Should You Offer Floating Holidays?

What is a floating holiday?

A floating holiday is a day of paid time off (PTO) an employee can use in addition to vacation time, sick leave, or other PTO during the calendar year. An employer can offer a floating holiday as a substitute for an unobserved public holiday or let employees choose which day to take off.

• Offering a floating holiday as a substitute: In option one, the employer creates a list of holidays for which the company doesn’t currently offer paid time off; the employee chooses their floating holiday from that list (e.g., Good Friday, Black Friday, Christmas Eve). 
• Letting employees choose their floating holiday: In option two, the employee chooses any day of the year to use their floating holiday.

Employees are typically eligible to use their floating holiday immediately, which often isn’t the case for other types of PTO that may require accrual.

What are the benefits of floating holidays?

Floating holidays are advantageous for businesses and employees, offering the following benefits:

1. Floating holidays can keep your business running during the holidays.

Floating holidays can help seasonal businesses stay profitable. 

Some businesses automatically give their employees time off during specific holidays. However, these holidays may coincide with their busiest seasons. Instead of losing revenue, they can offer floating holidays. Some employees can take time off while others continue working, keeping the business open. This floating holiday policy benefits the business and its employees.

“This is a nice policy, specifically for people who do not celebrate Christmas or don’t travel for Christmas, because they can choose when to use their holiday time,” explained Alison Pearson, head of human resources for Hal Waldman and Associates.

Remember that you may have to set floating holiday restrictions on how many employees can take off the same day.

2. Floating holidays can reduce administrative burdens.

Choosing holidays to include in a PTO policy can be challenging. Businesses want to provide an inclusive holiday schedule that accommodates every employee, but this can be taxing. 

Floating holidays minimize these scheduling issues. You can choose which primary public holidays to include in your standard PTO policy and let your employees choose specific, meaningful holidays to observe.

3. Floating holidays give employees flexibility and a better work-life balance.

Everyone loves taking PTO, but not everyone’s life fits neatly into the same time-off schedule. Instead of forcing employees to take days off when they’d rather be working (and vice versa), a floating holiday schedule gives employees flexibility, reducing stress and improving work-life balance.

“Many employees use floating holidays in tandem with other vacation days to maximize their PTO,” noted Chris Abrams, founder of Abrams Insurance Solutions. Abrams explained that floating holidays “don’t pigeonhole employees into taking days off” when they are overloaded with work.

Floating holidays can also be especially helpful for working parents who must stay home with children during specific days throughout the year.

4. Floating holidays help build an inclusive work culture.

Creating a diverse and inclusive workplace is at the top of many organizations’ to-do lists, and for good reason. Diversity and inclusion efforts can help improve employee performance, employee retention and overall satisfaction. 

Adding floating holidays to your employee benefits plan is an excellent way to support those initiatives. There are many religious and cultural celebrations that most organizations don’t recognize as paid holidays, and floating holidays allow employees to observe the celebrations that matter to them.

“Using floating holidays is a great way to be more inclusive,” Abrams said. “An employee may prefer to celebrate a religious holiday that isn’t part of mainstream culture.”

5. Floating holidays help attract and retain top talent.

A floating holiday is an inexpensive and desirable job perk that can help your company attract top talent and retain current employees.

“Floating holidays can be a huge perk for prospective employees,” Abrams noted. “You should include this information in job postings and onboarding documents alongside health insurance, retirement plans and other benefit information.”

Floating holidays encourage employees to take time off as needed and show you care about workplace mental health and work-life balance.

How to develop a floating holiday policy

Abrams said setting clear expectations is the key to developing a successful floating holiday policy. Your employees should know all your policy details before you implement it. Clearly outline policy guidelines, and encourage employees to take advantage of their time off. 

Abrams recommended holding a Q&A session about the policy and providing workers with a contact person to answer their questions. “Workers should feel empowered to take days off,” Abrams advised. “By failing to set the right expectations, employees may feel afraid to request time off or forget to use their floating holidays altogether.”

Because every team has different needs, a floating holiday policy should be unique to your business. However, there are a few standard steps every employer or HR manager can take to develop a successful floating-holiday policy.

Pearson created this five-step process for developing a floating-holiday policy:

1. Schedule your paid holidays. Determine which days the office will be closed and everyone will take off.
2. Select a number of floating holidays. Determine how many floating holidays the company will offer. Remember, these are paid days off when the office is open.
3. Set floating holiday parameters. Determine which days can be used as floating holidays and whether they can roll over to the following year. (Usually, they do not roll over.)
4. Create and distribute your time-off policy. Create a PTO memo that clearly defines holiday time, floating holiday time, vacation time and sick time. It should explain how employees will request the different PTO types. Add this policy to your employee handbook, and give the resource to all employees.
5. Set up different pay codes. A floating holiday may be full or partial pay.

Floating holiday FAQs

Here are answers to some of the most commonly asked questions about floating holidays:

When can an employee take a floating holiday?

Employees can take a floating holiday any day of the year or as otherwise outlined in their company’s floating holiday policy. For example, some companies make employees select from a list of floating holidays (e.g., Good Friday, Presidents Day, birthdays, and anniversaries). 

Can employees carry over unused floating holidays to the next year?

Unused floating holidays typically do not carry over to the following year. However, some employers pay employees for unused floating holidays when they leave the company. These requirements often vary by state and the conditions of each particular policy.

The specific guidelines for how floating holidays work are up to the employer (in accordance with state laws) and should be outlined in the floating holiday policy.

Do companies have to provide floating holidays?

No, companies are not legally required to include floating holidays in their employee benefits packages.

How important is it to keep track of floating holidays?

Keeping track of floating holidays is crucial for employee scheduling and payroll purposes. Keeping up-to-date records on which days each employee intends to use for their floating holidays helps ensure you have enough staff to keep your business running. It’s also essential for paying each employee accurately. 

Floating holidays work for everyone

Floating holidays are great for your business and your team. They’re an easy way to keep your company staffed at times of the year when it would normally close. Perhaps even more importantly, they respect your employees’ time-off needs on their culture’s most paramount occasions that aren’t federal or state holidays. 

Not every company offers floating holidays as a perk, so adding them can set your business apart. When you offer floating holidays, you immediately appeal more to future employees – and your entire current team.

Max Freedman contributed to this article. Source interviews were conducted for a previous version of this article.