Holiday pay can be classified as many things: a gift, an allowance, paid time off. But no matter how you view it, at the core, holiday pay is compensation for working or not working on what your company designates as a “holiday” and is usually part of your total rewards program.

Anytime you wonder if something is required by law, you want to go check your state laws to see if there are any corresponding federal laws. In the case of holiday pay, that’s the FLSA or Fair Labor Standards Act. According to the Department of Labor (DOL), the FLSA does not require employers to offer holiday pay or pay for any time that they do not work. Some states have laws restricting certain types of businesses from being open on holidays, however, this doesn’t change that the employer doesn’t have to pay employees on those days. The only exception to this is the salaried exempt employee. There are also exceptions if you have a government contract. If so, you’ll want to discuss any requirements with an attorney. Union contracts may also have a provision covering holiday pay. This US law is different from the European Union. In the EU, a law gives all employees a minimum number of paid days off for national holidays. If your business has locations in other states or countries, be sure to check their laws. When in doubt, contact an attorney to double-check.

Last second call-offs from employees over a holiday weekend puts extra strain on the staff. Offering holiday pay for these days, such as time and a half for hours worked on the actual holiday, gives employees an incentive to come to work.

Recruiting is a constant challenge. Having holiday pay as part of your total rewards can give your company that competitive edge. It has become an expectation to offer holiday pay, so without it you could lose key applicants.

Even though we see more employees opt to work a holiday to take advantage of holiday pay, employees know they could take that time off to be with their families. Mental health is a huge issue in the workplace and adequate family time is very important for creating a happy, healthy workforce. Offering holiday pay allows employees that time without worrying about losing their pay.

If your organization offers holiday pay to one full-time employee, they must offer it to all full-time employees. This needs to be specified in your company policy and given to employees at the time of hire.

These are employees who are working regular hours and scheduled in advance. On-call and intermittent employees and consultants don’t count here.

If the union contract has a provision for holiday pay, it must be honored.

Choosing what holidays to observe is a decision made by the organization. Federal contractors or government organizations observe all national holidays, but non-government organizations can choose. Most companies consider including designated national holidays. In Canada, there are 5 National Holidays with 6 more for Federal Contractors. In addition, each of the provinces has its own observed holidays and many businesses are closed. In the United States, national holidays are: