Managing leave around public holidays in the United States
Reviewed by Mellow Editorial Team, HR & payroll content team
Federal law does not require private employers to give employees time off on public holidays, paid or unpaid. What you offer — and how you manage leave around those days — is almost entirely your choice, shaped by your own policies and any applicable state rules.
What the law actually requires
No federal statute mandates paid holidays for private-sector employees. The Fair Labor Standards Act (FLSA) sets rules on minimum wage and overtime, but it says nothing about holiday pay. If a non-exempt employee works on a holiday, you owe them their regular rate for those hours — nothing more, unless your policy promises a premium.
A handful of states and localities have specific rules — for example, some require retail workers to be paid a premium on certain holidays or give them the right to refuse holiday work. Rhode Island and Massachusetts have historically had "blue laws" restricting Sunday and holiday retail work, though those rules have evolved. Always check your state's labor department guidance before finalizing your holiday policy.
Federal holidays (New Year's Day, Independence Day, Thanksgiving, and so on) are only legally binding for federal government employees and federal contractors under certain contracts. For everyone else, they are simply common reference points.
Building a clear holiday policy
Because the law gives you wide latitude, a written policy is essential. Without one, you will face inconsistent treatment, employee confusion, and potential discrimination claims. Your policy should address:
- Which days are observed. List the specific dates your business recognizes, not just names. "The Friday after Thanksgiving" is clearer than "Black Friday."
- Pay treatment. Will observed holidays be paid days off, unpaid days off, or regular workdays with optional use of PTO?
- What happens when a holiday falls on a weekend. A common approach: if a holiday falls on a Saturday, observe it on the Friday before; if it falls on a Sunday, observe it on the Monday after. State this explicitly.
- Eligibility. Full-time employees only, or part-time too? Prorated for part-timers? New hires in their first 90 days?
- Employees who work on a holiday. Will you offer a substitute day off, premium pay, or nothing extra beyond base wages?
Apply your policy consistently. Different treatment for employees in similar roles can create legal exposure.
Floating holidays and flexible leave
Many employers now offer one or more "floating holidays" — days employees can take at their discretion, for religious observances, cultural celebrations, or simply personal preference. This approach reduces the risk of inadvertently favoring one religion or culture over another, which matters if your team is diverse.
Floating holidays work best when you treat them like a separate bucket from general PTO: a defined number of days, taken with reasonable advance notice, and forfeited (or paid out, depending on your state) if unused by year-end. Note that California prohibits policies that cause accrued vacation to be forfeited without use — check whether your state has similar rules before setting a "use it or lose it" provision.
Managing requests when the whole team wants the same day off
Some holidays generate a surge of leave requests — the days around Thanksgiving, the week between Christmas and New Year's, or the day after a long weekend. A few practical approaches:
First-come, first-served is simple and transparent, but it can disadvantage employees who hesitate to ask early or whose circumstances change.
Rotating priority gives different employees first pick each year, which spreads the benefit more evenly over time.
Planned shutdowns work well for businesses that slow significantly during certain periods. You close for a defined stretch, everyone is off, and there is nothing to manage. The trade-off is that employees must use their PTO (or receive unpaid days, depending on your policy) for the closure period — be clear about this upfront.
Whatever method you use, document it and communicate it well before peak periods. Employees who understand the system in advance are less likely to feel treated unfairly.
Payroll implications to keep in mind
Holiday pay does not change how you calculate Social Security, Medicare, or federal income tax withholding — paid time off is treated as regular wages and processed through your normal payroll cycle. Where things get complicated is overtime: if a non-exempt employee receives holiday pay for a day they did not actually work, that pay typically does not count toward the 40-hour threshold for FLSA overtime purposes, unless your policy or a collective bargaining agreement says otherwise. Confirm your approach with a payroll professional or employment attorney if you are unsure how your policy interacts with overtime calculations.
If you employ workers across multiple states, holiday pay rules can vary — what is acceptable policy in Texas may conflict with specific requirements in another state. How Mellow runs payroll across six countries is one example of why jurisdiction-by-jurisdiction review matters even within a single country.
The simplest safeguard is a policy that is written down, applied uniformly, reviewed annually, and visible to every employee before they need to use it.
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