What Is Holiday Accrual?

What Is Holiday Accrual?

Holiday accrual is the process by which employees earn eligibility for paid time off on company-designated holidays based on hours worked, tenure, or employment status. Unlike vacation time that typically accrues gradually each pay period, most employers provide fixed holiday schedules (7–10 holidays annually) that employees access after completing probationary periods, though some organizations use accrual-based systems or unified PTO banks including holiday time.

Holiday accrual policies determine when employees qualify for paid holidays, how much they earn, whether part-time workers receive prorated benefits, and what happens to unused or accrued holiday time upon termination. Understanding holiday accrual helps employees know their paid time off entitlements and employers design competitive, compliant benefits programs.

Quick Answer

Holiday accrual determines how employees earn paid holiday time—most employers provide fixed schedules (7–10 holidays/year) after 90-day probation for full-time workers. Some use accrual systems or unified PTO banks where holiday time accumulates with vacation/sick leave.

According to U.S. Bureau of Labor Statistics data, 79% of private sector workers have access to paid holidays, averaging 8 days annually. Public sector workers average 11 paid holidays. Accrual and eligibility requirements vary significantly, with 63% of employers requiring waiting periods before holiday pay eligibility.

How Do Employees Earn Paid Holidays?

Fixed Holiday Schedule (Most Common)

Traditional approach providing predetermined holidays:

Employees receive paid time off on specific company-designated holidays after meeting eligibility requirements (typically 90-day probationary period completion and full-time job status).

Typical schedule:

Average: 7–10 paid holidays annually for private sector employers.

Organizations managing shift workers should clarify holiday pay for employees working night shift jobs on holidays.

Accrual-Based Holiday Systems

Less common approach where employees earn holiday time:

Formula example: Accrue 0.0385 holidays per hour worked (equals 8 holidays per 2,080 hours)

Calculation:

• Full-time employee working 2,080 hours/year
• 0.0385 holidays/hour × 2,080 hours = 80 holiday hours (10 days)
• Employee working 1,040 hours (part-time)
• 0.0385 × 1,040 = 40 holiday hours (5 days)

Advantages: Automatically prorates for part-time workers, rewards higher hours worked.

Disadvantages: More complex administration, employees may not understand accrual rates.

Unified PTO Banks

Combined leave approach pooling vacation, sick, and holiday time:

Employees receive single PTO bank (e.g., 25 days annually) covering all leave purposes including traditionally recognized holidays. Employees working on company-observed holidays may receive premium pay or additional PTO.

Example: Company provides 200 hours annual PTO (25 days) instead of separate vacation (15 days), sick (5 days), and holidays (5 days).

Advantages: Maximum flexibility, simplified administration, employee autonomy.

Disadvantages: Employees may not take time off on traditional holidays, year-end PTO exhaustion.

Organizations offering floating holidays typically provide separate allocation beyond regular holiday schedules.

What Are Typical Holiday Eligibility Requirements?

Waiting Periods

Common probationary periods before holiday pay:

Most common: 90-day probationary period before holiday pay eligibility.

Example policy: “Full-time employees become eligible for paid holidays after completing 90 days of continuous employment. Employees hired or completing probation mid-year receive paid holidays for all remaining holidays in the calendar year.”

Employment Status Requirements

Eligibility by worker type:

Organizations tracking FTE should clarify holiday eligibility thresholds in employee handbooks.

Prorated Holiday Pay for Part-Time Workers

Calculation methods:

Hours-based proration:

• Part-time employee working 20 hours/week (0.5 FTE)
• Holiday equals 8 hours for full-time workers
• Part-time holiday: 8 hours × 0.5 = 4 hours paid

Scheduled-hours proration:

• Part-time employee normally scheduled 6 hours on day holiday falls
• Holiday pay: 6 hours (actual scheduled hours)

Policy example: “Part-time employees scheduled to work on holidays receive holiday pay equal to their regularly scheduled hours for that day.”

How Does Holiday Pay Work When You Work the Holiday?

Premium Pay Options

Approaches when employees work holidays:

Most common: Regular pay for hours worked + separate holiday pay (straight time + holiday pay).

Example: Employee earning $20/hour works 8 hours on Christmas

• Hours worked: 8 × $20 = $160
• Holiday pay: 8 × $20 = $160
• Total: $320 (16 hours pay)

Organizations managing shift differential should clarify whether premium shift pay applies on holidays.

Required Work on Holidays

No federal requirement for premium holiday pay:

Fair Labor Standards Act (FLSA) doesn’t require:

• Premium pay for holiday work
• Paid holidays at all
• Time off for holidays

State variations: Some states require premium pay for specific holidays (check local laws).

Employer discretion: Holiday pay policies are voluntary benefits unless required by employment contracts or collective bargaining agreements.

What Happens to Holiday Pay at Termination?

State-Specific Payout Requirements

Varies significantly by state:

Key distinction: States requiring PTO payout typically apply to accrued vacation, sick leave, and unified PTO banks—not traditional fixed holiday schedules.

Fixed Holiday Schedule Termination

Typical treatment:

Employees on fixed holiday schedules (7–10 predetermined holidays) receive no payout at termination. They were paid for holidays occurring during employment; future holidays after termination aren’t compensable.

Example: Employee terminates August 15. Received holiday pay for New Year’s, Memorial Day, and July 4th (holidays during employment). Does not receive pay for Labor Day, Thanksgiving, or Christmas (after termination).

Accrued Holiday Bank Termination

When holidays accrue like PTO:

Some organizations allow employees to accrue holiday hours in banks (similar to vacation). In states requiring accrued PTO payout, unused holiday hours may require compensation at termination.

Example: Employee accrued 24 holiday hours throughout year but only used 16 hours. At termination in state requiring accrued time payout:

• Unused holiday hours: 8 hours
• Hourly rate: $25/hour
• Payout: 8 × $25 = $200

Organizations offering unpaid time off should clarify how extended absences affect holiday eligibility.

What Is the Difference Between Holiday Pay and PTO?

Unified PTO: Some organizations eliminate distinction by providing single PTO bank (e.g., 25 days) covering all purposes, giving employees flexibility to work traditional holidays if desired.

Organizations should reference floating holiday policies for flexible holiday alternatives.

How Do You Manage Holiday Accrual Policies?

Create Clear Policies

Essential policy elements:

• Eligibility: Who qualifies (full-time, part-time, waiting periods)
• Holiday list: Specific observed holidays with dates
• Premium pay: Compensation for working holidays
• Scheduling: Notice requirements for holiday staffing
• Religious accommodations: Process for requesting alternative holidays
• Proration: How part-time employees’ holiday pay is calculated
• Termination: Whether unused holidays are paid out

Communicate Holiday Schedules Early

Best practices:

• Publish next year’s holiday calendar by October/November
• Account for holidays falling on weekends (observe Friday/Monday)
• Clarify “floating” holidays vs fixed holidays
• Explain blackout periods when holiday requests aren’t granted
• Provide advance notice when holidays change due to business needs

Organizations using scheduling software should integrate holiday calendars for automatic pay calculations.

Track Holiday Usage

Administrative requirements:

• Record holiday pay separately from regular wages on pay stubs
• Track which employees worked holidays and received premium pay
• Monitor part-time employee eligibility and prorated calculations
• Audit compliance with waiting period requirements
• Report holiday pay costs for budgeting and FTE planning

Consider Unified PTO

Advantages of combining holiday time into PTO banks:

• Simplified administration: One accrual rate, one payout policy
• Employee flexibility: Workers choose whether to observe traditional holidays
• Diversity and inclusion: Employees observe personal religious/cultural holidays
• Predictable costs: Uniform accrual eliminates holiday work premium pay complexity
• Reduced liability: Clear accrual = clear payout obligations

Disadvantages:

• Employees may not take time off on traditional holidays (optics, coverage)
• Higher PTO balances create larger financial liability
• Loss of “company closure” forcing rest and separation from work

Organizations managing employee directories should indicate holiday schedules and blackout periods.

What Are Religious Accommodation Considerations?

Title VII Requirements

Equal Employment Opportunity Commission guidance:

Employers must reasonably accommodate employees’ religious observances unless accommodation creates undue hardship. This includes:

• Allowing use of PTO, floating holidays, or unpaid leave for religious holidays
• Permitting shift swaps or schedule changes
• Providing flexibility for religious observances not on company holiday calendar

Example: Jewish employee requests Yom Kippur off. Employer observes Christmas but not Jewish high holidays. Must allow employee to use PTO, floating holiday, or unpaid leave unless creates operational hardship.

Inclusive Holiday Policies

Balancing fairness:

• Offer floating holidays (1–2 days) for personal observances beyond fixed calendar
• Allow shift swaps for employees who don’t observe company holidays and want to work
• Consider adding culturally diverse holidays (Diwali, Eid, Lunar New Year) to company calendar
• Permit employees to trade traditional holidays for other days meaningful to them

Organizations with diverse workforces should implement inclusive holiday policies supporting all religious and cultural traditions.

The Bottom Line

Holiday accrual determines how employees earn paid holiday time, with most employers providing fixed schedules (7–10 holidays annually) after 90-day probationary periods for full-time workers. Common observed holidays include New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas, with 79% of private sector workers having access to paid holidays averaging 8 days per year.

Part-time employees often receive prorated holiday pay based on scheduled hours or FTE status (0.5 FTE = 50% of full-time holiday hours). Some organizations use accrual-based systems earning holidays per hours worked (0.0385 holidays/hour = 8 holidays/year for full-time), while unified PTO banks combine vacation, sick, and holiday time into single flexible allotments.

Employees working holidays typically receive regular pay plus separate holiday pay (16 hours total for 8-hour shift), though premium rates vary by employer policy. Holiday payout at termination depends on state law and whether holidays are fixed schedules (no payout) or accrued banks (payout required in some states). Religious accommodation requires allowing employees to use PTO, floating holidays, or unpaid leave for observances not on company calendars.

Try ShiftFlow’s scheduling and leave tracking tools to manage holiday schedules, calculate prorated part-time holiday pay, track premium pay for holiday work, and integrate holiday calendars with workforce planning for accurate budgeting.

Sources

• U.S. Bureau of Labor Statistics – Employee Benefits Survey
• U.S. Equal Employment Opportunity Commission – Religious Discrimination
• Society for Human Resource Management – Holiday Policies

Further Reading

• Floating Holiday Policies – Flexible personal observance days
• Unpaid Time Off – Managing unpaid leave requests
• FTE Calculation – Prorating benefits for part-time workers

Frequently Asked Questions

What is holiday accrual?

Holiday accrual is the process by which employees earn paid holiday time based on hours worked, tenure, or employment status. Most employers provide fixed holiday schedules (7–10 holidays/year) after probationary periods, while some use accrual systems or unified PTO banks.

How do employees earn paid holidays?

Most employers provide paid holidays after completing probationary periods (typically 90 days) for full-time employees. Common approaches: immediate eligibility for all company holidays, eligibility after 90 days, or accrual earning holidays over time. Part-time workers often receive prorated benefits.

What holidays do most companies observe?

Typical schedules include 7–10 paid holidays: New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving (often 2 days), and Christmas. Some add Martin Luther King Jr. Day, Presidents’ Day, Veterans Day, or day after Thanksgiving for 10–12 total.

Do you get paid for holidays if you quit?

Holiday payout at termination varies by state and policy. Some states require paying accrued PTO (which may include holidays in unified banks), others allow use-it-or-lose-it. Fixed holiday schedules typically provide no payout—employees are paid only for holidays during employment.

How does holiday pay work for part-time employees?

Part-time employees receive prorated holiday pay based on scheduled hours or FTE status. Example: 0.5 FTE employee receives 4 hours holiday pay (50% of 8-hour full-time holiday). Some employers don’t provide holiday pay to part-time workers at all.

Do you get extra pay for working on holidays?

Federal law doesn’t require premium pay for holiday work. Employers voluntarily offer premium pay (common approaches: regular pay + separate holiday pay = 2× total, or time-and-a-half + holiday pay). Specific arrangements vary by employer policy.

What is the difference between holiday pay and PTO?

Holiday pay is for specific predetermined dates (7–10 holidays/year) without flexibility. PTO (vacation/sick) accrues per pay period, employees choose when to use it, typically 10–25 days annually, and often rolls over year-to-year. Some employers combine both into unified PTO banks.

Can employers require working holidays?

Yes, most employers can require working holidays (exceptions for specific union contracts or employment agreements). Federal law doesn’t mandate time off for holidays. Employers typically offer premium pay or alternative days off to incentivize holiday work.