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Floating holiday FAQs: What is it, policies, PTO and more


Is a floating holiday really necessary to attract and retain top talent – especially if you already offer a robust benefits package?

Maybe. And maybe not. Like most things in life, there are numerous variables to consider before you decide.

That’s because there are many different ways to offer floating holidays to employees. And depending on the way you proceed, the outcome could be extremely rewarding or backfire on you as a business leader.

Do you decide the holidays that can be taken off, or do your employees decide? If employees don’t take the holiday during a calendar year, can they carry it over to the next one? Do you track floating holidays the same way you track PTO?

These are all valid questions that will arise when you consider adding a floating holiday to your employee benefits package. Keep reading to get practical answers to some of your most pressing questions around floating holidays, including these frequently asked ones.

1. What exactly is a floating holiday?

A floating holiday is a benefit some employers offer employees in addition to vacation or PTO. Typically, it’s a paid day off that is sometimes offered as a substitution for a public holiday. However, unlike a public holiday, a floating holiday may be used at an employee’s discretion, taken on a day they choose.

2. Why should you consider offering a floating holiday?

One of the biggest reasons business leaders may want to offer a floating holiday is to embrace diverse cultures or religious beliefs.

There are plenty of employees who observe holidays that aren’t part of the mainstream culture. By offering floating holidays, employers can give their staff the option of observing religious holidays that may not be included on the company holiday calendar.

In addition, floating holidays allow employees to observe public holidays, like Martin Luther King Jr. Day or Presidents’ Day, if your business doesn’t already commemorate them with paid time off. Some companies even offer birthdays as a floating holiday.

And although you’re under no sort of Fair Labor Standards Act (FLSA) obligation to provide a floating holiday for your employees, your team may feel more valued when you provide flexible options like this. Plus, it allows them to preserve more of their PTO for vacation, sick days or other personal needs.

3. Does it work just like PTO?

On the surface, a floating holiday may seem exactly like PTO, since it’s a day (or days) an employee doesn’t have to work. However, it’s a bit of a hybrid between an actual holiday, such as Christmas or the Fourth of July, and PTO. And that’s where it can get a little tricky.

For instance, when a floating holiday is not tied to a specific event, you’d have to pay it out upon termination in accordance with applicable state law and your PTO policy. (Keep in mind, not every state requires you to pay out PTO, so it’s important to stay up to date on any state laws that may apply.)

On the flip side, if the floating holiday is tied to a specific holiday, e.g. Christmas Eve, then an employee who terminates her employment in July is not entitled to payout for Christmas Eve. Why not? Because her right to pay for Christmas Eve was tied to, and conditioned upon, her employment through Christmas Eve.

4. How do you define expectations?

Employees should have a clear understanding of what they can expect when it comes to floating holidays. Can they just choose any day on their own? Or, are some days already designated.

For instance, let’s assume the Fourth of July is on a Thursday. Your employee may decide to take the following day – Friday, July 5 – as a floating holiday to give them a long weekend off. Or, Christmas could fall on a Tuesday, and you may offer Monday (Christmas Eve) as a floating holiday.

It simply comes down to what makes the most sense for your business in a calendar year.

Different businesses have different circumstances and needs. If you’re a manufacturer, for example, and your plant needs all hands on deck to keep up with demand during your peak period in November, you can’t have everybody on the front lines taking the day after Thanksgiving as a floating holiday. You’ve got to have all shifts covered.

You’ll need to consider factors like these before deciding whether a floating holiday will work for your company. Whatever you decide, just be sure to communicate it clearly in your employee handbook and PTO policy.

5. What are some disadvantages of offering floating holidays?

Inconsistency in your process can have an unfavorable effect. For instance, in the example above of the manufacturing plant, it may be necessary to request that frontline employees stagger any floating holidays they take after a company-observed holiday so that someone from the team is always onsite.

Although this makes sense for the business, it could be perceived as unfair by the frontline employee who ends up having to work the day after Thanksgiving or on Christmas Eve. So, you’ll have to figure out how to be fair and still take care of business if you decide to offer floating holidays.

Another disadvantage was briefly mentioned in FAQ No. 3: You may get stuck paying an employee for unused floating holidays – if you don’t designate specific dates for them to be used and the employee leaves your company before using them.

As an example, let’s say you offer employees six company-paid holidays – including Memorial Day, as well as a floating holiday – and one of your employees quits the day before Memorial Day.

That employee wouldn’t get paid for Memorial Day and probably wouldn’t be expecting to get paid for it since they quit the day before. But in this scenario, in some states, a floating holiday could still be owed to the employee if they hadn’t already used it.

6. Can floating holidays be carried over from year to year?

This decision is up to you, the business leader. You can write your own policy, as long as it complies with state laws.

For instance, in California, some employers follow a maximum of two floating holidays annually. This means employees can accrue two, and if they don’t use them by the end of the year, they don’t lose them – but they can’t accrue any more either.

7. How should you set it up?

Again, this is totally your call. Some companies create a floating holiday process that works like a menu. The menu includes a list of holidays or public observances that the company doesn’t otherwise provide holiday pay for, and then leaves it up to employees to choose.

For example, if your company doesn’t include Good Friday on its holiday calendar, employees who celebrate this particular day as part of Easter could make it their floating holiday. Your list of available options for floating holidays may even extend to bank holidays, school holidays, birthdays and more.

8. How important is it to keep track?

You can’t just tell employees they’ve got a floating holiday and then expect it to work on auto-pilot. It does require some maintenance and monitoring.

As with PTO or company-paid holidays, it’s important to keep track of any time off for both scheduling and payroll purposes. Otherwise, your office may look like a ghost town in the middle of your busiest season. (Remember the example of the manufacturing plant in FAQ No. 4?)

Or, you could end up with a payroll nightmare if you’re not keeping accurate records of actual hours worked and taken off. If you have a good time and attendance system, it should be easy enough to track floating holidays just like you probably already do with vacation, sick time and company holidays.

Consistency and communication are key

Floating holidays can be a viable option for businesses that want to provide their employees with an additional “time off” benefit. The most important thing is to be consistent and communicate your expectations clearly. Having a good policy is vital to everyone understanding and doing what’s expected of them. It keeps employees happy and your business on track.

Want more insight on how to provide a benefits package that will attract and retain the best and brightest job candidates? Download our free e-book: The Insperity guide to employee benefits.