What is Holiday Pay and Should You Offer It?

What is Holiday Pay and Should You Offer It?

Holiday pay is paid time off.

Government statistics report that small businesses paid $0.78 for holiday pay per hour in 2019. As the festive season approaches, it’s important to understand the benefits to offering this extra pay to employees.

There are no hard and fast holiday pay laws.

The Fair Labor Standards Act (FLSA) doesn’t make holiday pay a legal requirement.  It’s a separate deal that employers and employees work out. Still, it’s generally accepted days like Christmas Day and Easter are paid holidays. American workers get an average of 7.6 paid days off regardless.

Rebecca Mazin from Recruit Right outlined what needs to be considered to hammer out a plan that works. It’s important when you’re wondering how does holiday pay work to get this right and to include it  in your employee handbook so it’s clear to all staff what your policy is.

Holiday Pay

First figure out how many holidays your small businesses will pay for.

“Some employers set a schedule every year, others observe the same holidays each year,” she writes. “I recommend setting a schedule yearly.”

Business owners have room to tweak the schedule as they see fit.

“For example, you can celebrate July 4th on July 3rd, since the 4th is a Saturday in 2020,” she adds. “For a 7-day business, they may stick to July 4th.”

You need to consider how you’ll pay too. It’s part of a good policy.

Time and a Half?

“Holiday pay doesn’t include hours worked for overtime purposes,” Mazin writes. “Some employers pay time and a half. Others pay double time for hours worked on a holiday and do not pay anything more separately.”

Cynthia Flynn from Hackler Flynn & Associates makes a further distinction.

“Once an employer establishes a policy, they must be sure they comply with related federal and state laws. Employers must apply the policies, incentives, and requests in a fair, consistent and non-discriminatory fashion. Otherwise they can run afoul of federal and state laws and open
themselves up to claims or litigation.”

Overtime Makes A Difference

Overtime often makes a difference. Employees who can’t earn overtime are called exempt employees . You can’t reduce what you pay them for holiday pay. Employees who get overtime are non exempt. You only need to pay them for the time they work.

Small Business owners weighed in on the benefits.

Nunzio Ross from MajestyCoffee.com started with the positive side. He shared one of the big reasons his company offers the benefit.

Productive Employees

“I firmly believe that happy employees are more productive employees,” he writes. “They are working because they want to work. Their relationship with management is one of mutual respect and working towards a common goal that we will all benefit from.”

Nathan Wade, Managing Editor for WealthFit Money feels the same way.  He goes so far as to say that holiday pay has more than one benefit. Wade writes that it increases employees’ sense of worth.


“Getting refreshed gives them more motivation when the holidays have passed,” he writes.

Catherine Wragg, Senior Vice President HR TriNet talks about how holiday pay can attract employees.

“It can be a differentiator for employers competing for talent. As a gesture of good will, companies can offer a spot bonus or alternative day off for exempt employees working over a holiday. For nonexempt employees, companies may choose to offer a higher rate of pay on holidays to boost morale and motivate a high level of performance.”

Image: Depositphotos.com

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Rob Starr Rob Starr is a staff writer for Small Business Trends. Rob is a freelance journalist and content strategist/manager with three decades of experience in both print and online writing. He currently works in New York City as a copywriter and all across North America for a variety of editing and writing enterprises.

2 Reactions
  1. Another factor to consider is how your customers treat those holidays. If customers are out of the office, then it’s easier to give employees the day off.

  2. It is good for overall motivation and it can serve as a thank you to your employee for all of their efforts.