The question of whether an employee receives paid time off for Thanksgiving often comes down to individual company policy, not legal requirement. Federal law does not guarantee a paid holiday for employees in the private sector, meaning compensation for November’s major holiday is entirely determined by your employer’s written guidelines or employment contract. Understanding these internal policies is the only way to determine if you will receive a paid day off or premium wages for working.
The Legal Reality of Paid Federal Holidays
The common misconception surrounding paid holidays stems from the term “federal holiday.” A federal holiday simply designates a day when non-essential federal government offices close and the Federal Reserve banking system observes the day. This designation does not extend any requirement to private-sector employers to either close their doors or offer employees paid time off for the observation.
The Fair Labor Standards Act (FLSA), which governs minimum wage, overtime, and recordkeeping, does not contain any provision mandating that employers pay employees for time not worked, including holidays like Thanksgiving. Therefore, if a private company chooses to remain open, the employer is only obligated to pay employees their regular rate of pay for the hours worked. Any benefit, such as paid time off or premium wages, is offered voluntarily as an employee benefit.
Defining Standard Holiday Pay Policies
When private companies offer compensation for working on Thanksgiving, they establish a “holiday pay” policy, usually involving a premium rate. This pay structure compensates staff for working on a day generally reserved for family and leisure. The most common formulas are time and a half (1.5x) or double time (2x) the employee’s standard hourly wage.
An employee earning $20 per hour who works an eight-hour shift on Thanksgiving under a time-and-a-half policy would earn $30 per hour, resulting in $240 for the shift. A double-time policy would see that employee earn $40 per hour, totaling $320 for the day. Some companies structure the benefit as regular pay plus an additional eight hours of pay, which achieves the same total compensation as a double-time rate.
If the company closes for the holiday, the benefit usually involves paying non-working employees their standard eight hours of pay. This ensures employees do not see a reduction in their weekly earnings because the business chose not to operate. These policies usually apply uniformly across all major holidays observed by the company, such as Christmas and New Year’s Day.
Compensation Rules for Exempt and Non-Exempt Employees
The application of holiday pay policies varies depending on whether an employee is classified as non-exempt (hourly) or exempt (salaried) under the FLSA. Non-exempt employees, who are entitled to overtime pay, must be paid their regular rate for every hour worked on Thanksgiving. If the company offers a premium rate, that rate is applied to the hours worked and counts toward the calculation of any potential weekly overtime.
If a non-exempt employee receives paid time off for the holiday, the employer treats the day as a standard eight-hour shift for payroll purposes. This paid time off does not count as “hours worked” toward the 40-hour threshold for calculating overtime later in the week. Exempt employees, who are paid a fixed salary regardless of hours worked, involve different pay considerations.
Under FLSA salary basis rules, if an exempt employee works even for a small portion of Thanksgiving Day, the employer cannot deduct any pay from their weekly salary. They must receive their full weekly pay, and no additional premium pay is legally required for that work. Companies often offer a bonus or comp time to exempt staff as an incentive, but this is a courtesy, not a mandate.
If the company closes on Thanksgiving and an exempt employee takes the entire day off, the employer is prohibited from reducing the employee’s salary for that day. The FLSA mandates that the employee still receive their full salary for the week. This is why most companies grant the paid holiday, ensuring compliance with the salary basis test and providing financial protection for salaried staff.
Requirements to Qualify for Holiday Pay
Even when a company offers a paid Thanksgiving holiday, employees must meet certain internal policy requirements to qualify. A common stipulation is the “sandwich day” rule, which requires the employee to work their full, scheduled shift on the day immediately preceding and the day immediately following the holiday. This policy is designed to prevent employees from using the paid holiday as part of an unauthorized, extended absence.
If an employee calls out sick or fails to show up for the shift before or after Thanksgiving, they forfeit the holiday pay for the entire day. Many companies also impose a minimum tenure requirement, such as 30, 60, or 90 days of continuous employment, before a new hire becomes eligible for paid holidays. These rules are outlined in the employee handbook and must be met to receive the compensation.
Alternatives When Premium Pay Is Not Offered
When an employer does not offer premium pay for working on Thanksgiving, employees still have alternative avenues for compensation or time off. Employees can utilize their accrued Paid Time Off (PTO) or vacation hours to cover the day if the company allows the substitution of paid leave for holiday time. This option guarantees the employee receives pay for the day without requiring the employer to offer a premium rate.
Some companies offer “floating holidays” instead of designating a specific date like Thanksgiving. A floating holiday is a set amount of paid time that an employee can use on any day they choose, which allows for greater flexibility. Furthermore, employees covered by a Collective Bargaining Agreement (union contract) often have guaranteed paid holidays and specific premium rates that supersede standard company policy, representing a binding contractual obligation.