Paid Holiday:
Definition, Comparison, Calculation & Benefits

A paid holiday is a designated day of festivity or recreation when employees receive their regular pay without working, typically aligned with national, state, or religious holidays. These holidays are determined by employers as part of their compensation packages, providing employees time off to celebrate significant events while maintaining their regular income.

In the United States, federal law does not mandate that private sector employers provide paid holidays to their employees. The Fair Labor Standards Act (FLSA) regulates minimum wage and overtime pay but does not require payment for time not worked, including holidays. Despite this, approximately 97% of private sector businesses offer paid holidays as a standard employee benefit, making them a widely expected component of employment packages.

The federal government designates 11 official holidays for federal employees, though private employers determine which holidays they observe. Most Federal employees are entitled to paid holiday time off when excused from duty on a designated holiday, which includes official Federal holidays under 5 U.S.C. 6103(a), "in lieu of" holidays when applicable, Presidential Inauguration Day for the Washington, DC area, and Federal holidays declared by Executive order.

Related terms: federal holidays, paid time off (PTO), holiday premium pay, time in lieu

According to a Bureau of Labor Statistics survey from 2018, American workers receive an average of 8 paid holidays per year, with over three out of four civilian workers receiving paid holidays. The number of paid holidays an employee receives depends entirely on their employer's policies, as there is no federal requirement for private sector companies to provide any paid holidays.

The most commonly observed paid holidays across all sectors include Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and New Year's Day. These 6 holidays are unanimously observed by state governments of all 50 states and recognized by the vast majority of private sector employers.

Additional commonly offered paid holidays include Martin Luther King Jr. Day (observed by 45 states), Washington's Birthday or Presidents' Day (observed by 38 states), and the day after Thanksgiving (observed by 18 states and 69-75% of private employers). The specific holidays offered vary by industry, company culture, and geographic location.

The most common paid holidays recognized by employers in the United States include 8 standard holidays that the majority of businesses observe:

• New Year's Day (January 1) - 96% of businesses offer this as paid time off, with 72% of Americans celebrating
• Memorial Day (last Monday in May) - 95% of businesses offer this as paid time off
• Independence Day (July 4) - 97% of businesses offer this as paid time off, with 79% of Americans celebrating
• Labor Day (first Monday in September) - 95% of businesses offer this as paid time off
• Thanksgiving Day (fourth Thursday in November) - 97% of businesses offer this as paid time off, with 87% of Americans celebrating
• Christmas Day (December 25) - 94% of businesses offer this as paid time off, with 90-95% of Americans celebrating
• New Year's Eve - 71% of businesses offer this as paid time off
• Christmas Eve - 78-79% of businesses offer this as paid time off

Beyond these standard holidays, many employers also offer Black Friday (the day after Thanksgiving) with 69-75% providing paid time off, and Martin Luther King Jr. Day with 34-38% offering it as a paid holiday. The specific selection of paid holidays varies based on company policy, industry requirements, and regional customs.

Federal holidays are 11 specific days designated by Congress in Title V of the United States Code (5 U.S.C. § 6103) that apply to federal government employees, while paid holidays are days that private sector employers choose to offer their employees with compensation. Federal holidays serve as a common reference point for many businesses, but private employers have complete discretion over which holidays they observe.

The 11 federal holidays include New Year's Day, Birthday of Martin Luther King Jr., Washington's Birthday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day. Federal employees in the Washington, DC area also receive Presidential Inauguration Day as a holiday every four years.

Private sector employers may observe all federal holidays, select only certain ones, or add additional holidays not recognized by the federal government. For example, many private companies omit Columbus Day (observed by only 13-16% of private employers) but include Christmas Eve, New Year's Eve, or the day after Thanksgiving, which are not federal holidays. State and local government employees generally observe the same federal holidays, though individual states may add or rename certain observances to reflect local culture and history.

Part-time employees may receive paid holidays, but this depends entirely on their employer's policies. Federal regulations under 5 U.S.C. 6103 specify that part-time federal employees are entitled to a holiday when their daily tour of duty commences on a calendar holiday, though they are not entitled to an "in lieu of" holiday when a holiday falls on their scheduled day off.

For part-time employees under standard work schedules, they are generally excused from duty for the number of basic non-overtime hours they are regularly scheduled to work on that day, not to exceed 8 hours. For example, if a part-time employee is scheduled to work 6 hours on Independence Day, they receive 6 hours of paid holiday time. If they are not scheduled to work on a particular holiday, they do not receive compensation for that day.

In the private sector, whether part-time employees receive paid holidays varies widely by employer. Some companies extend the same holiday benefits to part-time workers as full-time employees, while others may offer prorated benefits or exclude part-time workers from paid holiday benefits entirely. The Fair Labor Standards Act does not require private employers to provide paid holidays to any employees, whether full-time or part-time.

When a paid holiday falls on a weekend, full-time employees are entitled to an "in lieu of" holiday on a weekday, while part-time employees generally are not. If a holiday falls on a Saturday, the "in lieu of" holiday is typically observed on the preceding Friday. If a holiday falls on a Sunday, the "in lieu of" holiday is observed on the following Monday.

An employee is not entitled to another day off as an "in lieu of" holiday if a Federal office or facility is closed on a holiday because of a weather emergency or when employees are furloughed on a holiday. This rule applies to all full-time employees, including those on flexible or compressed work schedules.

Part-time employees do not receive "in lieu of" holidays according to federal regulations. However, if an agency's office or facility is closed due to an "in lieu of" holiday for full-time employees, the agency may grant paid excused absence to part-time employees who are otherwise scheduled to work on that day. Many private sector employers follow similar practices, though policies vary by company.

Employers can require employees to work on paid holidays. Federal law does not prohibit employers from requiring employees to work on holidays, and employees are not automatically excused from work obligations simply because a day is designated as a holiday. Whether an employee works on a holiday depends on their employer's operational needs and scheduling policies.

When employees are required to work on a holiday, they may receive holiday premium pay in addition to their regular compensation, though this is not federally mandated for private sector workers. For federal employees, holiday premium pay equals an employee's rate of basic pay, meaning they receive double or 200 percent of their regular hourly rate for each hour of holiday work performed during their regularly scheduled basic tour of duty.

Employees who are required to perform any work during basic non-overtime holiday hours are entitled to a minimum of 2 hours of holiday premium pay under federal regulations. Industries that require continuous operations, such as healthcare, emergency services, hospitality, and retail, commonly schedule employees to work on holidays and may offer additional compensation or compensatory time off as an incentive.

Holiday premium pay is additional compensation provided to employees who are required to work during their regularly scheduled hours on a designated holiday. For federal employees, holiday premium pay is regulated under 5 U.S.C. 5546(b) and 5 CFR 550.131(a), which establish that holiday premium pay equals an employee's rate of basic pay.

This means federal employees who work on a holiday receive their regular rate of basic pay plus an additional amount equal to their basic pay rate, effectively doubling their compensation to 200 percent of their normal hourly rate. The holiday premium pay applies only to non-overtime work performed during the employee's regularly scheduled daily tour of duty on the holiday, not to exceed 8 hours for employees on standard or flexible schedules.

Private sector employers are not required by federal law to provide holiday premium pay. Whether private sector employees receive extra compensation for working holidays depends entirely on their employer's policies or collective bargaining agreements. Some private employers offer time-and-a-half (150 percent of regular pay) for holiday work, while others may provide compensatory time off or no additional compensation beyond regular wages.

Some employers offer floating holidays, which are paid holidays that employees can take at their discretion rather than on fixed dates. Companies might give their employees a few floating holidays for special events, birthdays, cultural holidays, or religious holidays that are not on the employer's standard paid holiday schedule.

Floating holidays provide flexibility for employees to observe holidays that are personally meaningful but may not be recognized by their employer's standard holiday calendar. Team members can use these days to extend holiday weekends, take personal vacations, or observe religious or cultural celebrations such as Passover, Ramadan, Diwali, Yom Kippur, or Chinese New Year.

Texas provides an example of this system with partial staffing holidays that state employees can replace with optional holidays of their choice. The state designates certain days like Confederate Heroes Day and Texas Independence Day as partial staffing holidays, which employees can exchange for other observances such as Good Friday, Cesar Chavez Day, Rosh Hashanah, or Yom Kippur. However, the availability of floating holidays varies significantly by employer, and many companies maintain fixed holiday schedules without this flexibility.

Paid holiday time off hours, along with hours of paid leave, use of accrued compensatory time off or credit hours, and hours of excused absence with pay, are credited as hours of work toward overtime pay standards. This applies when determining whether an employee has worked in excess of 8 hours in a day or 40 hours in a week under standard or flexible work schedules.

For employees on standard work schedules, overtime work on a holiday is work in excess of 8 hours in a day or 40 hours in a week. If an employee receives 8 hours of paid holiday time off and then works additional hours in the same week, those paid holiday hours count toward the 40-hour threshold for determining overtime eligibility.

For employees under compressed work schedules, overtime work on a holiday is hours of work in excess of the employee's compressed work schedule on that day, such as 8, 9, or 10-hour basic work requirements. The specific overtime calculation rules are detailed in 5 CFR 550.112(c) and 5 CFR 551.401(b) for federal employees. Private sector overtime rules follow the Fair Labor Standards Act, which may treat holiday hours differently depending on the employer's policies.

Paid holidays are specific designated days when employees receive compensation without working, typically aligned with nationally or culturally recognized celebrations, while paid time off (PTO) is an umbrella term that encompasses various types of leave including vacation days, sick leave, and personal days that employees can use at their discretion throughout the year.

Paid holidays are determined by the employer and occur on fixed dates or designated observances such as Thanksgiving, Christmas, or Independence Day. Employees typically cannot choose when to take paid holidays, as these days are predetermined by company policy or government designation. All employees receive the same paid holidays according to their employer's schedule.

PTO, in contrast, is an accrued or allocated bank of hours that employees can request to use when needed, subject to manager approval and scheduling requirements. Research from the Society for Human Resource Management indicates that paid time off and vacation time are consistently listed among the most important benefits by both employees and employers. BambooHR research found that 30% of workers left a job solely due to the benefits package, with better health benefits, more flexible work hours, and vacation time as high priorities. Some employers offer unlimited PTO policies, while others provide a set number of days that may increase with tenure.

Employers offer paid holidays as a strategic component of their compensation packages to attract and retain qualified employees, improve workplace morale, and remain competitive in the labor market. According to the Society for Human Resource Management, paid leave correlates with increased productivity, increased engagement, better physical wellness, and a positive employer brand.

Offering paid holidays helps employers demonstrate that they value employees' lives beyond work, particularly their desire to spend holidays with friends and families. This recognition can gain employee loyalty and boost job satisfaction. Many employees expect paid holidays as a standard employment benefit, and companies that do not offer them may struggle to attract top talent or lose good candidates to competitors with more generous holiday policies.

From an operational perspective, closing offices on widely recognized holidays can reduce overhead costs when customer demand is low. Industries that remain open during holidays, such as restaurants, healthcare facilities, and retail establishments, may use holiday premium pay as an incentive to ensure adequate staffing. The strategic use of paid holidays balances employee needs with business operations, creating a more sustainable and engaged workforce.

Paid holidays provide employees with compensated time to rest, celebrate cultural or religious observances, and spend time with family and friends without sacrificing income. Research indicates that paid time off helps lower stress in the workplace, which is essential for employees' mental health and overall happiness. Teams with less stress are more likely to enjoy their work, which can increase productivity and work efficiency.

Breaks from work during paid holidays allow employees to recharge and return to work with renewed focus and energy. This can lead to reduced absenteeism on other days, as employees have regular opportunities to address personal needs and avoid burnout. Having predictable days off also helps employees plan personal activities, family gatherings, and travel without needing to request vacation time or take unpaid leave.

From a financial perspective, paid holidays provide income continuity, allowing employees to maintain their standard of living even when not working. This is particularly important for hourly workers who might otherwise lose income during holiday periods. The psychological benefits of knowing that certain days are guaranteed as paid time off contribute to job satisfaction and can influence an employee's decision to remain with an employer long-term.

State governments observe different combinations of paid holidays based on local culture, history, and legislative decisions. While most state governments observe the same holidays that the federal government recognizes, every state includes and omits holidays to fit the culture relevant to its population. All 50 states unanimously observe 8 core holidays: New Year's Day, Memorial Day, Juneteenth, Independence Day, Labor Day, Veterans Day, Thanksgiving Day, and Christmas Day.

Beyond these universal holidays, state observances vary significantly. Martin Luther King Jr. Day is observed by 45 states, with some states renaming it as "Civil Rights Day" or combining it with Robert E. Lee's birthday. Washington's Birthday or Presidents' Day is observed by 38 states, while Columbus Day is recognized by only 23 states, with some renaming it as Indigenous Peoples' Day. The day after Thanksgiving is observed by 18 states, and Good Friday is a state holiday in 13 states.

Some states have unique holidays that reflect regional history and culture. For example, Texas offers Confederate Heroes Day, Texas Independence Day, and San Jacinto Day as partial staffing holidays. Hawaii recognizes Prince Jonah K?hi? Kalaniana?ole Day, Kamehameha Day, and Statehood Day. Alaska observes Seward's Day and Alaska Day. California schools close for César Chávez Day, while Utah celebrates Pioneer Day. These variations demonstrate how state governments adapt federal holiday frameworks to honor local heritage and values.

School holidays are days when educational institutions close or modify their schedules, which may differ from paid employee holidays observed by businesses and government agencies. An academic year typically spans from early fall to early summer, with two or three months of summer vacation marking the end of the year. K-12 public schools generally observe local, state, and federal holidays, plus additional days off around Thanksgiving, a winter break from before Christmas until after New Year's Day, a spring break usually in April, and sometimes a winter break in February or March.

School calendars include holidays that may not be observed as paid holidays by most employers. For example, New York City Public Schools close for Lunar New Year, Rosh Hashanah, Yom Kippur, Eid al-Fitr, Eid al-Adha, and Diwali if these holidays fall within the academic year. California education holidays include days when schools remain open but provide related instruction, such as Ed Roberts Day, Fred Korematsu Day of Civil Liberties, Ronald Reagan Day, and Harvey Milk Day.

Most colleges and universities divide the school year into two semesters, with the fall semester beginning after Labor Day in early September and running until mid-December, and the spring semester starting in mid-to-late January and running until May. Major federal, state, and local holidays are often observed, including the day before and after Thanksgiving, and spring break is usually a week in March or early April. These extended breaks differ significantly from the typical paid holiday schedule for employees, who usually receive individual days off rather than week-long breaks.

US banks generally observe federal holidays because of their reliance on the U.S. Federal Reserve for certain activities such as wire transfers and ACH transactions. While not legally required to close, the Federal Reserve's closure on federal holidays makes it operationally impractical for most banks to conduct certain banking activities, leading them to close or operate with limited services on these days.

Individual banks may choose which federal holidays to observe. For example, JP Morgan Chase observes all federal holidays except Columbus Day, while U.S. Bank observes all of them. The New York Stock Exchange also closely follows the federal holidays except for Columbus Day and Veterans' Day, but adds extra holidays on the day before Independence Day and Good Friday.

This practice affects when customers can conduct certain banking transactions. Federally regulated agencies like banks and financial institutions coordinate their holiday schedules to align with Federal Reserve operations, ensuring smooth functioning of the financial system. Customers should verify their specific bank's holiday schedule, as policies may vary between institutions.

Holiday pay is a type of compensation offered to employees instead of designated paid holidays off. Rather than receiving specific days off with pay, employees receive a lump sum or bonus in their paychecks to cover holiday time off. This approach gives team members more flexibility in using their time off, as they can choose when to take holidays rather than being bound to a predetermined schedule.

Holiday pay can reduce administrative burden for team leaders, as there is no requirement to track which employees are off on specific holidays, and there is less risk of paying for holidays that employees do not take. This system may also reduce absenteeism, as employees do not need to worry about taking time off for specific holidays and can instead use their time off when needed.

In contrast, paid holidays are specific designated days when all or most employees receive time off with pay. These are predetermined dates such as Christmas, Thanksgiving, or Independence Day when the business may close entirely or operate with reduced staff. Team members who choose to work on holidays under a holiday pay system may receive extra compensation for their effort, while traditional paid holiday systems typically excuse employees from work on those days. Holiday pay offers greater flexibility for both employers who require continuous operations and employees who may prefer to work on traditional holidays and take time off at other times of the year.

A paid holiday is often compared to 4 related concepts in employee benefits and compensation:

Paid Holiday vs. Paid Time Off (PTO)

A paid holiday is a specific designated day determined by the employer when employees receive pay without working, typically aligned with national or cultural celebrations. PTO is a broader benefit that includes various types of leave such as vacation days, sick leave, and personal days that employees accrue and can request to use throughout the year subject to approval. Paid holidays occur on the same dates for all employees, while PTO usage is individualized based on employee requests and accrual balances.

Paid Holiday vs. Holiday Premium Pay

A paid holiday provides employees with their regular compensation for a day they do not work, while holiday premium pay is additional compensation provided to employees who are required to work during a designated holiday. Federal employees who work on a holiday receive their rate of basic pay plus holiday premium pay equal to their basic pay rate, effectively doubling their compensation to 200 percent. Private sector employers are not required to provide holiday premium pay, though many offer enhanced compensation as an incentive for holiday work.

Paid Holiday vs. Floating Holiday

A paid holiday occurs on a predetermined date set by the employer, such as Christmas or Independence Day, while a floating holiday is a paid day off that employees can take at their discretion. Floating holidays provide flexibility for employees to observe personal, cultural, or religious celebrations that may not be included in the employer's standard holiday schedule. Some employers offer floating holidays in addition to fixed paid holidays, allowing employees to customize their time off to match their individual needs and preferences.

Paid Holiday vs. Compensatory Time Off

A paid holiday is a benefit provided to employees on designated dates regardless of their work hours, while compensatory time off is time off earned by working extra hours, typically as an alternative to overtime pay. Compensatory time off must be earned through additional work, whereas paid holidays are granted as a standard benefit without requiring employees to work beyond their normal schedules. Compensatory time is particularly common in public sector employment, where agencies may offer comp time instead of overtime pay for hours worked beyond the standard schedule.