Holiday Pay for Hourly Employees: Set Up Paid Holidays, PTO and Overtime Before Thanksgiving

Under the federal Fair Labor Standards Act, a private employer does not have to pay hourly staff for a holiday they do not work, and does not have to pay a premium for working on one. Holiday pay is a policy you choose, so the real job is deciding which days you close, whether those days are paid, and putting that into the schedule before the Thanksgiving and Christmas requests arrive.

That decision is simple to make and easy to lose. A diner, a cleaning company or a retail store usually has it in the owner's head, a group text from last year and a payroll provider who only hears about it after the fact. This guide covers what the federal rule says, what a holiday shift actually costs, and how to set the whole thing up in one screen.

Do hourly employees get holiday pay?

Not under federal law. Here is the short version of what the US Department of Labor says. It is the background to the set-up, not the point of this guide, so read the pages themselves for anything unusual about your staff.

• No federal holiday pay. The Department of Labor's holiday pay page says the FLSA "does not require payment for time not worked, such as vacations or holidays (federal or otherwise)", and that these benefits are generally a matter of agreement between an employer and an employee. Checked on 7 October 2026.
• No federal holiday premium. The overtime pay page says covered, non-exempt employees must get overtime for hours worked over 40 in a workweek at not less than time and one-half their regular rate, and that the FLSA does not require overtime pay for work on Saturdays, Sundays or holidays unless overtime is worked on those days. Checked on 7 October 2026.
• The workweek is fixed. The same page says a workweek is a fixed and regularly recurring period of 168 hours, and that averaging hours over two or more weeks is not permitted.
• Federal government contracts are different. The holiday pay page notes that contracts under the Service Contract Act or Davis-Bacon can carry their own holiday requirements.

State and local law can add more, for example paid sick leave or daily overtime in some states. Check your state labor department for the rules where your staff work.

This is general information, not legal advice: check with the agency or an employment lawyer for your case.

What a Thanksgiving shift actually costs

Because the federal overtime line counts hours in the week, the same holiday shift can cost very different amounts. Take a line cook paid $18 an hour who works 8 hours on Thanksgiving Day.

In the 38-hour week, the federal rule asks for nothing extra: the Thanksgiving hours are ordinary hours at $18. In the 46-hour week, the 6 hours over 40 are paid at time and a half, $27, whichever day they fell on. Plenty of owners choose to pay more for holiday work anyway, to get the shift covered. That is a fine policy; it is just yours, not the federal rule's, so write it down and apply it the same way to everybody.

Three decisions to make before the first holiday request

Owners rarely get the federal rule wrong. Holidays go wrong in quieter places:

1. Which days you close. The 11 federal holidays on OPM's federal holidays list are the days federal employees get off, which makes them a common list for private businesses, not a required one. A restaurant may open on Labor Day and close on Thanksgiving and Christmas only. Decide the list and tell people before November.
2. Paid or unpaid. If the store closes on Christmas Day, are hourly staff paid for it? Federal law leaves it to you. A part-timer who finds out on their paycheck that the answer was no is the conversation you want to avoid.
3. How much time off, and of what kind. The FLSA does not require paid vacation either, but many small businesses offer PTO to hire and keep people, and some states and cities require paid sick leave. Decide how many days, whether they are paid, and keep the balance somewhere staff can see it.

The fourth thing, overtime, is not a decision for non-exempt hourly staff: hours over 40 in the workweek are paid at time and a half. What you do need is a schedule and a time clock that count those hours the same way every week.

US holidays, overtime and leave in one screen: the Starter pack

Shiftelio is an employee scheduling, time clock and leave app for small businesses with hourly staff. For US companies it has a Starter pack: one screen that adds the common holidays, an overtime plan and leave types in one go.

Open Leave and holidays, then Open starter pack. Only the company owner, or a co-owner, can use it.

After that, staff ask for time off from their phone and you approve it, the holidays show on everybody's schedule, and the hours they clock count towards the 40-hour line in the same way every week.

What the pack deliberately leaves to you

• State rules are not added. Daily overtime, state sick leave counted in hours and state holidays stay with you. The pack says so on the screen.
• Leave is counted in days, not hours. The sick leave preset of 5 days is about 40 hours for a full-time employee. If your state counts sick leave by hours worked, set the days to match your policy.
• The days are a starting point. 10 days of PTO is a common choice, not a rule. Part-time staff may need a smaller allowance, set by hand.

A worked example: two diners, one holiday list

Dana runs two diners in Ohio with 22 hourly staff. Before November she opens the Starter pack, ticks Thanksgiving Day and Christmas Day only, because both diners stay open on the other holidays, and leaves Paid days off on: staff are paid for the two days the diners close. She keeps the overtime plan at 1.5x after 40 hours and adds Paid time off at 10 days.

Her office manager also gets the day after Thanksgiving off, which the line staff do not. Dana adds that day by hand in Leave and holidays and sets it for the office department only, because in Shiftelio a holiday can belong to one branch or one department without giving it to everybody. The line cooks still see a normal Friday on the schedule, and nobody argues about it in December.

Which app sets up US holidays, PTO and overtime for me?

You can see how it fits a US business on the Shiftelio US page, and how schedules and shift rates work on the shift scheduling page.

Questions owners ask