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Which Holidays Should Your Business Offer Paid Time Off For?

Donna Fuscaldo
Donna Fuscaldo

There are many holidays businesses can celebrate with paid time off. Before choosing which ones to observe, you should know your options and how to craft your PTO policy.

In the United States, there are dozens of observed holidays. Some are recognized at a federal level, others at the state level. Some are religious in nature and others political. With so many holidays celebrated by American workers, it can be tough for employers to figure out which holidays they should observe by offering paid time off.

A lot of factors should go into your company's decision of which holidays should be paid days off, such as which ones your employees really want off and how offering them will impact your bottom line.

"Small business owners have to make trade-offs," Karen Williams, a mentor for the nonprofit small business counseling service SCORE, told business.com. "They have to look at their finances to see how much they can afford."

Types of paid holidays

Before you can put a paid time off (PTO) policy on the books, you have to know which holidays are part of the American work culture to help you determine what's right for your business. [Want help tracking your paid time off? Check out our best time and attendance systems for small businesses.]

Federal holidays

These are days off designated by the federal government, which means, by law, all government agencies and banks have to be closed for the day in observance. It's not illegal for private sector businesses to remain open on public holidays, and companies aren't forced to offer employees paid time off, but the federal government hopes non-government businesses will observe these holidays as well.

There are 10 federal holidays that government agencies and banks close their doors for each year. Many are treated as paid holidays by private and public companies alike.

  • New Year's Day
  • Martin Luther King Jr. Day
  • Presidents Day (Washington's Birthday)
  • Memorial Day
  • Independence Day (Fourth of July)
  • Labor Day
  • Columbus Day
  • Thanksgiving
  • Christmas Day

"The federal government sets the standards for part of the workforce and certainly expectations for the rest," said Williams. "For anyone who works in the government or banking space, those holidays are set in stone."

If a holiday falls on a weekend, organizations tend to give employees the Friday before or the following Monday off.

State holidays

In addition to the 10 public holidays, states have the right to institute their own holidays that local government agencies must honor. They vary from one state to the next and, like federal holidays, typically don't have to be followed by the private sector. According to the Employment Law Handbook, there are two exceptions to the rule – Massachusetts and Rhode Island, which require private employers to give employees the day off for a state-designated holiday.

For instance, Connecticut gives workers time off for Lincoln's Birthday, on Feb. 12. In New York, Lincoln's Birthday is a floating holiday for state workers. Meanwhile, in Texas, state employees get time off for Confederate Heroes Day, which falls on Jan. 19, and Texas Independence Day, which occurs on March 2.

"We don't observe state holidays at Zenefits as part of our paid time off policy," said Tracy Cote, chief people officer at Zenefits. "They are common in Canada, where each province observes different holidays."

Floating holidays

These are extra paid days off that employees can take in addition to paid holidays. They can be used for religious holidays, special events or birthdays. Floating holidays are not offered by every organization, but they can be a useful way to avoid conversations about why one holiday is on the calendar and another isn't.

"Everybody celebrates different things, and everybody wants to take time off for different reasons," said Ali Fazal, senior director at human resources company Hibob.

Key takeaway: Federal and state governments have their own sets of paid holidays, and offering floating holidays has become a common practice to make sure employees who celebrate other holidays can take time off for them.

Most common paid holidays in the U.S.

With so many holidays to choose from, most small business owners pick the ones that make the most sense for their employees. To make the selection process a little easier, here's a list of the most common paid holidays in the U.S.

  • New Year's Day
  • Easter (not a federal holiday, since it always falls on a Sunday, but some retail and service workers usually have to work on Sundays)
  • Memorial Day
  • Independence Day
  • Labor Day
  • Thanksgiving Day
  • The day after Thanksgiving (Black Friday)
  • Christmas Day

Small business owners don't have to offer all of these holidays to their workers, but Williams said they should consider at least giving employees New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas off. 

Key takeaway: Most businesses give employees certain federal holidays off, mainly New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.

Incorporating holidays into your PTO policy

Small business owners usually can't afford to give employees every federal and state holiday off, but they have to offer a few to lure talent and remain competitive. That's why it's important to create an official holiday PTO policy that considers your business's financial situation and the desires of your workers.

1. Assess your finances.

Before you can choose which holidays to give employees paid time off for, you have to figure out how much you can afford. If your benefits budget is big enough, you may be able to give them all 10 federal holidays. If money is tight, it may be just the main six.

"If the worker won't be there that day, is the business still generating enough revenue to be able to pay the employee?" Williams said employers have to ask themselves. "The business owner has to look at the cash situation versus how they are doing recruiting people."

2. Measure the competition.

Recruitment and retainment can get costly, which is why reducing turnover is so important. When putting together a holiday paid time off policy, you have to be aware of what your competition is doing. If you're not, it may be hard to recruit and retain top talent.

Before choosing the holidays to offer, see what your rivals are doing. At the very least, you want to match them, but if you're looking for an edge, you may want to add an extra holiday to the mix.

3. Poll the employees.

It may be easy to pick some of the most common federal holidays and leave it at that, but a better strategy is to find out what your employees want. You may think giving staff the day off for Christmas is a no-brainer, but if most of your workers don't celebrate the holiday (for cultural or religious reasons, for example), it's a wasted day off.

"There are so many worthy holidays and observances, it can be hard to decide which ones to select," said Cote. "As employers, you also have to consider the needs of the business."

Your employees may prefer to have Martin Luther King Jr. Day off rather than Columbus Day, but you won't know it if you don't ask. For another example, it may be difficult for employees to get to the polling stations on Election Day; by making that a paid day off, you could build goodwill and loyalty among the ranks.

4. Consider the moment in time.

Your holiday PTO policy doesn't have to be set in stone. It can be flexible and everchanging to address the current social climate. For example, in response to the Black Lives Matter movement, Zenefits designated Juneteenth as a permanent paid company holiday starting in 2020. Cote said the company also offers civic and volunteer time off so employees can vote, volunteer, or protest.

"As an employer, it's about doing the right thing and making a difference," Cote said. "In 2020, Black history (Juneteenth) and Election Day are about as important as it gets."

5. Decide whether to stay open.

Just because you offer paid time off for a holiday doesn't mean you can afford to close completely. Offices and banks may be shuttered in observance of Christmas, but a restaurant or bar may remain open. Before you put a holiday on the books, figure out how many employees need to work and how much you'll pay them. If you make Christmas an official holiday but still need staff that day, paying time-and-a-half or double time is a great way to boost goodwill, if your business can afford it.

Key takeaway: Incorporating paid time off for holidays requires upfront work on the business owner's part. You have to see how much PTO you can afford, the impact it will have on productivity and the bottom line, and what your competitors are doing. Equally important is making sure you give employees the holidays off that they observe.

Donna Fuscaldo
Donna Fuscaldo,
Business News Daily Writer
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A lifetime New Yorker, I am a veteran finance and business journalist that has contributed to several national media outlets including Forbes, Investopedia, and Bankrate.com. I have spent my career providing consumers and business owners with advice and guidance to help them navigate the world of finance. As a senior finance writer, I report on all aspects of finance from managing cash flow to choosing the best accounting software.