As we enter the busy holiday season, employers face an annual question: what are your obligations when it comes to paying employees for holidays? The U.S. Department of Labor (DOL) provides clear guidance under the Fair Labor Standards Act (FLSA), but many businesses still get tripped up—leading to avoidable wage claims, audits, and litigation.
Below is an overview of the federal rules you need to know as you prepare your end-of-year schedules.
No Federal Right to Paid Holidays (For Most Employees)
Under the FLSA, hourly and non-exempt employees have no legal right to be paid for holidays they do not work. Paid holidays—such as Christmas Day, Thanksgiving, or New Year’s Day—are considered a voluntary employer benefit unless a union agreement, employment contract, or company policy requires paid time off.
Exception: Salaried Exempt Employees
For overtime-exempt salaried employees, employers generally must pay their full weekly salary if the business is closed for a holiday and the employee works any portion of that workweek. Failing to do so risks undermining the employee’s exempt status.
If Non-Exempt Employees Work on a Holiday: No Required Premium Pay
The FLSA imposes only one baseline obligation when non-exempt employees work on a holiday: they must be paid at least the applicable minimum wage for all hours worked.
Beyond that requirement, there is no federal mandate to pay premium or bonus rates for holiday shifts. Extra compensation is optional unless required by policy or collective bargaining.
Important Note About Premium Rates Below 1.5x
For overtime-eligible employees, holiday premiums can affect overtime calculations.
If an employer pays a premium that is less than 1.5 times the employee’s regular rate—for example, an additional two dollars per hour, or a premium of 1.25x or 1.3x—that additional amount must be included in the employee’s regular rate when calculating overtime. These payments increase the regular rate and therefore can increase the overtime rate owed for that workweek.
Only premium payments at 1.5x or higher are excludable from the regular rate.
These rules apply only to overtime-eligible (non-exempt) employees.
Holiday Premium Pay and Its Effect on Overtime Calculations
Under DOL regulations (29 CFR Part 778), premium pay of 1.5x or more for holiday work may be excluded from the regular rate for overtime purposes.
Premiums at 1.5x or higher do not increase overtime liability. Premiums below 1.5x must be factored into the regular rate and can increase overtime costs. These regular-rate rules apply only to non-exempt employees who are eligible for overtime under the FLSA.
Understanding this distinction is critical during the holiday season when schedules fluctuate and employees work irregular hours.
How Forework Protects Your Company During the Holiday SeasonAt Forework, our payroll rules for holidays are pre-configured to comply with federal labor laws, including the correct treatment of holiday premiums, inclusion or exclusion of premium payments from the regular rate, proper handling of exempt salary obligations, accurate overtime calculations, and state-specific holiday rules where required.
Our system ensures employees are paid correctly, employers remain compliant, regular-rate errors are avoided, and businesses minimize legal exposure and reduce the risk of costly lawsuits.
Forework exists to help employers navigate the complexities of wage-and-hour laws with confidence—especially during the most compliance-heavy time of the year.