Contractors operate as their own business, which means they set their own rates, schedules, and policies. But this flexibility also raises questions: Can contractors charge more for working holidays? Are businesses ever required to pay extra?
This guide will break down what holiday pay looks like for 1099 contractors, how to plan time off, and what both sides should agree on before the vacation season starts.
What is holiday pay?
Holiday pay refers to paid time off (PTO) given to employees during public holidays – like Independence Day or Christmas. In the U.S., however, it’s not guaranteed by law. Under the Fair Labor Standards Act (FLSA), employers aren’t required to pay workers for time they don’t spend working, so the federal holiday pay isn’t a must.
Many businesses still offer paid holidays as part of their employee benefits package, but it’s entirely up to the employer. These policies are usually outlined in an employment contract.
Hiring independent contractors requires understanding work schedules and specific tasks. Unlike employees, independent contractors operate their own business and handle their own taxes, which affects how labor laws apply to their working arrangements. Long story short – independent contractors get paid only for work completed, not for time off.
What are US federal holidays?
In the United States, federal holidays are recognized by the government and apply mainly to public sector workers. These include, among others, New Year’s Day, Labor Day, Martin Luther King Jr. Day, Presidents’ Day, Independence Day, and Veterans Day.
Private employers, however, are not legally required to follow the federal holiday schedule or provide holiday pay to regular employees.
Contractor vs. employee: the risk of worker misclassification
Before diving deeper into holiday pay policies, there’s a crucial first step: making sure your workers are actually contractors and not misclassified employees. Getting this wrong could mean you owe holiday pay after all.
The line between an employee and a 1099 contractor can sometimes blur. But from a legal and tax standpoint, the distinction is crucial. Misclassifying contractors can lead to costly financial consequences and back taxes. That’s why it’s essential to get it right from the start.
Here are the key differences between contractors and employees:
| Category | Employee | Independent Contractor |
| Work Control | Employer controls how and when tasks are done | Contractor controls how work is completed |
| Tools & Equipment | Provided by employer | Provided by contractor |
| Taxes & Benefits | Employer withholds taxes, provides benefits | Contractor handles their own taxes and insurance |
| Job Duration | Ongoing or permanent | Usually project-based or short-term |
Remember, that when you settle deals through dedicated platform like Useme, you can be sure that the whole process will be 100% compliant.
Understanding behavioral control and financial control: how the IRS tells the difference
When talking about worker misclassification, it has to be said that the IRS doesn’t rely on job titles or company preferences. Instead, it looks at how the work relationship functions in practice. In other words, the IRS examines behavioral control (how work is performed) and financial control (business aspects of the worker’s job) to distinguish between traditional employees and independent contractors. This process is guided by what’s known as the Economic Realities Test, which considers three main factors:
- Control over work: Does your business decide how tasks are performed? Do you train or supervise the worker daily?
- If yes, the person likely qualifies as an employee.
- Financial arrangement: Are they paid a fixed salary or reimbursed for expenses? Do they rely on your company as their main source of income?
- If they aren’t financially independent, they may not be a true contractor.
- Nature of the relationship: Is there a long-term agreement or promise of ongoing work? Are you offering benefits like paid leave or insurance?
- These point toward an employee status.
Treating a contractor as an employee – or vice versa – isn’t just a paperwork error. If the IRS or Department of Labor finds a misclassification, your business could be responsible for unpaid taxes, interest, and penalties. You might also owe back wages or face audits.
To protect your business:
- Always use clear, written contracts.
- Avoid offering benefits reserved for employees.
- File the right forms (like Form 1099-NEC for contractors).
- When in doubt, consult a tax professional.
Read our Independent Contractor Guide: Taxes, Compliance, and Important Definitions to learn more about the differences between a 1099 contractor, a regular worker, and a freelancer.
Are independent contractors entitled to paid holidays?
Independent contractors are not employees. As self employed workers who may serve multiple clients, they run their own business, choose their schedules, and decide when to take time off. Because of that, they’re only paid for the work they complete – not for the days they don’t work.
Do 1099 contractors get holiday pay? The answer depends on the contractor agreement. Unless the contract with a freelancer clearly states otherwise, you are not obligated to pay a contractor for holidays, sick leave, parental leave, or vacation time.
💡You don’t need a traditional contract to make your collaboration with a freelancer legal. With Useme, it’s the platform – not you – that signs the agreement with the freelancer. The intermediary makes things easier for both sides.
As we said before, in the U.S., paid time off – including holidays – isn’t legally required, even for full-time employees. The applicable federal law is the Fair Labor Standards Act (FLSA), which establishes minimum wages and overtime pay. However, it doesn’t mandate paid vacation or sick pay. These benefits are typically offered by employers to attract and retain talent.
Overtime pay when hiring independent contractors
The overtime pay laws that apply to full-time employees do not extend to independent contractors in the gig economy. That means if a contractor works on a national holiday or outside standard hours, they aren’t automatically entitled to higher pay – unless you both agreed to that in writing.
Do state laws require paid time off for contractors?
In most states, contractors do not receive holiday pay by law. Even in states with stronger labor protections like Rhode Island or Massachusetts, holiday pay requirements typically apply only to employees – not independent contractors.
California, however, has introduced additional scrutiny around contractor status through Assembly Bill 5 (AB5). This law uses the ABC Test to determine whether a worker truly qualifies as an independent contractor. To maintain contractor status under AB5, a worker must:
A) Be free from company control in how the work is done.
B) Perform services outside the core activities of the business.
C) Have an independent business doing the same type of work.
If a contractor in California fails this test, the business must reclassify them as an employee, which may mean they’re now entitled to benefits such as overtime or paid holidays, depending on company policy.
Misclassifying contractors as employees can lead to financial penalties and legal consequences, making compliance crucial for businesses.
Do independent contractors get holiday pay when working on federal projects?
Most standard contractor work doesn’t require holiday pay, but federal projects can be a different story.
Working with government contractors on federally-funded projects comes with extra layers of rules, especially when it comes to wages, holidays, and benefits. While independent contractors generally don’t receive holiday pay, certain federal regulations may create exceptions – particularly if your project falls under specific laws.
Here’s what U.S. businesses need to know when hiring contractors for government work.
Special cases: PTO for government contractors
In most cases, independent contractors are not entitled to holiday pay, even if they work on a federal holiday. They are considered self-employed and negotiate their own rates, schedules, and availability.
However, if a contractor is hired on a federally funded project, things may get more complex. In some situations, the law may require minimum pay levels that include benefits like holiday premiums – but only for certain types of workers and contracts.
Let’s break it down.
Two federal laws that may influence holiday pay
- Davis-Bacon and Related Acts (DBRA) If your business is involved in construction, alteration, or repair work on federally funded public buildings or infrastructure – and the contract is over $2,000 – the Davis-Bacon Act could apply.
Under this law, contractors and subcontractors must pay on-site workers no less than the “prevailing wages and fringe benefits” in the local area. These wage standards are published by the U.S. Department of Labor.
Holiday pay implications: If local wage rules include extra compensation for working on holidays, then your business must match those terms. This doesn’t apply directly to independent contractors, but if someone is classified as a mechanic or laborer, and not a contractor by legal standards, you’re responsible for paying accordingly. - McNamara-O’Hara Service Contract Act (SCA) This act covers non-construction service contracts over $2,500 performed for the federal government. It applies to a broad range of services, from janitorial work to administrative support.
Under the SCA, service workers must be paid at least the prevailing wage in the project’s location. If there was a prior contractor with a union agreement, the new contract must meet or exceed those same wage and benefit levels.
Holiday pay implications: If the previous contract included holiday premiums or paid time off, your business must uphold those same standards – again, only for service employees, not truly independent contractors.
What about state or local government projects?
If you’re working on a project funded by state or local governments, similar wage rules may apply. Some states have “little Davis-Bacon” laws or other labor protections that include holiday premiums or mandatory fringe benefits for workers on public contracts.
Always review the contract and applicable local laws carefully before hiring contractors for public-sector work.
For Contractors: setting rates and planning time off
If you’re a contractor yourself, here’s what you need to know about holiday work and taking time off.
Can 1099 contractors charge more for holiday work?
Yes, because unlike regular workers, 1099 contractors aren’t guaranteed overtime or holiday pay. But they can set their own rates, including premium pricing for work done on public holidays like Thanksgiving or Christmas.
Contractors typically negotiate their rates based on specialized skills and availability, allowing them to set premium pricing for public holidays.
Best practices for contractors: how to set holiday rates
- Discuss early: Before you start the project, ask about expected holiday hours.
- Include it in your contract: Make sure the rate for holiday work is clearly outlined and agreed upon.
- Be transparent: Let the client know why your rate is higher for holiday work – you’re making yourself available during a time most people are off.
Why it matters
Working on holidays takes away from personal time. Charging more reflects both your availability and the added value of meeting urgent or off-hours needs.
📌 Tip for businesses: If you need freelance help during the holidays, expect to pay more – and lock in rates in writing upfront.
Can independent contractors take time off? Here’s how to plan for it
One of the best parts of being an independent contractor is flexibility. You choose your projects, set your schedule, and decide how much you want to work. But that freedom comes with a tradeoff: there’s no paid vacation, sick leave, vacation days, or sick days by default.
If you’re self-employed, stepping away from work means hitting pause on your income – unless you plan ahead. Whether you’re thinking about a vacation, sick days, or unexpected family needs, here’s how to take time off without losing control of your business or burning out.
Option 1: Save up and hit pause
This is the most common approach. If you want true, uninterrupted time off, you’ll need to set aside enough money in advance to cover your expenses while you’re not working.
How to do it:
- Estimate how long you want to take off.
- Calculate the average income you’d lose during that time.
- Save up gradually – some freelancers create a “vacation fund” or build this into their monthly budgeting.
- Inform clients well in advance, especially if you have ongoing projects.
✅ Pro tip: Add extra buffer days to your return date. This gives you time to ease back in or handle any post-holiday surprises.
Option 2: Delegate the work
If your services can’t pause – or you want to avoid a gap in client support – you can hire help to keep things running.
Depending on your field, this could be:
- A subcontractor to handle deliverables while you’re gone.
- A virtual assistant to manage emails, invoicing, or client communication.
- A project manager to coordinate deadlines and updates.
This way, your business stays active even when you’re offline. Just be sure to:
- Brief your support team clearly.
- Get client permission (if needed).
- Set up contracts and payment agreements in advance.
While this option involves paying someone else, it may be worth it to protect long-term client relationships.
Option 3: Scale back, don’t shut down
For shorter breaks or personal emergencies, a full stop may not be necessary. If you’re dealing with a brief illness or a child home from school, you might choose to reduce your workload rather than pause entirely.
Ideas to make it work:
- Extend deadlines where possible.
- Focus only on urgent tasks or priority clients.
- Let clients know your availability may be limited.
- Automate what you can (invoices, messages, etc.).
This approach helps you stay present in your business while giving yourself breathing room.
Planning time off: What your clients need to know
Clear communication is key when you’re stepping away. Here’s how to handle it professionally:
- Give plenty of notice (2–4 weeks if possible).
- Set clear expectations: when you’ll be away, how urgent tasks will be handled, and when you’ll return.
- Offer alternatives, like early delivery or backup support.
- Update your out-of-office message and autoresponders.
Clients will more likely respect your need for time off if you’re proactive and transparent.
Do contractors get holiday pay – final thoughts
So, do independent contractors get holiday pay? Overall, the short answer is that freelancers don’t receive certain benefits like health insurance or paid holidays that employees receive. Independent contractors aren’t independent contractors entitled to vacation pay under U.S. labor laws – and most states don’t require it either.
That said, they can charge higher rates for holiday work, as long as it’s negotiated upfront. Understanding labor laws and contractor agreements is crucial for ensuring compliance and fair treatment.
For contractors, the key is to treat time off like any other part of business: plan ahead, communicate with clients, and include clear terms in your contracts. Whether it’s taking a break or charging extra for holiday hours, you’re in control.
For businesses, working with contractors means more flexibility – but also more responsibility. You don’t have to offer holiday pay, but you should discuss expectations early and respect your contractor’s availability. Fair, transparent agreements help build strong, long-term partnerships.
General practices for businesses working with independent contractors
To avoid confusion and legal risk, follow these steps when working with freelancers or independent professionals to ensure fair treatment in contractor relationships while maintaining compliance:
- Put everything in writing: Clearly define the contractor’s scope of work, payment terms, and whether any time off (paid or unpaid) is allowed.
- Don’t assume you’re the only client: Contractors work on their own schedule and may serve multiple clients.
- Avoid treating contractors like employees: Don’t dictate schedules or assign company equipment.
- Stay informed about local laws: If your business operates in states like California, be especially careful with classification rules.
