Are You Required to Pay Employees for Holiday Closures? (2025 Update)

As we move deeper into 2025, many employers are asking a critical question: “Do I have to pay employees when the business is closed for a holiday?” The short answer? In most cases, no — but the details matter. Here’s what employers need to know to stay compliant and competitive.

1. Federal Law Doesn’t Require Holiday Pay — But It Does Set Ground Rules

According to the U.S. Department of Labor (DOL), the Fair Labor Standards Act (FLSA) does not require private employers to pay employees for holidays, paid or unpaid, whether the business is closed or not. Employers are only required to pay for actual hours worked.

That means:

• No legal mandate to pay for national holidays (like Thanksgiving, Christmas, or July 4th) if your business chooses to close.
• No federal requirement to offer premium pay (like time-and-a-half) for hours worked on a holiday.

2. State and Local Laws Can Change the Game

While federal law sets the baseline, state and local regulations may impose additional requirements related to paid time off, leave accruals, or employee protections that can indirectly affect holiday pay practices.

Some states and municipalities have expanded paid leave laws that employers must factor into their payroll and scheduling decisions. These laws vary widely and continue to evolve, making compliance especially important for multi-state employers.

Related reading: State Laws on Paid Time Off

Employers should review applicable state and local laws annually — or whenever expanding into a new jurisdiction — to ensure holiday policies align with current requirements.

3. Employer Policies and Agreements Matter

Even though holiday pay is not federally required, employer-established policies can create a legal obligation. If your employee handbook, offer letters, or collective bargaining agreements promise paid holidays:

• Those commitments must be honored.

• Policies must be applied consistently across similarly situated employees.

• Any eligibility rules (such as “must work the day before and after the holiday”) should be clearly documented.

Many organizations choose to offer paid holidays as part of a broader benefits strategy, recognizing that holiday pay plays a role in employee satisfaction, retention, and recruitment.

4. Exempt vs. Nonexempt Employees: What You Need to Know

Understanding how holiday closures affect pay depends heavily on whether an employee is classified as exempt or nonexempt.

Nonexempt (hourly) employees

• Must be paid only for hours actually worked.

• If the business is closed for a holiday and no work is performed, pay is not required unless company policy states otherwise.

Exempt (salaried) employees

• Generally must receive their full weekly salary for any week in which they perform any work — even if the business is closed for a holiday.

• Deductions are typically allowed only if the business is closed for an entire workweek and no work is performed at all.

Missteps here can jeopardize exempt status and lead to wage and hour issues.

5. Best Practices for Holiday Pay and Payroll Compliance

To reduce risk and improve clarity:

• Document your holiday pay policy clearly in your employee handbook.

• Communicate expectations ahead of holiday closures.

• Track hours accurately, especially for overtime-eligible employees.

• Review policies annually to keep pace with regulatory changes and workforce expectations.

If you’re unsure how holiday closures impact your payroll or policies, working with a knowledgeable payroll and HR partner can help ensure your practices remain compliant and employee-friendly. 

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Are You Required to Pay Employees for Holiday Closures?