This Is How to Track Holiday Pay for Your Employees

Holiday pay works a little differently than a regular paycheck, and it starts with a policy decision most employers don’t realize is actually optional. Here’s what you need to know to set that policy, calculate it correctly, and keep an accurate record for payroll.

Is Holiday Pay Required by Law?

No. Under the Fair Labor Standards Act, private employers are not required to pay employees for holidays not worked, or to pay a premium rate for holidays that are worked, according to the U.S. Department of Labor. Holiday pay is a benefit employers choose to offer, not a legal mandate. Some states, local governments, or union contracts may set their own rules, so it’s worth checking those before finalizing a policy. Most employers offer some form of holiday pay anyway, since it’s a standard expectation for hourly and salaried staff alike.

Determine Your Paid Holidays

Once you’ve decided to offer holiday pay, the next step is choosing which holidays qualify. Common choices include New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. Beyond that, it’s entirely up to you. Some employers add days like Juneteenth or the day after Thanksgiving, while others keep the list shorter. Whatever you choose, write it down in your employee handbook so there’s no confusion later.

Set Eligibility Rules for Holiday Pay

Not every employer extends holiday pay to every employee from day one, and not every employee receives the same amount. Many employers set an eligibility waiting period, commonly around 90 days of employment, before a new hire qualifies for paid holidays. Part-time employees typically receive holiday pay prorated to their normal schedule, often 4 or 6 hours, while full-time employees receive a full 8-hour day. Some employers also require employees to work their scheduled shift immediately before and after the holiday to receive the benefit, mainly to prevent someone from taking an unscheduled day off around a holiday and still expecting to be paid for it.

TimeTrakGO supports custom rules for all of these scenarios, including waiting periods, full-time and part-time proration, and day-before/day-after requirements, so each employee’s holiday pay is calculated correctly and consistently, pay period after pay period.

Choose a Pay Model

There are three common ways to pay employees for a holiday: their regular rate, time-and-a-half, or double pay. Regular rate means an employee who works the holiday is paid the same as any other shift. Time-and-a-half and double pay are premiums employers use to reward staff for working on a day most people have off.

Here’s what that looks like in practice. Say an employee earns $20 an hour and works an 8-hour shift on a designated holiday at time-and-a-half. Their rate for that shift is $20 × 1.5, or $30 an hour, for a total of $240. The same 8-hour shift at their regular rate would be $160.

Account for Overtime on Worked Holidays

Holiday pay and overtime pay are calculated separately, and mixing them up is a common payroll mistake. Under the FLSA, paid holiday hours that an employee doesn’t actually work don’t count toward the 40-hour threshold used to determine overtime, according to the Department of Labor. If an employee takes a paid holiday off, that day doesn’t push them into overtime even if they already worked 40 hours earlier in the week.

Hours an employee actually works on a designated holiday are different. Those hours count as regular worked hours, just like any other shift. If working the holiday pushes an employee’s total hours worked past 40 for the week, standard FLSA overtime applies to those hours on top of whatever holiday premium you’ve chosen to pay. Decide how the two will interact before finalizing your pay model, so there are no surprises on payday.

Track Holiday Hours for Payroll

Once your policy and pay model are set, accurate tracking is what keeps holiday pay from becoming a payroll headache. TimeTrakGO logs exactly which hours were worked on a designated holiday, so you have a clear, accurate record for every pay period. The graphical time cards make it easy to see holiday hours at a glance, and the built-in report builder lets you pull a holiday-hours report whenever you need one.

Because TimeTrakGO integrates with payroll providers like ADP, Paylocity, and Sage 50, those tracked hours flow directly into your payroll run, cutting out a manual reconciliation step.

Communicate Holiday Pay to Your Employees

Tracking holiday pay accurately only helps if your employees understand how it works. Let them know which days are paid holidays, what pay model applies, how eligibility rules work, and how it will show up on their paycheck. Clear communication upfront reduces the number of questions and disputes you’ll field after the fact.

Include Holiday Pay on Pay Stubs

Because holiday pay can look different from a regular shift, break it out separately on the pay stub. Seeing the holiday hours and rate listed on their own line helps employees understand exactly how they were paid, and it saves you time explaining discrepancies later.

A clear policy and accurate tracking take the guesswork out of holiday pay, even during your busiest pay periods. If you’re ready to see how TimeTrakGO handles it, check out our pricing here.