Labor Day Is Coming for Your Payroll Schedule

What Small Business Owners Need to Know Before September 7

Labor Day is right around the corner, and while your employees are probably thinking about a long weekend, payroll teams are thinking about something else entirely: Will everyone get paid on time?

This year, Labor Day falls on this coming Monday, September 7, 2026. The Federal Reserve will be closed for the holiday, and FedACH processing will pause over the holiday weekend. That means if your company uses direct deposit, your normal payroll processing timeline may be affected.

The good news? A little planning now can prevent a last-minute payroll scramble.

Here are the five things every small business owner or manager should check before Labor Day.

Check your payroll calendar now

If your normal payday or payroll processing date falls on or around Labor Day, don't wait until the week of the holiday to figure out what needs to change.

Because Labor Day is a Federal Reserve holiday, ACH processing is affected. For 2026, FedACH processing ends on Saturday, September 5 at 3:00 a.m. ET and resumes Monday, September 7 at 5:30 p.m. ET.

That doesn't necessarily mean your employees won't be paid on time. Most payroll providers build holiday adjustments into their processing calendars, but your payroll submission deadline may move earlier.

What to do

Log into your payroll system now and check:

• Your next pay date
• Your payroll submission deadline
• Whether the deadline has moved because of Labor Day
• Whether your payroll provider requires an earlier approval
• Whether any manual checks or special payments need to be handled differently

Don't assume your payroll system has automatically taken care of everything. Your provider's specific processing requirements should be your source of truth.

For additional information, you can review the Federal Reserve's 2026 holiday schedule and Nacha's explanation of ACH processing.

Holiday pay is generally a company policy, not a federal requirement

One of the biggest misconceptions we hear from small business owners is that employees are legally entitled to be paid for Labor Day simply because it is a federal holiday.

Generally, that isn't the case for private employers.

The FLSA does not require employers to pay employees for holidays they don't work. Holiday pay is generally determined by the employer's policy, employment agreement, or collective bargaining agreement.

So if your company closes on Labor Day, you need to know what your own policies say. For example:

Policy A: "Employees receive eight hours of holiday pay for Labor Day."

That is a company benefit you've chosen to provide, and you should apply the policy consistently.

Policy B: "The company is closed on Labor Day and employees are not paid for the day."

That can also be permissible under federal law for most private employers, assuming no other applicable state or contractual requirement applies.

The important part - Check your handbook before making a decision.

If your handbook says one thing but your payroll team does something different, you can create an unnecessary employee relations and compliance problem. This is also a great opportunity to make sure your holiday policy clearly explains:

• Which holidays the company observes
• Whether employees receive paid time off
• Who is eligible for holiday pay
• What happens when a holiday falls on a weekend
• Whether employees must work the day before or after a holiday to receive holiday pay
• How holiday pay interacts with PTO and other leave

If employees work Labor Day, understand the overtime rules

Working on Labor Day does not automatically mean an employee is entitled to double time or time-and-a-half under federal law.

Under the FLSA, overtime is generally required when a covered, nonexempt employee works more than 40 hours in a workweek. The FLSA does not require additional pay simply because the hours were worked on a holiday.

So, for example, if an employee works:

Monday: 8 hours
Tuesday: 8 hours
Wednesday: 8 hours
Thursday: 8 hours
Friday: 8 hours
Monday Labor Day: 0 hours

Their paid holiday may be eight hours depending on company policy, but those holiday hours generally aren't considered "hours worked" for federal overtime purposes.

On the other hand, if a nonexempt employee actually works 45 hours during the workweek, overtime rules still apply to the hours over 40.

Make sure your payroll system is set up correctly

Holiday payroll issues aren't always caused by the holiday itself. Sometimes they're caused by how the payroll system is configured.

Before Labor Day, check that:

✓ Your holiday is correctly configured in your payroll system

✓ Employees who are eligible for holiday pay are receiving the correct amount

✓ Holiday hours aren't accidentally being counted as hours worked for overtime calculations

✓ Employees working the holiday are recording their actual hours worked

✓ Any holiday premium your company offers is configured correctly

✓ Managers know how to approve timecards before the payroll deadline

✓ Your payroll provider's holiday processing deadline has been confirmed

This is particularly important if you have hourly employees, multiple locations, remote employees, or employees working in different states.

Tell employees what to expect

You don't need a lengthy announcement. A simple message can eliminate a surprising amount of confusion:

"Reminder that our offices will be closed Monday, September 7 in observance of Labor Day. Employees eligible for holiday pay will receive it in accordance with our company policy. Please make sure all timecards are submitted and approved by [date/time] so we can process payroll on schedule."

If payday is changing, tell employees before the holiday. If payday isn't changing but the payroll approval deadline is earlier, tell managers.

The goal is simple: no one should be wondering on Friday whether their paycheck is coming.

Your hoiday payroll checklist

If you're a manager or business owner, here's the quick version:

☐ Check your next payroll date

☐ Confirm your payroll submission deadline

☐ Review your holiday pay policy

☐ Confirm which employees are eligible

☐ Make sure timecards are submitted early

☐ Check any state-specific overtime or holiday requirements

☐ Confirm holiday pay is configured correctly in your payroll system

☐ Communicate any schedule changes to employees

☐ Don't wait until the last payroll approval deadline

Need a second set of eyes on payroll?

This is exactly the type of detail we help small and midsize businesses manage every day at Rising Tide HR.

Our payroll team can manage payroll processing, help review payroll configurations, support multi-state payroll compliance, troubleshoot payroll issues, and make sure important deadlines don't sneak up on you.

Whether you need ongoing payroll management or simply want someone experienced to review your current setup, we're happy to help.

Want to make sure your payroll is ready for the holiday season?

Visit Rising Tide HR to learn more about our HR and payroll services or connect with our team.

And most importantly, enjoy your Labor Day weekend. Your employees should be relaxing, and hopefully, so should you!