Which company holidays should a small business observe, and are floating holidays worth offering?

No law sets your list, so start from your customers and your team

Private employers in the United States are generally not required to observe federal holidays or to pay employees for them, apart from limited state and local rules for certain industries. That freedom means the holiday list is a business decision. Start with when your customers expect you to be closed or quiet: a business serving other offices can close on the standard federal days without losing much, while a restaurant or a clinic may be busiest on exactly those days and need a different approach. Related: How do PTO accruals actually work and how should a small business set them up?

Then look at your team. If most of your employees observe a holiday that is not on your list, they will take PTO for it anyway, and you will have a de facto closure with worse planning. Ask what people actually take off each year. A common small business list covers the major federal holidays, often with the day after Thanksgiving added and sometimes with a closure between Christmas and New Year's Day, but the right list is the one that matches how your business and your people really operate.

Keep reading: Why does tracking employee PTO in a spreadsheet eventually break down for teams?, How do PTO accruals actually work and how should a small business set them up?, How can managers approve time-off requests fairly without leaving the team short?. See how LeaveLedgr helps you employee pto and leave balance tracking.

Fixed holidays versus floating holidays

A fixed holiday is a paid day off on a specific date for everyone. It is easy to plan around, it does not need a request, and it keeps the whole team on the same rhythm. Its weakness is that one list cannot fit a diverse team: someone who observes a religious holiday not on the list ends up using vacation for it while colleagues get a free day for a holiday they do not care about. Related: What are the real benefits of giving your whole team a shared leave calendar?

A floating holiday is a paid day the employee can take on a date of their choosing, usually with manager approval and within the calendar year. One or two floating days let people cover a religious observance, a cultural holiday, a birthday, or a school event without touching vacation. The tradeoff is that floating days need tracking and approval like any other leave, and they are effectively a small vacation grant with a different name, which matters for the rules below. Related: Why does tracking employee PTO in a spreadsheet eventually break down for teams?

The rules that make floating holidays work

Decide whether floating holidays are truly open or tied to a list of eligible observances. Fully open days are simpler and more inclusive but are treated like vacation in some states for payout purposes, meaning unused floating days may have to be paid out at separation. Days tied to a specific event, such as a named religious holiday, are more likely to be treated like a fixed holiday that is lost if not used. An employment attorney can tell you how your state draws the line.

Set the practical rules in writing: how many floating days per year, whether they prorate for new hires, whether they carry over (most policies say no, where the law allows), how much notice is needed, and whether they can be taken in half days. Record them in the leave system as their own category with their own balance so they never get mixed into vacation, and so the year-end report shows clearly who has an unused floating day before it expires.

Handling holidays for part-timers, shift workers, and the people who work them

Holiday policies often assume a Monday to Friday full-time schedule and fall apart for everyone else. Decide how a part-timer is paid for a holiday that falls on a day they were not scheduled: nothing, a prorated amount, or a floating day in lieu. Decide what happens when someone is required to work the holiday: a premium rate, an alternate day off, or both. Neither is federally required for private employers, but a written rule prevents the same argument every December.

Finally, publish next year's holiday calendar early, ideally before the current year ends, and load the dates into the shared leave calendar so they appear alongside vacation and blackouts. When holidays, floating days, and PTO all live in one view, managers can see real coverage and employees stop asking whether a given Friday is a day off. That single calendar does more for holiday planning than any policy paragraph. Related: How can managers approve time-off requests fairly without leaving the team short?