Paid Holidays for Small Businesses: A Complete Guide

If you're a new business owner heading into your first holiday season, paid holidays probably aren't the thing you want to be figuring out right now. But here you are, wondering whether you're legally required to offer them, which ones to pick, and what to do when someone has to work.

Here's the good news: the rules are simpler than they look. This guide walks you through which paid holidays most small businesses offer in the US, what the law actually requires, how holiday pay works, and how to build a policy your team will understand.

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Paid holidays for small businesses: What you need to know

Paid holidays come with more questions than most people expect. Before you get into the details, here's what matters most.

• No federal law requires paid holidays. Offering them is entirely your call as a business owner.
• Most small businesses offer 6 to 8 paid holidays per year, starting with the Big Six: New Year's Day, Memorial Day, July 4th, Labor Day, Thanksgiving, and Christmas.
• Paid holidays and holiday pay aren't the same thing. A paid holiday is the day itself; holiday pay is the rate you pay employees who work on it.
• Only Rhode Island requires premium pay for holiday work. Most states leave this entirely up to you.
• Offering paid holidays costs roughly 2% of annual payroll and is one of the lowest-cost ways to compete for hourly employee benefits.

How do paid holidays work for hourly employees?

A paid holiday is a designated day off where eligible employees receive their regular pay without coming in to work. Think of it like a day that counts toward their paycheck even though they're not on the clock.

Here's what a lot of new business owners get surprised by: private-sector workers have no automatic right to paid holidays under the Fair Labor Standards Act (FLSA). Unlike federal government employees — who get 11 paid federal holidays by law — your team's holiday benefits are entirely up to you.

What is holiday pay?

Holiday pay is one of the most misunderstood terms in small business payroll — and conflating it with paid holidays leads to policy mistakes that are hard to walk back. Here's the clearest way to think about it.

A paid holiday is a day off where an employee gets their regular wages without working. A holiday pay rate is what you pay an employee who actually comes in on a holiday — and that rate may or may not be higher than their normal wage.

The key thing to know: working on a holiday doesn't automatically trigger overtime or premium pay under federal law. Holiday pay rules default to the employee's regular hourly rate unless your policy says otherwise. If you want to offer time and a half or double time as an incentive for holiday shifts, that's a choice — not a legal requirement.

Are employers required to give paid holidays?

Most private employers aren't — and understanding where the federal baseline ends and state rules begin will save you a lot of confusion. Here's what the law actually says.

The FLSA does not require private employers to give paid time off for holidays — federal, state, or otherwise. Federal holidays are only mandatory paid days off for federal government employees. The 11 federal holidays are:

• New Year's Day
• Martin Luther King Jr. Day
• Presidents' Day
• Memorial Day
• Juneteenth
• Independence Day
• Labor Day
• Columbus Day
• Veterans Day
• Thanksgiving
• Christmas

If you close on Christmas and pay your team, that's a benefit you're choosing to provide — not a legal obligation.

State-by-state requirements

State laws vary, but most don't add much to the federal baseline. Here's where things differ:

• Rhode Island requires all employers to pay 1.5x for employees working on Sundays and certain holidays. The distinction between retail and non-retail businesses affects how overtime is calculated alongside that premium, but the premium pay obligation applies broadly.
• Massachusetts eliminated its Sunday and holiday premium pay requirement in 2023, so it no longer applies there.
• California, New York, and Connecticut have Sunday premium rules in certain industries that can affect holiday pay calculations.

For most states, the bottom line is the same: you're not legally required to offer paid holidays or premium pay for holiday work.

What holidays are paid holidays in the US?

There's no single official list — what counts as a paid holiday depends entirely on your policy. That said, clear patterns have emerged across industries, and most small businesses use the same core set as their starting point. The average private-sector employer offers around 8 paid holidays per year, according to BLS data.

The Big Six that almost every business offers

These six holidays are observed by the vast majority of employers who offer any paid time off at all. If you offer nothing else, start here:

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

The next tier (commonly offered)

Once you've got the Big Six, these are the holidays most commonly added as businesses grow their benefits:

7. Martin Luther King Jr. Day
8. Presidents' Day
9. Columbus Day / Indigenous Peoples' Day
10. Veterans Day
11. Day after Thanksgiving (Black Friday)
12. Christmas Eve
13. New Year's Eve

Federal observed holidays for 2025 and 2026

When a federal holiday falls on a weekend, it's typically observed on the nearest weekday — Friday if it falls on a Saturday, Monday if it falls on a Sunday. For the full list of paid federal holidays with observed dates for both years, the Office of Personnel Management keeps an up-to-date calendar.

How many paid holidays a year should you offer?

The right number depends on your size, industry, and what you can sustain. Here's how it typically breaks down across small businesses.

• Micro employers (1–9 employees): About 50% don't offer any paid holidays. When margins are thin and every day counts, it's a real trade-off.
• Small employers (10–99 employees): Typically offer 5 to 8 paid holidays. The Big Six is a common starting point, with more added as the business grows.
• Industry matters: Retail and hospitality often offer fewer holidays because they stay open on many of them. Professional services typically offer more to match white-collar norms.

What your competitors are offering

Here's the retention case: replacing an employee costs 50 to 200% of their annual salary, according to SHRM research. Not offering paid holidays puts you at a real disadvantage when you're competing for the same hourly workers as businesses that do.

Figuring out which holidays to pay for is one thing — calculating what each employee is owed is another. With payroll for small businesses, Homebase automatically handles holiday pay based on your policy so you never overpay or shortchange your team.

How to decide which paid holidays to offer your team

Choosing which paid holidays to offer doesn't have to be a guessing game. Use this four-step framework to build a holiday schedule that works for your budget and your team.

1. Start with the Big Six

These are the holidays your team will expect. If you're opening your doors for the first time, offer at minimum New Year's Day, Memorial Day, July 4th, Labor Day, Thanksgiving, and Christmas. Offering fewer than the Big Six puts you at a real hiring disadvantage.

2. Ask your team

Not everyone on your team celebrates the same holidays. A quick survey before you finalize your policy can reveal which days actually matter to your people — and save you from offering holidays nobody cares about.

Floating holidays are worth considering here too. They're paid days employees can use whenever they choose, which makes it easy to accommodate religious and cultural observances without expanding your fixed holiday list.

3. Run the numbers

Before you commit, calculate the cost. Multiply your number of employees by their average hourly rate, then by 8 hours — that's roughly what each paid holiday costs you. Budget roughly 2% of annual payroll for a standard 6 to 8 day holiday schedule.

4. Add incrementally

Start with the Big Six, then add one or two holidays per year as the business grows. Document your plan so employees know what to expect.

What paid holidays cost — and why they're worth it

Paid holidays are one of the more predictable line items in your labor budget. Most small businesses find that a standard 6 to 8 day holiday schedule runs roughly 2% of annual payroll — and the math is straightforward.

Here's what that looks like in practice:

• 10 employees at an average of $18/hour
• 1 paid holiday = $18 × 8 hours × 10 employees = $1,440
• 6 paid holidays (Big Six) = $8,640/year
• 8 paid holidays = $11,520/year

Use this formula for your own numbers: number of employees × average hourly rate × 8 hours = cost per holiday. Then multiply by however many days you plan to offer. The labor cost calculator can help you model it for your specific team.

Manual holiday pay calculations invite errors — and errors are expensive. Rather than tracking it by hand, Homebase payroll automatically calculates what each employee is owed based on your holiday policy.

Do you have to pay time and a half on holidays?

Short answer: in most cases, no. There's no federal law requiring premium pay for employees who work on holidays.

Under the FLSA, overtime is triggered by total hours worked in a week — not by the specific day. If an employee works on July 4th but logs fewer than 40 hours for the week overall, you're not required to pay them anything beyond their regular rate.

The main exception is Rhode Island, which requires all employers to pay 1.5x for employees working on Sundays and certain holidays — not just retail businesses. If you operate in Rhode Island, that premium pay obligation applies to your team regardless of your industry.

One thing to watch: if a holiday shift pushes an employee over 40 hours for the week, those extra hours are subject to overtime under the FLSA — not because it's a holiday, but because they crossed the weekly threshold. See our guide to overtime pay laws for more detail.

How to calculate holiday pay if you choose to offer premium pay

Many employers offer time and a half or double time voluntarily to incentivize holiday coverage. Here's how the math works:

• Time and a half: hourly rate × 1.5 × hours worked
• Double time: hourly rate × 2 × hours worked

For example, an employee earning $18/hour who works 8 hours on Thanksgiving earns $216 at time and a half — compared to $144 at their regular rate. Spell out which holidays qualify and at what rate in your written policy.

How to create a holiday pay policy

Once you've decided which holidays to offer, get it in writing. A solid holiday pay policy keeps everyone on the same page and protects you if questions come up later. At a minimum, it should cover:

• The list of paid holidays your business observes, with specific dates or a reference to the federal holiday calendar
• Eligibility requirements — does someone need to work a minimum number of hours per week, complete a probationary period, or be full-time?
• How holiday pay is calculated — regular rate of pay, or a premium for working the holiday
• Weekend observance — if a holiday falls on Saturday, do you observe it on Friday? If Sunday, on Monday?
• What happens if someone works the holiday — comp time, premium pay, or just their regular rate?
• Floating holiday rules — how many, how to request them, any blackout periods, and whether unused days expire

Once it's written, put it in your employee handbook guide and review it during onboarding. Track holiday balances and PTO separately so eligibility is always clear.

Build your paid holiday policy with confidence

You don't have to get it perfect on day one. Start with what you can afford, write it down, and tell your team. You can always add more holidays as the business grows — what matters is that people know what to expect.

And when payday rolls around during the holidays, that shouldn't be one more thing on your plate. Your scheduling, time clock, and payroll all connect in Homebase, so holiday pay works itself out based on the policy you set.

Bradley Cooke, Executive Director of Forebay Aquatic Center, put it simply: "I'm not concerned about payroll problems anymore. I don't have that stress on my mind."

You set the policy. Homebase handles the rest. Get started for free.

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Paid holidays: Frequently asked questions

What are the paid holidays in the US?

The most common paid holidays in the US are the Big Six: New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. Many employers also offer MLK Day, Presidents' Day, Veterans Day, and the day after Thanksgiving. The average private-sector worker receives around 8 paid holidays per year.

What are the 7 most common paid holidays?

The seven most common paid holidays are New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, Christmas, and the day after Thanksgiving. Some employers swap Black Friday for MLK Day or Presidents' Day depending on their industry and team preferences.

Do you have to pay time and a half on holidays?

In most states, no — there's no federal law requiring premium pay on paid holidays. Rhode Island is the main exception — it requires 1.5x pay for Sunday and holiday work regardless of industry. Many employers offer time and a half voluntarily to incentivize holiday shifts, but it's not legally required in most states.

How many paid holidays do most companies give?

The average private-sector employer offers around 8 paid holidays per year. Small businesses typically start with 5 to 8 days, beginning with the Big Six — New Year's, Memorial Day, July 4th, Labor Day, Thanksgiving, and Christmas — and adding more as the business grows.

Do new hires get holiday pay?

Whether new hires get holiday pay depends on your policy. Some employers require a probationary period — typically 30, 60, or 90 days — before new hires qualify for holiday pay. Others extend it from day one. Whatever you decide, document it clearly in your employee handbook so there's no confusion when the first holiday rolls around.