Santa or Scrooge? A Small Business Guide to Paid Holidays

With eleven federal holidays and dozens more religious and traditional holidays on the United States calendar, it’s challenging to develop a paid holiday plan that’s both practical for your business and satisfying for employees. At the same time, you may feel unsure about your legal obligations.

Do you need to give your employees a certain number of paid holidays off to stay compliant?

Your yearly financial goals may entice you to be stingy with paid time off (PTO) like Scrooge, but your fear of turnover and legal complications might make you feel generous like Santa.

In reality, you shouldn’t choose between profits and employees because both are crucial to your success. But each has unique needs, and you need to create a paid holiday policy that fulfills them all as well as possible.

While we can’t tell you exactly what policy will be right for you, we can walk you through the steps you should follow when it’s time to determine which paid holidays to offer your team.

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What are the most common paid holidays in the US?

It may be a relief to hear that the federal government doesn’t require small business owners in the private sector to give employees paid holidays. Even so, employers offer their staff members an average of eight paid holidays per year.

The most common paid holidays in the United States are:

• New Year’s Day (January 1st)
• Memorial Day (May 27th, 2024)
• Independence Day (July 4th)
• Labor Day (September 2nd, 2024)
• Thanksgiving Day (November 23rd, 2023 and November 28th, 2024)
• Friday after Thanksgiving (November 24th, 2023 and November 29th, 2024)
• Christmas Day (December 25th)

However, some employers also choose to honor additional national, religious, and cultural holidays like:

• Martin Luther King Junior Day (January 15th, 2024)
• President’s Day (February 19th, 2024)
• Good Friday (March 29th, 2024)
• Easter (March 31st, 2024)
• Eid al-Fitr (April 10th, 2024)
• Vaisaki (April 13th, 2024)
• Eid al-Adha (June 16th, 2024)
• Juneteenth (June 19th)
• Rosh Hashanah (September 15th - 17th, 2023 and October 2nd - 4th, 2024)
• Yom Kippur (September 24th - 25th, 2023 and October 11th - 12th, 2024)
• Columbus Day/Indigenous People’s Day (October 9th, 2023 and October 14th, 2024)
• Veteran’s Day (November 11th)
• Diwali (November 12th, 2023 and November 1, 2024)
• Christmas Eve (December 24th)
• Day after Christmas (December 26th)
• New Year’s Eve (December 31st)

How to decide on your PTO policy in 4 steps

It’s unlikely that your team members will ever be mad about extra time off. It can boost morale, prevent them from burning out, and even strengthen your local reputation as an employer that cares about work-life balance. But how do you ensure it’s making the right impact for your employees without affecting your bottom line? These four steps can help you design a practical yet effective PTO policy for your small business.

1. Consider your financials

Depending on your industry, certain seasons of the year may be more lucrative than others. For example, if you operate a small housewares store, you probably experience your biggest rush around Thanksgiving and Christmas. That doesn’t mean you should avoid giving paid holidays around a profitable period, but consider:

• Past sales data from the holidays in question. For example, Homebase’s labor costing tool lets you break down your labor spending by hour, department, and role. You can compare that data against your holiday traffic and sales to see whether it’s worth staying open for specific holidays and, if so, how many staff members you’ll need.
• The projected budget for that time of year should account for expected revenue, typical expenses, and cash flow.
• Extra expenses related to specific holidays. These might include the wages you have to pay seasonal employees, overtime pay, or holiday bonuses.

If you realize your profits will be stretched thin over specific holidays, it doesn’t mean your PTO options are completely off the table. However, you might have to implement marketing and sales promotions strategically and ahead of time, which can boost your revenue and give you enough extra profits to pay team members for the days you’re closed.

2. Reach out to your peers and research your competitors

You can learn from your fellow business owners' experiences regarding paid holidays. It’s possible, for example, that your friend who also owns a small restaurant has discovered that her employees prefer to work Christmas Eve because customers tip especially well.

When consulting your peers on what they’ve learned regarding paid holidays, ask:

• Which paid holidays do you currently offer, and how did you figure out which ones work best for employees?
• Do you offer floating or flexible holiday options?
• Are there any specific cultural or religious considerations you’ve kept in mind?
• What positive results have you noticed as a result of offering paid holidays?
• Are you considering updating your paid holiday policy in the future?

You should also investigate what your competitors are doing so you can offer a PTO policy that sets you apart as a better, more considerate employer. Focus on similar-sized businesses within your community and industry that cater to the same customer base. Once you’ve narrowed your competitors down, you should:

• Comb their websites and social media platforms for information about their PTO policies, if available.
• Check out Glassdoor reviews to see if employees have left reviews about paid holidays.
• Reach out to anyone you know who might have worked for them in the past or may work for them now.
• Use a platform like Reddit to connect with your competitors’ current and former employees. Ask them what PTO policies their employers offered, as well as which holidays they’d prefer to take off.

3. Ask team members which holidays work best for them

Today’s small business employees may not be used to their bosses asking them to weigh in on policies and processes. Just prompting them to share their input on paid holidays could help you stand out in a positive way. But remember — you need to take action on their feedback to earn their long-term trust.

You can use a tool like Typeform or Google Forms to create an anonymous survey and share it via your team chat app. Be sure to explain that you intend to use the survey to update your paid holiday policy so team members will feel more motivated to participate. Include questions like:

• Which holidays are most important to you personally, and why?
• Do you have any cultural or religious holidays that you wish were offered in our PTO policy?
• Would you prefer a fixed list of holidays or the option to choose some holidays based on your needs and preferences?
• Were there any holidays in the past that you felt we didn’t need to be open or working?
• What family or personal considerations should we be aware of when creating our PTO policy?
• Would you be willing to work on specific holidays if you received overtime pay or other incentives? If so, which?
• Do you feel our paid holidays are evenly distributed throughout the year? If not, please elaborate.
• What suggestions or concerns do you have regarding our PTO policy?

Share everyone’s answers with the entire team anonymously once you’ve gathered and organized them. Doing so helps you build trust and reassure team members that their input directly impacts the paid holidays you provide.

4. Determine when you’ll close your doors — and when you’ll stay open

Having weighed your financial situation, your peers’ advice, competitor research, and employee feedback, it’s time to decide which holidays you’ll close your business. If possible, offer a balanced combination of public and religious holidays to cater to your team members’ needs and preferences. And, regarding the religious holidays, make sure to honor your employees’ cultural traditions equally.

Then, use Homebase to create and customize your PTO policy. Our platform lets you configure PTO rules for holidays separately so employees don’t have to use their regularly accrued PTO on holidays when you’re not open.

Thankfully, calculating holiday pay when your business is closed is simple. For hourly employees, you’ll pay them their regular wages multiplied by their average daily hours. So, if they usually work eight hours a day and you pay them $17 an hour, their holiday pay would be $136.

However, employees may prefer to work some holidays, especially in industries known for tipping. You might also choose to stay open on holidays like Christmas Eve or the day after Thanksgiving (Black Friday) due to increased customer traffic and incentivize team members with time-and-a-half pay. In that case, you’d multiply their regular daily pay by 1.5. If we use the previous example and multiply $136 by 1.5, the employee’s overtime pay would amount to $204.

Although it’s not legally required on a federal level, overtime pay for holidays is a great way to reward your employees for their willingness to work.

Simplify paid holidays and keep employees smiling with Homebase

Even if you can’t offer your employees as many paid holidays as you’d like, team members will notice the effort you put into creating a policy with their needs in mind. That level of mindfulness and care will translate into more motivated, productive employees who want to keep working for you in the long term.

It also makes a difference when you use the right technology to ensure you implement your policy accurately and avoid mistakes, like PTO, scheduling, and time tracking tools.

Homebase can take the stress out of creating a PTO and paid holiday policy, keep shifts full, and track employee hours correctly. With our free time tracking and paid time off feature, you can create PTO and holiday rules that make sense for you and ensure paid holidays are reflected in employee timesheets. Our built-in, easy-to-use scheduling feature lets you set up staff timetables in minutes based on their pre-approved availability. The cherry on top is our HR and compliance feature, which allows you to consult directly with HR experts who can review your PTO policies and ensure you’re doing everything by the book.

With Homebase, you can rest easy knowing that you’ve got the tools you need to keep your team members satisfied and your business on the right track.

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