March 21, 2024

What are paid holidays?: An employer’s guide

paid holidays

The crux of any successful organization is its workforce, composed of engaged, motivated employees who feel they’re valued by their employer. A key part of ensuring a positive employee experience that drives workers to put forth their best efforts on the job is offering fair policies for a healthy work-life balance. For that reason, it can be beneficial for organizations to create, maintain, and closely examine their paid holiday offerings—both to improve the employee experience, and consequently, their bottom line.

But the process of developing and maintaining a paid holiday policy is not free of challenges. Organizations often contend with complex, time-consuming leave and accrual management needs. These employers need reliable, effective strategies that bolster their paid holiday policies without sacrificing workforce productivity, efficiency, and employee satisfaction.

Understanding your options regarding paid holidays can help your organization make an informed decision about the best paid holiday policy for your company and employees. Here, we’ll outline everything you need to know about paid holidays, including how they work, some real-life examples, why they matter, and how a strong policy backed by automated leave and accrual processes can help you retain top talent and avoid attrition.

What are paid holidays?

Paid holidays are days that employers can choose to observe by allowing their employees to take the day off while still earning their pay. Providing paid holidays is not required by federal law, so private organizations can decide which to offer, if any. According to the Fair Labor Standards Act (FLSA), paid holidays are a matter of agreement between employers and their employees, so holiday pay typically varies from one organization to the next.

How do paid holidays work?

To establish a paid holiday policy, employers must first determine which holidays they’ll include. Typically, these days are associated with federal holidays, which are dates that the U.S. government has deemed legal public holidays. While they’re offered at the discretion of each employer, they’re often included as part of a benefits package to entice new potential employees and retain current workers, too.

Although federal law doesn’t require private employers to offer paid holidays, some federal employees—like U.S. Postal Service workers and federal government office secretaries—are guaranteed paid holidays. Among private organizations, paid holidays do vary, but there are several that employers in the U.S. often offer to their employees.

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Examples of paid holidays in the U.S.

81% of all U.S. workers employed by private institutions are offered paid holidays. According to a 2022 study, American civilian workers have an average of six paid holidays per year.

The following are the most popular paid holidays that employers may offer their employees:

  • New Year’s Day (January 1)
  • Martin Luther King, Jr. Day (Third Monday in January)
  • Washington’s Birthday/Presidents Day (Third Monday in February)
  • Memorial Day (Last Monday in May)
  • Juneteenth/Emancipation Day/Freedom day (June 19 or the closest working weekday)
  • Independence Day (July 4)
  • Labor Day (First Monday in September)
  • Indigenous Peoples’ Day/Columbus Day (Second Monday in October)
  • Veterans Day (November 11)
  • Thanksgiving Day (Fourth Thursday in November)
  • Christmas Day (December 25)

Other paid holidays organizations may offer

While the following aren’t considered federal holidays, employers often include them in their paid holiday policies:

  • Easter Monday (Monday after Easter Sunday)
  • Good Friday (Friday before Easter Sunday)
  • Friday after Thanksgiving
  • Christmas Eve (December 24)
  • New Year’s Eve (December 31)

Some organizations also offer paid holidays based on local legislation or customs. For example, Election Day is a public holiday in some states, and many organizations in New Orleans give employees paid time off during Mardi Gras.

Benefits of offering paid holidays

As an employer, it can be difficult to justify offering a significant number of paid holidays when reaching operational goals is a priority. But it’s essential to consider the positive impact that a strong policy can make on both your operations and your employees. Such benefits include:

  • Increased employee engagement: Employee engagement may feel like nothing more than a popular buzzword, but teams with high levels of engagement are actually 14% more productive than their counterparts. Engaging your employees requires tangible strategies that demonstrate how much the organization values and appreciates their efforts, and offering paid holidays does just that. These days off allow workers to decompress, enjoy personal time and celebrations with family and friends, and encourage them to return to work well-rested and ready to perform at the highest level possible.
  • Improved employee wellness: To stay productive and effective in their roles, employees need to be physically, emotionally, and mentally healthy. Offering ample opportunities to rest and recharge can help prevent burnout. While regular paid time off (PTO) is beneficial for this, some employees appreciate that on paid holidays, everyone is off work. Knowing the work isn’t piling up on their desks in their absence can help them fully unplug and enjoy their time off. Creating initiatives like paid holiday policies that support worker wellness can mitigate overstimulation and exhaustion that may otherwise cause absenteeism or even cause employees to search for another job.
  • Positive organizational reputation: The reputation that your company upholds can become a unique differentiator against its competitors. A robust paid holiday policy helps you establish and maintain your image as a company that cares about its employees instead of profit alone.
  • Ability to attract top talent: In the same vein, offering a generous number of paid holidays to employees can become a powerful tool for attracting and securing new talent, who often have the upper hand when it comes to choosing employment. If a highly-skilled, experienced professional has their pick between working for several different companies, your attractive paid holiday policy (or lack thereof) could actually become the determining factor in their decision.

To reap the most benefits possible, be sure to create a paid holiday policy based on the specific needs of your organization and employees.

Automate your leave and accrual management process with TCP Software

A solid paid holiday policy is a must in today’s hyper-competitive job landscape, as employers continue to search for ways to improve employee engagement and attract and retain top talent—all without letting productivity and profitability fall by the wayside. But creating a policy that works for your organization also requires close attention to your leave and accrual management processes, both of which rely on accuracy, compliance, efficiency, and the overall employee experience.

Accounting for paid holidays is a vital (and sometimes unintentionally overlooked) component of leave management, and manual processes for managing paid holidays are both-error prone and time-consuming. Your organization needs an automated leave management system to take the guesswork out of the equation.

The right tool makes it easy to set up paid holidays for employees so the payroll team doesn’t need to babysit those days. It also prevents employees from being accidentally scheduled on holidays and enables workers to plan their time off well in advance. It should seamlessly incorporate paid holidays as one component of a holistic leave management process, which should also include managing a PTO policy (including accruals), various leaves of absence, and transparent, automated workflows for requesting, approving, and documenting time off.

TCP’s leave management software can help organizations optimize leave and accrual management with tools that:

  • Prevent costly compliance issues with collective bargaining agreements (CBAs) and/or internal policies
  • Enable half-day holiday pay for part-time employees
  • Foster trust by giving employees visibility into their accrual and leave—including paid holidays—with 24/7 self-service access across multiple devices, including mobile
  • Apply different holiday pay and other leave management policies to different employees based on factors like seniority, role, and compliance
  • Enable time-and-a-half or double-time pay for hourly workers who choose to work on holidays
  • Automatically include paid holidays in employees’ hours to ensure accurate pay

TCP believes organizations shouldn’t have to choose between meeting their goals and keeping their employees happy, regardless of the complexity of the company’s operational needs. Backed by TCP’s powerful time and attendance solution, your organization can maximize its bottom line by improving accuracy, efficiency, compliance, and the employee experience.

Learn more about how you can drive greater efficiency with effective leave management, or speak to an expert to discover how TCP can help you streamline your time and attendance processes.

Frequently asked questions (FAQs) about paid holidays

There are 11 federal holidays currently observed in the U.S., including:

  • New Year’s Day (January 1)
  • Martin Luther King, Jr. Day (Third Monday in January)
  • Washington’s Birthday/Presidents Day (Third Monday in February)
  • Memorial Day (Last Monday in May)
  • Juneteenth/Emancipation Day/Freedom Day (June 19 or the closest working weekday)
  • Independence Day (July 4)
  • Labor Day (tFirst Monday in September)
  • Indigenous Peoples’ Day/Columbus Day (Second Monday in October)
  • Veterans Day (November 11)
  • Thanksgiving Day (Fourth Thursday in November)
  • Christmas Day (December 25)

If a holiday falls on a weekend, some employers will offer the previous Friday or following Monday as a paid day off.