal holidays recognized by the US government:

  • New Year’s Day (January 1)
  • Martin Luther King Jr. Day (3rd Monday in January)
  • George Washington’s Birthday (3rd Monday in February)
  • Memorial Day (last Monday in May)
  • Juneteenth National Independence Day /Jubilee Day (June 19th)
  • Independence Day (July 4)
  • Labor Day (1st Monday in September)
  • Columbus Day (2nd Monday in October)
  • Veterans’ Day (November 11)
  • Thanksgiving Day (4th Thursday in November)
  • Christmas Day (December 25)

Click infographic to enlarge

list of US federal holidays

Source: Office of Personnel Management

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FMLA and Holiday Pay Laws

When an employee has taken a week-long Family and Medical Leave Act (FMLA) leave and a holiday fall in the same week, the holiday time off is considered as FMLA leave. But, when an employee has taken leave for a few days in the week, the holiday leave is not considered FMLA leave.

Let’s take an example to understand this better. Assume that an employer provides paid holiday time off for Thanksgiving. If an employee is on FMLA leave for the last two weeks of November, the Thanksgiving holiday – which is observed on the last Thursday of every November – is counted as FMLA leave and the employee does not get paid for the holiday. However, if an employee is on FMLA leave for just two days, say Monday and Friday, in the week of Thanksgiving, then the Thanksgiving holiday is not considered FMLA leave, and the employee is entitled to the paid time off.

Holiday Compliance for Global Remote Teams

Today, most organizations have embraced hybrid and remote work models. This means employees have the flexibility to work from the location of their choice. In addition, when organizations have a global employee base, the burden on compliance falls on the employer.

Every country has its own holiday list and regulations. The number of holidays differs from region to region. Based on employee location, the number of public leaves may range from seven to 28. Countries like India, Sri Lanka, Colombia, the Philippines, and Cambodia have the highest number of public holidays, with the number ranging between 18 and 28. European countries have anywhere from 10 to 14 public holidays. In countries like the Netherlands and the US, employees don’t have a legal right to a day off on a public holiday. The average number of paid holidays across all 195 countries in the world comes to 11 days. Employee-friendly organizations need to create paid holiday time-off policies and schedules that are inclusive and allow employees to observe their preferred holidays.

Time and attendance software that can automatically comply with local holiday leave policies dramatically reduces the risk of non-compliance and automates leave approvals.

Holiday Pay Laws for Global Remote Teams

Source: Wikipedia

Holiday Pay Laws

Holiday pay laws vary based on region and employee type. In the US, Federal laws do not distinguish between a holiday and any typical day. They, therefore, do not obligate employers to make overtime pay to employees working on a holiday. However, based on the location, state laws require employers to pay overtime to employees who meet certain work hours. Therefore, employees who cover additional shifts during the holidays are entitled to overtime pay, which is usually calculated for every week. For instance, if an employer is obligated to pay time and a half for holiday work, an employee who works more than 40 hours during the week of a paid holiday such as Thanksgiving or Christmas is entitled to the extra pay.

States like California have a daily overtime standard. If an employee works more than eight hours a day, employers are required to provide time and a half for every extra hour worked. For instance, if an employee working in California works for 10 hours on a Thanksgiving day, the state law requires the employer to pay time and a half for the extra two hours. In addition, California has a double-time rule which requires employers to pay twice the regular rate when employees work for more than 12 in any workday or more than seven consecutive workdays.

Holiday Time Off for Hourly and Salaried Employees

Hourly and salaried employees have different rights when it comes to holiday time off.

Hourly or non-exempt employees: Employers are not obligated to provide paid time off to hourly or non-exempt workers for holidays. These employees receive an hourly rate and receive pay for hours worked during holidays. If they work more than 8 hours per day on a holiday, they receive overtime pay at the rate of time and a half. For instance, a non-exempt employee who has worked 12 hours on holiday should receive pay time and a half for the extra four hours.

Salaries or exempt employees: Salaried workers mostly get paid time off on holidays. When salaried employees don’t get paid for holidays, employers risk the status change of the exempt employee to non-exempt. If the status changes, employers will have to pay overtime for hours worked over 40 every week. But, if an exempt employee works on a holiday, employers are not obligated to compensate for the overtime. Since the Fair Labor Standards Act (FLSA) does not require employers to pay for time not worked, benefits are usually agreed upon between an employer and an employee or the collective bargaining agent.

Potential Requirements to Receive Holiday Pay

  • An employee is required to work the day before and after a holiday.
  • An employee is required to have worked for the employer for a minimum period of one year.
  • If an employer requires its employees to attend an event or party on holiday, they must pay all attendees.
  • Non-exempt employees are eligible for overtime pay when they work extra hours on holiday.

PTO vs Holiday Time off: What’s the Difference?

PTO or paid time off is an umbrella term used for all time off days that employers compensate for. This includes vacations, illnesses, holidays, and personal days. Most of the US employers provide ten paid holidays, two personal days, eight sick leave, and two weeks of paid vacation every year. With the PTO plan, employers credit 30 days of paid time off every year. Here’s a State-by-State Guide to Paid Time Off laws in major cities.

Employee's Vacation Time Off VS Paid Time Off

Depending on the pay schedule, employees are credited specific days of PTO. For instance, employees who get paid bi-weekly accrue 1.3 days in their PTO account. On the other hand, employees with a semi-monthly pay schedule i.e., payday on the first and 15th of every month, get 1.25 days credited to their account on the first day of 24 pay periods.

Unused Paid Time Off by Years of Services

Source: Zippia

A PTO model of time off makes a company more attractive to talents. In addition, as there are no restrictions on the criteria for applying for leaves, employees have the benefit of saving up leaves and using them when they need them. For instance, employees can add unused sick days to their vacation time or use their holiday leaves to care for family members. This way, employers don’t have to bear the additional cost, and employees are happy.

Paid Time Off by Industry Type

Source: Zippia

Employers should consider the following points when developing PTO plan for their organization:

  • The limit on the number of PTO days an employee can earn in a year.
  • The number of leaves employees accrue and can roll over.
  • State law about PTO payout when an employee resigns or terminated
  • How many days prior should employees inform for taking PTO
  • Limit on the number of PTO applied in a month.
  • Will unanticipated leave, such as jury duty or bereavement, be included in the PTO

How to Create the Best Holiday Policy for The Year 2022

Since most organizations have employees working in hybrid or remote mode, it’s a good time for employers to revisit their holiday policies and revise them if needed to meet legal requirements and employee satisfaction. When done right, the time-off guidelines will enable employees to be more productive and avoid resourcing conflict when most employees want to take off.

Organizations usually pick one of the following time off policies:


This is the most type of paid time off plan adopted by a large number of organizations. According to this model, employees accrue some hours of paid time off when they meet specific criteria, such as the number of hours worked or completion of a certain number of weeks or days. Without a time and attendance management software in place, employers can have a hard time tracking accruals and use time offs by leave type – holiday, sick, earned, etc.


Like the traditional time-off policy, allotment policy provides employees with a limited amount of paid time off every year. However, in this model, employees get their entire allotment of PTO for the year on Jan 1st or other predetermined dates set by the employer. Employers can allow employees to carry over unused leaves.


Startup and technology companies who want to gain competitive recruiting advantage have popularized the concept of unlimited time off. For employees, this means that they can take time off without any restriction or meeting requirements such as minimum employment period. And for employers, this policy means that they are not liable to pay any amount when employees resign as leaves are not rolled over.


This is a far less common type of PTO policy but can be significant to help employees avoid burnout, especially in the remote working environment. As the name suggests, this leave policy requires (or at least very highly encourages) employees to use their entire allotment of time off. Companies can even pick a few days, such as New Year’s day or other largely observed regional holidays. Such mandatory holidays help employees to recharge and be more productive.

Now that you have an idea of different types of paid time off policies, you can revisit your existing policy and revise if needed. Take inputs from your employee to understand what works best for them. You can choose the vacation policy based on the goals you want to achieve – this could be creating a rewards structure for employees, minimizing company costs, or being competitive for hiring.

How to Tackle an Influx of Holiday Time-off Requests

Come holiday season, managers will most likely have their inbox filled with time-off requests. This could be especially true this holiday season as travel restrictions have been eased after a long time, and people are looking forward to spending time with their family and friends. As a result, managers will have a more challenging time approving vacation requests while making sure that work gets done as expected.

7 ways to handle holiday time-off requests and diffuse conflicts

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Frequently Asked Questions Around Holiday Time Off

In project management, cost budgeting refers to estimating the potential costs or necessary efforts for completing a project successfully. It includes estimation of costs, setting a fixed budget, and monitoring and controlling the actual cost against the set estimates.
Project cost management is critical to ensure that a project’s budget is on track and will be completed within the planned scope. Without effective cost management, a company can easily lose track of costs incurred, reducing the project profit.
In the US, FLSA law does not require employers to pay employees for any state or federal holiday. These benefits are usually agreed upon between employers and employees when making or accepting job offers.
In the US, FLSA law does not require employers to pay employees for any state or federal holiday. These benefits are usually agreed upon between employers and employees when making or accepting job offers.
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Be Prepared for The Holiday Year 2022

Holiday season for 2021 is around the corner and it’s a good time to learn and prepare for the holidays of the next calendar year. Here’s a quick checklist that will help you be better prepared:

  • Revisit your holiday list to ensure that it is inclusive and meets compliance requirements.
  • Address the criteria such as employee type (full-time, part-time), minimum number of hours worked, etc. to be eligible for vacation
  • Define the limitation on the number of vacation days that can be carried over from year to year.
  • Define what will happen when vacation days are not used.
  • Specify maximum limitation on accrual of vacation days.
  • Address what happens when a holiday falls on a Saturday or Sunday.
  • If your vacation and holiday policy coordinated with any union contract, make sure the terms are met.
  • If you’re using spreadsheets or emails to track time off, now’s a good time to evaluate a solution that supports regional compliance and requires minimum user intervention.

For a happy holiday season, it is important to set expectations early on, make employees aware of critical tasks which need to be completed and – above all – be prepared for sudden and unannounced time off with a dependable, cloud-based time tracking software.