Are Independent Contractors Entitled to Holiday Pay?

When you bring an independent consultant or contract on board, one key question often arises: do they get holiday pay or paid time off if your office is closed for federal holidays? If your full-time team receives federal holiday pay, it’s natural to wonder if independent contractors should get the same.

In this article, we will define holiday pay and discuss how the self-employed nature of independent consultants affects their access to holiday pay. We will also review the legal importance of classifying contractors correctly.

What Is Holiday Pay?

When “holiday pay” comes up, it may refer to one of two types:

• Premium pay for working on a holiday. Employees work their regular hours per their employment contract but get bonus pay for working a holiday, such as time-and-a-half or double time.
• Paid time off. The business is closed, but employees receive a day’s pay at their usual rate.

History of Holiday Pay

The concept of paid holidays came from union efforts and collective bargaining agreements during the early- and mid-1900s labor movements. [1]

As unions, especially larger ones like the Congress of Industrial Organizations (CIO), gained momentum, they negotiated for holiday pay as a benefit to offset the long hours and labor-intensive work their employees were subject to. Private employers soon followed suit to attract and retain talented full-time employees.

Holiday Pay and the Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (FLSA) doesn’t require any private employers to provide holiday or vacation pay to their employees. This act only mandates record-keeping standards, overtime, and minimum wage requirements. [2] Any holiday or paid time off is at the private employer’s discretion or the decision of a collective bargaining agreement.

List of Federal Holidays

Most federal offices are closed on federal holidays, and employees may not work. Exceptions include the armed forces and other critical agencies, like the Federal Aviation Administration. In most cases, federal employees are entitled to holiday pay, whether paid holidays off or premium pay. [3]

The 11 federal holidays currently observed are the following: [4]

• New Year’s Day: January 1
• Martin Luther King Jr.’s Birthday: Third Monday in January
• Presidents’ Day: Third Monday in February
• Memorial Day: Last Monday in May
• Juneteenth: June 19
• Independence Day: July 4
• Labor Day: First Monday in September
• Columbus Day: Second Monday in October
• Veterans Day: November 11
• Thanksgiving Day: Fourth Thursday in November
• Christmas Day: December 25

When Must Private Employers Give Employees Holiday Pay?

Private employers and union contracts may award paid holidays or premium pay, but they have no obligation to do so in most cases. Some exceptions where a private employer must provide holiday pay include the following:

• There is a company practice of giving holiday pay or paid holidays.
• The employee’s contract promises holiday pay.
• The collective bargaining agreement or union contract guarantees paid holidays.

In these cases, employees may have grounds to file a complaint with the labor board.

Do Independent Contractors Get Paid Holidays?

Independent contractors are not entitled to paid holidays if they’re working for private companies. Contractors only receive payment for the work they perform; if they don’t work over a holiday, they don’t get paid.

This lack of qualification for paid holidays is part of the independent contractor’s self-employed nature. They set their schedules, decide when to take time off, and are responsible for managing their work hours. In addition to no holiday pay, they typically don’t receive sick pay or overtime pay.

Paid Holidays and Misclassifying Workers

Employers might assume they’re saving on costs by denying paid holidays to independent contractors, but the real issue is ensuring compliance with labor laws. If a company incorrectly classifies a worker as an independent contractor when they’re actually an employee, denying them benefits like paid holidays can result in severe legal and financial consequences for the employer.

Why Employers Avoid Paid Holidays for Independent Contractors

Independent contractors and employees have fundamentally different relationships with the businesses they work for. By design, independent contractors aren’t entitled to paid holidays or other employee benefits, and employers are careful not to blur these lines.

A simple misunderstanding like offering holiday pay to an independent contractor can trigger scrutiny from federal agencies over a worker’s classification.

FLSA Guidelines for Determining Worker Classification

In 2024, the Fair Labor Standards Act (FLSA) updated its criteria for distinguishing between employees and contractors. Rather than focusing on one defining factor, the FLSA considers the “totality of circumstances” to assess classification, with several key factors:

• Behavioral Control: Employees typically have schedules set by the employer, while contractors decide when and how to work.
• Financial Control: Employees are paid and taxed through employer payroll systems. Contractors, however, negotiate their fees, pay their own taxes, and cover their business expenses.
• Work Relationship: Employees usually perform work that is integral to the company’s daily operations and stay long-term. Contractors, however, take on projects with a defined start and end date and are hired for skills outside the usual scope of business operations.

No one of these factors is more important than another. A regular employee might be so highly valued or have a degree of seniority that they can be responsible for their own schedule. That does not make them a “contractor.” Only when all factors are considered can the IRS or other regulators decide if a worker is a contractor or an employee.

The Risks of Misclassifying Workers

Misclassification is more than an administrative mistake; it’s a legal issue that can lead to penalties from the Internal Revenue Service (IRS), the US Department of Labor, and the FLSA.

Misclassified workers may become eligible for employee benefits, back pay, and holiday pay retroactively. Employers may also have to pay fines that can accumulate on a per-worker, per-day basis. The IRS and Department of Labor have expanded oversight on worker classifications, making it critical for businesses to maintain a clear boundary between independent contractors and employees.

How Do Independent Contractors Get Time Off?

As an employer hiring an independent contractor, it’s essential to understand how time off works for these self-employed workers. Unlike employees, independent contractors manage their own schedules and don’t rely on the company to provide paid time off. Instead, they plan their work to accommodate personal time away.

Legally, it’s not the employer’s responsibility to arrange time off for a contractor, but employers can work with contractors to coordinate schedules to benefit both parties.

For example, suppose a company hires a contractor for a project that’s expected to take 30 working days to complete. The company may agree to enter into a contract lasting 36 days. This way, while the company isn’t explicitly granting time off, it’s allowing the independent contractor more freedom to work at a pace that works for them.

Can Independent Contractors Charge a Higher Rate for Work on Holidays?

Yes. Independent contractors can charge a higher rate for work on holidays, but they must negotiate beforehand. Before signing a long-term contract that requires them to work over holidays, they can inquire about holiday expectations. Be honest in your discussions with them and tailor their contract accordingly.

You may approve higher rates for holidays, but you should finalize these rates in their contract before they begin working and before the holidays approach.

How Do Federal Holidays Affect Government Contractors?

Government contractors are a separate kind of contractor. Government contracts are subject to regulatory oversight and bidding requirements that make acquiring and working on them much different than other contracts. This applies to federal holidays. [5]

The McNamara-O’Hara Service Contract Act (SCA) affects contractors and subcontractors performing services on government contracts. The SCA requires contractors to pay at least the federal minimum wage and local prevailing wage on all contracts over $2,500. [6]

The Davis-Bacon and Related Acts (DBA) apply to all federally funded construction contracts to build or repair public buildings or works. DBA contractors must pay workers no less than the prevailing minimum wage and time-and-a-half for overtime on these construction contracts if valued over $2,000. [7]

Ensuring Clear Status and Fair Treatment for Independent Contractors

Companies must understand and respect the distinction between contractors and employees when hiring independent contractors. Unlike employees, independent contractors generally aren’t entitled to paid holidays or other employee benefits. However, if a contract includes paid holidays, the business should honor that agreement like any other contractual term.

Clear distinctions are essential for compliance and fair treatment. Misclassifying contractors and giving them employee-like benefits, like paid holidays, can raise issues with federal agencies over a worker’s classification.

Employers should be clear about contractors’ independent status, treating them as valuable partners rather than regular employees. This approach preserves the integrity of the contractor’s role and strengthens the working relationship, allowing both parties to focus on delivering high-quality results without confusion around work status or benefits.