Holiday Pay Laws and Paid Holiday Rules for Employers (2026)

Paid Holidays Small Businesses Commonly Offer

Most paid holiday lists start with the federal holidays and then add or drop days to fit the business. The days most often given as paid holidays are:

1. New Year's Day (January 1)
2. Memorial Day
3. Independence Day (July 4)
4. Labor Day
5. Thanksgiving Day
6. Christmas Day (December 25)

Depending on your industry, location and team, you might also give some of these days off with pay:

• Christmas Eve or New Year's Eve
• The day after Thanksgiving (Black Friday)
• Martin Luther King Jr. Day
• Juneteenth
• Columbus Day
• Veterans Day
• Good Friday
• A floating holiday each employee picks, such as a birthday or a religious or cultural holiday

Retail stores, restaurants and shipping companies often stay open on holidays because they're busy days. Instead of a paid day off, many pay employees who work the holiday a premium, such as time and a half or double time.

State Holiday Pay Laws for Private Employers

Every state has its own list of legal holidays. In most states, that list sets when state offices and courts close. It doesn't require private businesses to close or pay for the day. The DOL notes that whether you owe holiday pay beyond federal law depends on your state's laws, so check with your state labor department.

Two New England states have holiday rules that do reach private employers: Rhode Island and Massachusetts.

Rhode Island Sunday and Holiday Premium Pay

The Rhode Island Department of Labor and Training says work on Sundays and state holidays must be paid at least one and one-half times the normal rate. Under R.I. Gen. Laws 25-3-3, employees also can't be fired or penalized for refusing to work on a Sunday or holiday.

Retail stores have two extra rules under R.I. Gen. Laws 5-23-2. Sunday and holiday work must be strictly voluntary, and each employee who works must be guaranteed at least 4 hours of work.

These are the Rhode Island holidays that trigger premium pay:

• New Year's Day (January 1)
• Memorial Day (last Monday in May)
• Juneteenth (June 19)
• Independence Day (July 4)
• Victory Day (second Monday in August; August 10 in 2026)
• Labor Day (first Monday in September)
• Columbus Day (second Monday in October)
• Veterans Day (November 11)
• Thanksgiving Day (fourth Thursday in November)
• Christmas Day (December 25)

Some employers are exempt from part of the rule. The statute exempts taxi and limousine companies that run 24 hours a day, 7 days a week, from the premium, along with car rental agencies at T.F. Green airport whose lease requires them to open. Manufacturers that run 7 days a week don't have to make Sunday and holiday work voluntary. A few older employer-group exemptions also remain, such as private security guard businesses and call centers, according to a 2025 Littler summary of the new regulations.

Most Rhode Island retail stores also can't open on Thanksgiving or Christmas Day. The exceptions include pharmacies, bakeries, garden and floral stores, and food stores with fewer than 6 employees per shift at a location.

The 2025 regulations also explain how the premium works with overtime. A retail business can count its Sunday and holiday premium hours toward overtime. Any other employer has to pay both. Here's an employee who earns $20 an hour and works 48 hours in a week, including 8 hours on a holiday.

Massachusetts Holiday Rules for Retail Stores

Massachusetts used to require retail stores to pay time and a half for work on Sundays and most holidays. A 2018 state law (Chapter 121 of the Acts of 2018, often called the "Grand Bargain") lowered that premium a little each year until it ended on January 1, 2023. The state's blue laws guide confirms the Sunday and holiday premium is gone. Retail employees still get time and a half for hours over 40 in a week, including Sunday and holiday hours.

A few rules are still in place for retail stores:

• Retail employees can't be required to work on Sundays or certain holidays, and you can't discipline, fire or cut the hours of an employee who says no. Some small food stores and other exempt businesses aren't covered by this rule.
• Thanksgiving and Christmas Day are restricted holidays. Most retail stores can open only with state approval and a local police permit, unless they qualify for an exemption.
• On Columbus Day, retail work before noon needs state and local permits. On Veterans Day, the same applies before 1:00 p.m. Work after those times is allowed, but it has to be voluntary.

Holiday Pay and Overtime Rules

Federal overtime is based on hours actually worked. A paid day off for a holiday isn't hours worked, so it doesn't count toward the 40 hours that trigger overtime. You can see this in the DOL's hours worked guidance and in 29 CFR 778.218. California's Labor Commissioner follows the same rule for state overtime.

Maria earns $20 an hour. Her workplace closes on Thanksgiving and gives her 8 hours of holiday pay. She works 8 hours on each of the other four weekdays and 8 hours on Saturday.

You can choose to count holiday hours toward overtime if you want to be more generous. Just put it in your policy and apply it to everyone.

Holiday premium pay works the other way. If you pay at least time and a half for work on a holiday, 29 CFR 778.203 lets you count that extra pay toward overtime owed for the same week.

Jordan earns $20 an hour and works 48 hours, including 8 hours on Thanksgiving. Your policy pays time and a half for holiday work.

Two limits apply. Pay for a holiday the employee takes off can't be counted toward overtime (29 CFR 778.219). A holiday premium below time and a half has to be added into the employee's regular rate, and it can't be credited toward overtime. For more examples, see our guides on how to calculate overtime pay, whether PTO counts toward overtime and overtime laws.

Holiday Pay Rules for Salaried Exempt Employees

Exempt employees are paid a salary of at least $684 a week ($35,568 a year) and do work that passes the federal duties tests. Under 29 CFR 541.602, they must get their full salary for any week in which they do any work.

A holiday closure is time off you choose, and an employee who's ready and able to work can't have their pay docked when you don't have work for them. If your office closes on Friday, July 3, 2026, an exempt manager who works Monday through Thursday still gets the full weekly salary.

The rules allow full-day deductions only in limited cases, such as full days an employee chooses to take off for personal reasons. Our guides on the federal overtime salary threshold and how to classify employees explain the exemption tests.

Holiday Pay for Federal Contractors

Federal contractors are the main group of private employers that federal law requires to pay for holidays. If you have a federal service contract over $2,500 covered by the McNamara-O'Hara Service Contract Act (SCA), the holiday and vacation requirements are listed in the contract's wage determination.

The DOL's Fact Sheet 67B explains how SCA holiday benefits work:

• Most wage determinations list a specific number of named holidays that you must pay for.
• An employee who does any work during the workweek of a named holiday is generally entitled to the holiday benefit.
• A full-time employee who works on a named holiday gets regular pay for the work plus a full day's holiday pay (up to 8 hours) or another paid day off.
• Part-time and temporary employees are generally entitled to a prorated share of the fringe benefits.

Construction contracts under the Davis-Bacon and Related Acts work differently. Holiday pay is required only for the job classifications where the contract's wage determination lists it.

Who Is Eligible for Paid Holidays

Since paid holidays are voluntary for most businesses, you decide who gets them. Full-time employees, including those in entry-level jobs, usually get paid holidays. If you don't offer them to full-time staff, it may be harder to hire and keep good people, because most employers near you likely offer some holiday benefit.

Part-time employees are less likely to get paid holidays. Some businesses give them a prorated amount, such as 4 hours of holiday pay for someone who works 20 hours a week. Whether someone is paid a salary or by the hour shouldn't be what decides eligibility.

Common eligibility rules include:

• Paid holidays start after a waiting period, such as 30 or 90 days on the job.
• Employees must work their scheduled shifts the day before and the day after the holiday to get paid for it.
• Seasonal and temporary workers aren't eligible.
• A holiday that falls during an employee's vacation is paid as a holiday, so it doesn't use up vacation time.

Whatever you pick, apply it the same way to everyone in the same group.

How to Write a Paid Holiday Policy

A short written policy prevents most holiday pay questions. Make sure it covers these points:

• The list of paid holidays for the year, with dates.
• Which employees are eligible and when eligibility starts.
• How much holiday pay each group gets, such as 8 hours for full-time employees.
• What happens when a holiday falls on a weekend or on an employee's day off.
• The pay rate for employees who work on a holiday, if you pay a premium.
• Whether paid holiday hours count toward overtime.
• Any state rules that apply to you, such as Rhode Island's premium pay.
• How holidays fit with your other paid time off. Our guide to PTO laws by state covers vacation and sick leave rules.

Bottom Line

Federal law leaves holiday pay up to you, with exceptions for Rhode Island, Massachusetts retail and federal service contracts. Choose your holidays, write them down, track holiday hours apart from hours worked, and pay exempt employees their full salary in holiday weeks.

Final Thoughts on Holiday Pay

Most private employers don't have to offer paid holidays. Still, they're a simple way to make your business a better place to work, and employees notice when they can enjoy a holiday without losing pay.

Talk with your employees about which days matter most to them, then build a list that works for your schedule and budget. Check your state's rules, write the policy down and apply it the same way every year.

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This guide is general information and isn't legal advice. For your situation, check with your state labor department or an employment attorney.