For many people, payday is a very exciting day. Who doesn't enjoy being rewarded for their efforts, after all? It’s critical for your business to deliver your employee's payroll compensation on time. But how do you navigate when payday falls on a holiday?

Nothing is worse than realizing that your employees will not be paid until after the holiday when you already assured them that you would have it done before. As such, here are some tips to make sure your payroll doesn’t put a damper on everyone’s holiday spirit.

Why do federal holidays matter?

Nowadays, a lot of banks are actually open on holidays. However, even if a bank is open and the Federal Reserve is closed, there is no actual movement of money. This is what prevents the deposits from going through. Some employees may still be able to deposit and cash checks at their banks if they are open.

Although the direct deposit is electronic, it cannot be processed on holidays due to the Automated Clearing House (ACH) following the same rules as the reserve. The ACH is an electronic network for financial transactions in the United States and is used for business-to-business payments, direct deposit of payroll, consumer bills, Social Security, e-commerce payments, and tax payments.

Since your employees will not be receiving their direct deposit on holidays, you’ll want to ensure you review your next scheduled check date for accuracy and alter the run date to accommodate the holiday if it needs to be adjusted.

Federal holidays for 2023: 

  • New Year’s Day - Monday, January 02, 2023*
  • Birthday of Martin Luther King, Jr. - Monday, January 16, 2023
  • Washington’s Birthday - Monday, February 20, 2023**
  • Memorial Day - Monday, May 29, 2023
  • Juneteenth National Independence Day - Monday, June 19, 2023
  • Independence Day - Tuesday, July 04, 2023
  • Labor Day - Monday, September 04, 2023
  • Columbus Day - Monday, October 09, 2023
  • Veterans Day - Friday, November 10, 2023*
  • Thanksgiving Day - Thursday, November 23, 2023
  • Christmas Day - Monday, December 25, 2023

*As noted by the U.S Office of Personnel Management, most Federal employees will treat the Friday before a holiday that falls on a Saturday as a holiday for pay and leave purposes if that Friday falls on a workday. **For the vast majority of Federal employees, the Monday after a holiday is considered to be a holiday for the purposes of pay and leave.

Keep in mind that many employees take additional vacation days surrounding these holidays. So, if the person in charge of payroll plans to take a few days off when payroll is due, make sure that it is submitted early or that you have it covered.

Tips for handling holiday pay.

  • Be Consistent

    • If you decide to pay your employees the day before the holiday, it’s a good idea to continue to do the same all year.

  • Be Transparent

    • Make sure that your employees know if they are getting paid for a federal holiday or not. Communication is key. 

  • Distribute a Schedule

    • Make a schedule at the beginning of the year to ensure that the year goes as planned. Be sure to share it with employees so everyone knows when they will be paid throughout the year.

Practical example.

If you decide to pay your employees before Thanksgiving Day, here is an example of how you could process your payroll.

If you normally process your payroll on Thursdays, please plan on processing it on Wednesday, Nov. 23. For direct deposit: If your check date falls between Thursday, Nov. 24 and Friday, Nov. 25, please consider processing your payroll early.

Please read our disclaimer here.

Editor’s Note: This post was originally published in October 2018 and has been updated for freshness, accuracy, and comprehensiveness.