Paid Holidays: A Complete Guide for Employers

The first time I had to decide how many paid holidays to give, I did what most founders do: I guessed. I picked the days that felt obviously right, wrote them in an email, and moved on. This guide is the answer I needed then, written for the employer making the decision rather than the employee looking it up.

The guessing held up until somebody asked whether the day after Thanksgiving counted, whether Christmas Eve was a half day, and what happens when the Fourth of July lands on a Saturday. I realized I had not made a policy. I had made a list of dates and a set of assumptions I had never checked.

The sections below check each of those assumptions: whether paid holidays are legally required, how many are standard, exactly which days go into a six, seven, eight, nine, or ten-holiday schedule, how holiday pay actually works, the rule about exempt employees that trips people up, and what the whole thing costs. Employment rules vary by state and change, so treat this as general information rather than legal advice.

A holiday schedule is one of the most visible parts of your benefits package and one of the cheapest. It shows up in every job posting and offer conversation, costs a fraction of what people assume, and only holds up if it is written down and applied the same way every year. That kind of policy tracking is exactly what I built FirstHR to handle.

What Are Paid Holidays?

Paid holidays are days when a business closes or excuses employees from work and still pays them for the day. They are tied to specific calendar dates, they are separate from vacation and paid time off (PTO), and in the US private sector they are entirely voluntary. Which days you observe, how many you offer, and who is eligible are all yours to decide.

The distinction from PTO matters more than it sounds. A paid holiday is a day nobody works, chosen by the company and applied to everybody. PTO is a bank of days the employee chooses and requests.

That difference has practical consequences. Holidays need no approval workflow and none of the accrual tracking that PTO demands. They close the business rather than thin it out, and they cannot be cashed out.

How paid holidays and PTO interact

Keep the two balances separate, and pay a holiday as a holiday even when it lands inside an approved vacation. An employee who books the week of July 4 should come back having used four PTO days, not five. Charging a vacation day for a company holiday is the quickest way to make a benefit feel like an accounting trick.

Some employers do merge everything into one bank, which is where the idea of holiday PTO usually comes from. It simplifies tracking and lets people observe the days that matter to them rather than the ones on your calendar. The cost is the shared closure: if anybody can work Thanksgiving, somebody eventually will, and the collective part is what most teams actually valued.

Three rules settle nearly every question that comes up. A holiday inside a PTO week is not charged to PTO. Someone whose regular day off falls on a holiday gets a substitute day if they work shifts, and usually does not if they are salaried.

The third rule covers departures. Whether unused floating holidays are paid out depends on your written policy and on state law. California's labor enforcement manual presumes that leave given without conditions is vacation, whatever the policy calls it. An unused floating day can therefore be owed at exit there, which is why the policy section below flags payout as worth checking.

Are Employers Required to Give Paid Holidays?

No. There is no federal law requiring private employers in the US to provide paid holidays, and none requiring premium pay for working on one. This surprises a lot of people, and it is the single most important fact in this guide, because everything else is a business decision rather than a compliance obligation.

Two clarifications follow. First, the eleven federal holidays set the calendar for federal government offices, not for private employers. A private business can observe all eleven, six of them, or none at all without violating any federal law. Second, you can offer paid holidays without paying time-and-a-half to the people who work them. That premium is a custom, not a requirement.

None of which means you should offer nothing. It means the decision is a competitive and cultural one rather than a legal one. Given that four in five private industry workers have access to paid holidays, a business offering zero is making a visible statement in a market where the norm is eight. The law gives you freedom here. It does not give you cover.

Are paid holidays mandatory in New York, or in any other state?

No state obliges a private employer to provide paid holidays, and New York is not an exception. The New York State Department of Labor puts it plainly: payment for time not actually worked, other than sick time, is not required unless the employer has established a policy granting it, and holidays fall squarely inside that category.

What New York does require is disclosure. Section 195.5 of the state Labor Law obliges every employer to notify employees in writing, or by publicly posting it, of the policy on sick leave, vacation, personal leave, holidays, and hours of work. So the schedule is yours to set, and once you have set it you have to tell people what it is.

Two states have regulated what you pay somebody who works on a holiday rather than what you give them off. Rhode Island requires at least one and a half times the normal rate for work on Sundays and its listed legal holidays, with exemptions for certain employers. An employee also cannot be penalized for declining that work. Massachusetts had a comparable retail rule, and its premium pay requirement ended on January 1, 2023.

Everywhere else, including New York, the only enforceable holiday obligation is the one you create yourself through a written policy, a handbook, or a promise made in an offer letter. That is a good reason to write the policy deliberately rather than assembling it from emails, which is the subject of the last section of this guide.

How Many Paid Holidays Is Standard?

Eight is the national average, and it is the number to benchmark against. The range in practice runs from six at the minimal end to ten or more at generous employers, and it varies meaningfully by industry.

The industry variation is worth knowing before you benchmark. According to the Bureau of Labor Statistics National Compensation Survey (March 2026), manufacturing averaged 9 paid holidays and financial activities 10, while leisure and hospitality averaged 6.

Company size pulls the same way. Paid holiday access reaches 73 percent at establishments with fewer than 100 workers and 91 percent at larger ones, per the Bureau of Labor Statistics (March 2026), so a small business measuring itself against the national average is partly measuring itself against enterprise employers with a benefits department.

Which Days: The Big Six and Beyond

Six holidays are close to universal among US employers who offer any paid holidays at all, and everything else is a tier below them. Knowing the tiers is what lets you build a schedule deliberately rather than by feel.

The Big Six are the floor. According to the Bureau of Labor Statistics (BLS) holiday profiles (National Compensation Survey, March 2018), 97 percent of private industry workers who receive any paid holidays get Thanksgiving and Christmas. New Year's Day, Memorial Day, Independence Day, and Labor Day sit at 89 to 94 percent.

The practical consequence is simple. A schedule that skips one of those six reads as a gap rather than a choice, and anyone who came from a job that observed it will say so inside their first year.

The second tier is where the actual decisions live. The day after Thanksgiving is the most commonly added seventh day, and it is popular for a practical reason: almost nobody is productive that Friday anyway, so you are paying for a day you were largely losing regardless.

The same BLS profiles show how steep the drop is after the Big Six. Of private industry workers who receive holidays at all, 39 percent get the day after Thanksgiving, 26 percent Christmas Eve, 24 percent Martin Luther King Jr. Day, 19 percent each Presidents' Day and Good Friday, 14 percent New Year's Eve, and 11 percent Veterans Day.

Juneteenth, a federal holiday only since 2021, postdates that survey. Which of Martin Luther King Jr. Day, Presidents' Day, Juneteenth, and Good Friday you add is a statement about what your business values. The third tier is optional flavor, and floating holidays in particular are worth considering, since they let employees observe things your fixed calendar does not.

What Are the 6, 7, 8, 9, and 10 Paid Holidays?

No official list exists for any of these numbers, because no law defines a holiday schedule for private employers. What exists is convention, and the most common configuration at each size is below.

The pattern is worth naming: every schedule is the Big Six plus additions, and up to eight days the additions come in a predictable order. The day after Thanksgiving usually comes seventh, and MLK Day or Christmas Eve usually comes eighth. At nine and ten, schedules start borrowing from the federal calendar, which is where Juneteenth, Veterans Day, and Presidents' Day come in.

The practical shortcut follows from that order. Decide how many days you can afford, add them in that sequence, and you will land on a schedule that looks normal to any candidate who reads it.

The 11 Federal Holidays

The eleven federal holidays are the days federal government offices close, and they are frequently confused with a list private employers must follow. They are not. They are a useful reference and a common template, nothing more.

One naming point, since it shows up in handbooks. The statute lists the February holiday as Washington's Birthday. Presidents' Day is the colloquial name, and Columbus Day is the statutory name for the October holiday that many employers now label Indigenous Peoples' Day.

Note what the right-hand column tells you. Six of the eleven are observed almost everywhere. The BLS holiday profiles cited above put Martin Luther King Jr. Day at about a quarter of private industry workers with paid holidays, Washington's Birthday at about a fifth, and Veterans Day at about a tenth. They do not measure Columbus Day at all.

Juneteenth is the newest entry: it became a federal holiday in 2021, three years after that BLS data was collected, so there is no comparable figure for it. If you are building a schedule now, it is worth a deliberate decision rather than an omission by default.

How Holiday Pay Actually Works

Holiday pay normally means the employee's regular rate for a day they did not work, and the rest of the holiday pay rules follow from that. Everything beyond it, the time-and-a-half and double-time people associate with holidays, is voluntary and set by your policy.

The row that trips employers up is the overtime one. A common misconception is that holiday hours automatically count toward overtime, or that working a holiday triggers time-and-a-half. Neither is true federally.

The Department of Labor is explicit in Fact Sheet 23: the Act does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, as such. Overtime is owed on hours actually worked over 40 in a workweek.

Paid holiday hours that nobody worked are generally not counted as hours worked for that calculation unless your policy says they are. An employee who takes Thursday as a paid holiday and works 36 hours the rest of the week is therefore not automatically owed overtime. The same is true of PTO hours: they do not count toward the 40-hour threshold either unless your policy says otherwise.

That said, premium pay for holiday work remains a good idea for a business that needs people to show up on Thanksgiving. It is not required, but it is what makes the ask reasonable. Just be clear in writing about which days qualify, what the multiplier is, and whether it applies to everyone or only to non-exempt staff.

Holiday Pay Days: Two Meanings, Both Answered

Holiday pay days can mean two different things, and both deserve an answer. The first is which days are paid, which is the holiday schedule covered above. The second is what happens when payday itself lands on a holiday, which is a payroll timing question with its own answer.

When a scheduled payday falls on a federal holiday, the Federal Reserve is closed (it observes all eleven), so ACH transfers, the bank-to-bank payments behind direct deposit, do not settle. The standard practice is to run payroll a business day early so employees are paid on the preceding business day rather than late.

Paying early is always safe. Paying late may violate your state's pay frequency and timing laws, which vary from state to state and do not make an exception because a bank was closed.

Exempt vs Non Exempt: The Rule That Trips People Up

The most consequential technical rule about holidays involves salaried exempt employees (the ones not entitled to overtime), and getting it wrong can put their exempt status at risk. The rule is set out in 29 CFR 541.602: an exempt employee must receive the full salary for any week in which the employee performs any work, without regard to the number of days or hours worked.

That means if you close the office on Thursday for Thanksgiving and an exempt employee works Monday through Wednesday, you owe them their entire weekly salary. The same section bars deductions for absences caused by the employer or by the operating requirements of the business. A holiday closure is exactly that kind of absence, so you cannot dock a day.

Making improper deductions from an exempt employee's salary can jeopardize the exemption itself, which is a far bigger problem than the day of pay you were trying to save. The narrow exception is a full workweek closure: where the employee performs no work at all that week, no salary is owed.

Non-exempt employees work under the opposite default. They have no federal entitlement to pay for days not worked, so a paid holiday for an hourly employee is purely your policy. If they work the holiday, they get their regular rate for those hours, and overtime only if they cross 40 hours in the week.

The exempt and non-exempt classification is what determines which set of rules applies, so it is worth confirming that your classifications are actually correct before you rely on them.

What Paid Holidays Cost You

Paid holidays cost far less than most small business owners assume, and the number is knowable rather than a matter of guesswork. According to the Bureau of Labor Statistics Employer Costs for Employee Compensation series (June 2026), paid holidays cost private employers $1.05 per employee hour worked, or 2.2 percent of total compensation.

Holiday pay is a small line inside the overall cost of benefits per employee, not the item driving it. Paid leave as a whole runs $3.54 an hour in private industry, and vacation alone costs more than holidays do.

The arithmetic is worth doing explicitly, because it is the argument that wins the internal debate. A business with ten employees at an average $60,000 salary has a $600,000 payroll. Eight paid days out of roughly 260 working days is about 3.1 percent of each salary, so a full eight-day schedule runs about $18,500 a year.

The day-count estimate is higher than 2.2 percent of the same payroll would suggest, because the BLS figure is measured against total compensation, benefits included, and averages in the workers who get no holiday pay at all.

Losing one of those ten employees to a competitor with better benefits, and paying to recruit and ramp a replacement, plausibly costs more than the whole $18,500 schedule on its own. The holiday schedule is not the expensive part of your benefits package. It is one of the cheapest.

Do that arithmetic on your own numbers rather than on the illustration. The worksheet below prices each holiday separately, because the argument you are actually settling is almost always about one specific day rather than the schedule as a whole.

Retention research also argues against trimming the schedule. A study from Florida Atlantic University and Cleveland State University, using 18 years of data and more than 32,000 observations, found that offering only one to five paid days off produced modest reductions in quitting, while six to ten days significantly lowered resignations.

The threshold is the finding that matters. A token amount of paid time off barely moves retention, while a real amount does. The strongest effect in that study appeared at 11 or more paid days off. That is a useful frame for a business deciding whether to go from six holidays to nine.

How Many Should Your Business Offer?

Match the average or beat it, unless your industry genuinely cannot. Eight is the benchmark, and a small business landing below it is making a choice that shows up in every hiring conversation whether or not anyone says so out loud.

Writing a Paid Holiday Policy

An unwritten holiday policy is a series of arguments waiting to happen, because every ambiguity will eventually be tested by a specific situation and resolved in the moment, inconsistently. Write it down once and the questions stop, and a ready-made holiday policy gives you the skeleton to fill in.

The two clauses that prevent the most arguments are the weekend observance rule and the eligibility rule. Those are the ones employees will test first, and having a stated answer converts a potential grievance into a five-second lookup.

Frequently Asked Questions