A Guide to Holidays and Holiday Pay in the USA

Josh Redford
May 12, 2021

From time-off for workers to holiday pay and employee benefits, federal holidays in 2021 can affect your business in many ways. Also, the effects of federal holidays may differ from that of state or regional holidays. As a business owner in the USA, you must understand the possible impacts these holidays can have on your business so you can plan how to better manage them.

During holidays in the USA, most employees are entitled to take a break from work. And according to the Fair Labor Standards Act (FLSA), employers are required to pay employees only for the time they have worked, unless otherwise written into their contract agreement.

Some employers may think not giving holiday pay helps their balance sheet. On the other hand, business activities may be affected when workers are on holiday. As such, a good understanding of how holidays work is essential to designing a PTO (Paid Time Off) policy for your small business.

What is a federal holiday?

In the USA, a federal holiday is a date that is recognized and assigned by the federal government as a holiday. On such holidays, non-essential federal institutions and offices are closed. Trading in the stock market is also usually suspended.

Though similar, a federal holiday is not to be mistaken for a national holiday. A national holiday is observed by all employees in a nation, including state and private companies unless otherwise exempted. Unlike national holidays, federal holidays require only federal employees to stay off-work. It is not mandatory for state and private employees to observe federal holidays although they may decide to participate as a general convention of courtesy.

USA federal holidays are established by Congress, and Congress is permitted by the constitution to designate holidays only for federal institutions. As such, the United States does not observe any national holidays.

Employees in federal institutions and organizations are entitled to holiday pay during a federal holiday. But whether or not you pay your employees as a small business owner is dependent on the holiday pay policy you operate. Unlike federal institutions, private employers are not required to pay their employees on holidays. 

However, you may decide to give your employees holiday pay or pay them based on the work they do on holidays. Also, companies can implement their unique internal holiday policies to create better working conditions for their employees.


What are the 10 federal holidays in the  USA?

The United States observes 10 legally recognized federal holidays annually. These holidays are not mandatory for state and private institutions although they may decide to join. As listed by the OPM, the 10 U.S federal holidays in 2021 and their respective dates are:

  • New Year Day - Friday, January 1
  • Martin Luther King Jr. Day - Monday, January 18
  • George Washington's Birthday - Monday, February 15
  • Memorial Day - Monday, May 31
  • Independence Day - Monday, July 5
  • Labor Day - Monday, September 6
  • Columbus Day - Monday, October 11
  • Veterans Day - Thursday, November 11
  • Thanksgiving Day - Thursday, November 25
  • Christmas Day - Saturday, December 25

The USA also celebrates Inauguration Day on 20th January every four years. If the 20th of January falls on a Sunday, the Inauguration Day for that year is celebrated the following Monday.

Should any federal holiday fall on a Saturday, employees are allowed to observe it the preceding Friday. Federal holidays that fall on Sundays are observed the following Monday for pay and leave purposes.

In the case of a federal holiday that falls on a day when an employee is not scheduled to work, the employee can take the holiday on the scheduled workday immediately before the actual holiday date.


What is a state holiday?

A State holiday is a holiday that is recognized and designated for organizations in the public and government sector of that state. Private organizations in a state may observe state holidays although it may not be mandatory for them to do so.

The designations of holidays may differ from one state to another. A state may have some holidays peculiar only to that state. For example, the State of Arizona recognizes the second Sunday in May as a holiday for Mothers' Day. In the State of Florida, the second Monday in October is recognized as Farmers Day.

The requirements for state holidays may also vary across states. For instance, most states in the U.S. do not require private companies to pay their employees on holidays—the exceptions are Rhode Island and Massachusetts.

As such, most state laws permit private employers to implement their policies regarding holidays and holiday pay. However, your business is bound by the policies if you created anyone. To find out the holiday requirements for a state, you can contact the State Labor Office in that state. 


What is a regional holiday?

While U.S. federal holidays apply to federal institutions, regional holidays are observed in regions within the country. Different regions observe different holidays that are peculiar only to them.

Some examples of regional holidays in the USA include:

  • Pioneer Day - July 24 - Utah 
  • Gaspee Days - Rhode Island
  • Margaretta Day - June 16 - Maine
  • San Jacinto Day -April 21 - Texas
  • Mildred Fish - Harnack - September 16 - Wisconsin

What is a government holiday?

A government holiday is a calendar date recognized and allocated as a holiday by the government. Each level of government in the U.S.—federal, state, and local government—may have different designations for holidays.

Federal holidays apply to employees in institutions under the federal government, state holidays apply to state government workers, and so on.  This implies that employees under the federal level are not expected to participate in state or local government holidays.


How do I navigate holiday pay when it comes to paying my employees?

As a business owner in America, you are not bound by any laws to pay your employees for holidays. How you manage your company's holiday pay depends on your own holiday pay policies and your employee benefits programs.

While some employers may consider not offering holiday pay as one of the effective ways of saving labor costs, others consider it an effective employee retention strategy. It all depends on your business perspective.

Of course, everyone desires to work where they are valued and appreciated. One of the ways to show such appreciation to your employees is by implementing employee-friendly holiday pay policies.  Paying holiday-pay even when it is not required by law can be proof that you value your employees’ service. 

So, how do you pay your employees for holidays? You can design a holiday pay policy that makes provision for employee holiday payment based on certain conditions. For instance, you may require your employees to work for a lesser time during holidays.

Alternatively, you can integrate holiday payment into your employee benefits program. It can be a good incentive for motivating your workers to give their best at all times. A good employee management software can help you manage your payroll to effectively implement these policies and allow you to forecast labor costs. 

It is very necessary to secure your business against any possible negative effects during employee holidays. With Push's powerful time tracking tool, you will be able to monitor and manage your employees' availability, starting, and ending dates of holidays. By so doing, you can make all necessary arrangements to ensure that staff holiday absence does not affect your business. Making holiday pay a breeze.


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