What Is A Floating Holiday? (Policies, Examples, And Differences From PTO)

By Sky Ariella - Jun. 17, 2021
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Offering your staff paid time off benefits improves motivation, productivity, and overall employee satisfaction. In addition to providing a good salary, paid time off in a benefits package is an investment in an organization’s long-term success.

The way that each company chooses to handle its employee’s time off is unique to their values and goals for growth.

One way to provide time off while accommodating the needs of all your employees is by offering a number of floating holidays.

What Is a Floating Holiday?

A floating holiday is an employee-paid time off offer that doesn’t correlate with a specific, federally designated holiday.

Some federally recognized holidays in the U.S. include:

  • Christmas Day (December 25)

  • Thanksgiving Day (Fourth Thursday of November)

  • Veterans Day (November 11)

  • Labor Day (First Monday of September)

  • Independence Day (July 4)

  • Memorial Day (Last Monday of May)

  • Martin Luther King Jr. Day (Third Monday of January)

  • New Year’s Day (January 1)

  • Juneteenth (June 19)

Employees are typically supplied with an annual number of floating holidays that they choose when to use. In some ways, it’s similar to a personal day because it’s taken at the employee’s discretion.

Often, these floating holidays are applied to religious observances outside of federally recognized days like Christmas and New Year’s Day. However, it is not a requirement that employees must use floating holidays for religion. Some employees prefer to save this time in the case of an emergency to avoid applying vacation time.

A set number of floating holidays are usually included with other forms of paid time off in a company’s benefits package.

Examples of paid time off compensation include:

  • Sick leave

  • Vacation time

  • Personal days

  • Federally regulated holidays

  • Nationally relevant events, such as Election Day

Employers are not required by law to provide floating holidays for their employees or paid time off in general. However, it is fairly standard to implement a basic paid time off incentive in your benefits package.

Supplying your team with adequate time off and floating holidays to observe occasions of their choosing demonstrates how much you value them and their work-life balance. Employees who feel appreciated and supported put forth their best work.

Floating Holiday Considerations

When you’re offering your team floating holidays, there are a couple of considerations you need to make beforehand. Since floating holidays can be used at the employee’s discretion, it brings up the issue of giving notice.

For major holidays and vacation time, employees usually give their employers some level of prior notice. When it comes to floating holidays, they could be used whenever they’re needed — just like personal or sick days.

Giving your entire staff a set number of floating holidays could result in stress when adequate notice isn’t given. This is one point to consider when devising your own floating holiday policy.

It’s also beneficial to consider any restrictions or guidelines you’ll place on floating holidays. Perhaps the fourth of July is the busiest weekend of the year for your company. In this scenario, it might be best to allow floating holidays any time, other than July 3rd-6th.

While making these considerations though, try not to block off complete months at a time. This can make the offer seem narrow and less useful. Ultimately, negating the purpose of offering floating holidays in the first place.

Specific Decisions Regarding a Floating Holiday

It’s best to be clear with your new hires and current employees about the specifics involved in the floating holidays you’re offering. As previously discussed, you must give guidelines about when they’re allowed to take their floating holiday.

In addition, you should provide information about:

  • Whether their floating holidays roll over to the next year

  • How often they’re given more floating holidays (annually, every six months, etc.)

  • If an employee will be allowed to “cash-out” their floating holiday pay when they leave the company

Failing to consider these factors will result in a loss if you haven’t accounted for them. Make sure your employees have an understanding of the details and time to negotiate if needed.

The Goal of Floating Holidays

Happy employees are productive and passionate about their work. The goal of providing employees with floating holidays is to facilitate satisfaction. Paid time off isn’t just a benefit that employees want — it’s one they need. Whether it be for religious observance, family emergencies, or simply as a time to reenergize.

You want your employees to utilize their floating holidays because it’s one of the most cost-efficient ways of providing valuable benefits to them. People’s lives are all different, and as such, they should be able to dictate why they need their time and when. Giving employees the capability to decide when they need days off is greatly appreciated and will improve your team’s morale.

Floating Holiday FAQ

  1. What’s the difference between vacation time and floating holidays?

    While vacation time and floating holidays are often very similar, there are a couple of key differences. Companies will usually offer vacation time earned on a reward system for the length of time employed or milestones reached. Floating holidays are given as a set number for a given amount of time to employers when they’re first hired (or when you begin offering it).

    Floating holidays are not earned, cannot be increased, and will reset according to a predetermined schedule.

    For example, an organization offering vacation time might include a stipulation that employees receive two weeks of paid vacation after their first six months.

    However, if a company is offering two floating holidays per year, that’s all she wrote. At the beginning of the next year, you have two floating holidays again, even if you used none the year prior.

  2. Are there disadvantages to floating holidays?

    Implementing floating holidays into your company’s benefits package can positively impact employee satisfaction and productivity. However, drawbacks to floating holidays can arise if you fail to clearly consider and outline the stipulations of your offer. The downsides of floating holidays can be great if you don’t establish guidelines for them.

    Failing to carefully consider each aspect of your floating holidays offer can result in issues, such as:

    • Scheduling mishaps

    • Paying an employee for unused floating holiday time

    • Dissatisfaction by employees who feel the details weren’t adequately explained

  3. Can floating holidays carry over to the next year?

    The beauty of having fewer federal requirements involving paid time off is that it gives you room for employer preference. How you choose to design your floating holiday package and accrual system is completely up to you and what you believe will benefit your organization. With this being said, take into consideration your state’s laws before implementing anything permanent.

    For instance, some states ban “use it or lose it” vacation policies, so you might opt to pay employees for unused floating holidays each year if you want to prevent accrual while still fairly compensating everyone for their time.

  4. Do unused floating holidays need to be paid out upon termination?

    It depends on state laws. For example, in California, if floating holidays can be taken at any time, they are considered vacation days. That means they’re essenitally the same as earned wages, meaning employees are entitled to payment for them upon termination.

    Regardless of legal statutes, though, respectful, professional companies will always pay employees for unused PTO of any form, because it’s fair and the right thing to do.

  5. Are employers required to provide floating holidays?

    The short answer is no. Employers aren’t legally required to provide their staff with paid time off. The specifics of this can differ between states and career fields.

    However, legality aside, full-time employees should be compensated with a comprehensive benefits package, if you expect to secure and maintain the best employees. Floating holidays are an excellent way to implement employee benefits, without taking on a huge financial cost.

  6. What are the benefits of providing floating holidays?

    Providing floating holidays for your employees is a great way to improve employee morale. After all, retaining your strongest team members is crucial to the long-term growth of the company. If you can’t meet their benefits expectations, they might go to someone who can.

    Including floating holidays, specifically, as a form of paid time off accounts for the diverse, unique group that your team is. Even though there’s a series of federally recognized holidays, that doesn’t account for everyone’s backgrounds.

    Floating holidays establish a more flexible environment, in which employees can decide for themselves when the best time to take the day off is. You’ll feel the effects of employee appreciation in their enthusiasm and work ethic.

    Not to mention that folks who don’t mind working on days when everyone else wants off (Christmas, Thanksgiving, etc.) can keep your business operating more days of the year, while giving those same folks the days they do want off.

  7. Is it important to keep track of floating holidays?

    Once you’ve decided to incorporate floating holidays into your company’s benefits package, it’s imperative to keep track of them like you would any other paid time off. This is important for scheduling purposes, as well as payroll. Neglecting to organize and monitor employee’s floating holiday usage could result in chaos when it comes to payouts.

    Keeping track of your employee’s floating holidays isn’t too difficult. It can be done in the same manner you’d account for any other time off, through an online filing system.

  8. How can I implement floating holidays?

    As an employer, you set the tone for how floating holidays can be utilized. You should do some reflection about the guidelines that will be necessary to impose and how to present this part of your benefits package. Put some serious time into establishing employee expectations and deciding what system will work best for your organization.

  9. Does an employee have to use a floating holiday for religious purposes?

    Absolutely not. Offering your staff a set number of floating holidays doesn’t mean that there are stipulations for what they do with these days. Floating holidays are similar to personal days in this way.

    While many people will use their floating holidays for religious purposes, you cannot exclude some members of staff if they don’t celebrate religious holidays or use them for something else.

    The point of supplying a benefits package is to provide an incentive to the employee. You want them to be happy with your offer before negotiations. The benefit of floating holidays is that the employees can use them for anything they choose. Whether that be for a holiday, event, or spending the day with their children.

Floating Holiday Sample Policy

All exempt employees will receive 2 floating holidays each year in addition to [Company Name]’s mandated holidays and their regular PTO days. These floating holidays may be used for any cultural, religious, federal, state, or personal holidays when [Company Name] remains open.

Floating holidays are available starting on January 1st for all current employees, or upon being hired for employees who join our staff mid-year. An employee hired on or before July 1st will receive 2 floating holidays for the year, and an employee hired after July 1st will receive 1 floating holiday for the year.

Employees must request a day off for a floating holiday at least 5 business days in advance and receive approval from a supervisor.

Floating holidays do not carry over each year, but [Company Name] will offer prorated payments based on annual salary for unused floating holidays each year or upon termination.

Final Thoughts

No matter what stage of their career, employees appreciate an employer who provides plenty of opportunities for flexibility. Floating holidays show respect for a diverse workforce and the work-life balance of all employees, boosting employee satisfaction and benefiting the whole organization in an incredibly cost-effective way.

Whether it’s to observe a religious practice that’s not on the calendar of federal holidays, serve jury duty, take time for bereavement, meet with friends or family, or simply take some time for personal leave, floating holidays a form of PTO that workers are entitlted to in addition to vacation time.

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Sky Ariella

Sky Ariella is a professional freelance writer, originally from New York. She has been featured on websites and online magazines covering topics in career, travel, and lifestyle. She received her BA in psychology from Hunter College.

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