Redefining Time Off: How Floating Holidays are Shaping the Workplace

By Mariah Collins, SHRM-CP on Sep 06, 2023
5 min read 0 comment(s)

Share this:

what is a floating holiday

Navigating the modern world of employee benefits can sometimes feel like sailing in uncharted waters. Among the various offerings, one phrase has been making waves lately: floating holidays.

But what is a floating holiday exactly? How does it differ from traditional paid time off (PTO)? And why should businesses consider offering them?

In this post, we'll dive deep into floating holiday pay, the advantages of this flexible benefit, potential pitfalls and key considerations for employers aiming to craft a balanced and attractive floating holiday policy.

What is a Floating Holiday?

A floating holiday is an additional paid day that employees can take away from work. This benefit option allows employees to choose one or more days in a calendar year to request off work at their own discretion.

For example, a person who doesn’t celebrate traditional American holidays could take an alternative day off and receive pay. Offering this benefit to your employees helps to support diversity and inclusion by recognizing the importance of other cultural traditions. It can also improve morale around the office.

RELATED: How to Deny an Employee Vacation Request >>

Other Benefits of Floating Holiday Pay

Employers are not subject to any mandates that require them to offer this benefit, but they may want to consider doing so because it allows employees to:

  • Celebrate official but unpaid holidays

    Provides employees with the ability to take work off for unpaid holidays, like Vereran's Day or Martin Luther King, Jr. Day, without using traditional PTO days.
  • Extend vacation time

    Allows employees to extend vacation time by allowing more paid days away from work.
  • Preserve their PTO hours

    Makes it possible for employees to preserve their PTO hours to use for the care of a sick child or other personal needs.
  • Have more flexibility 

Provides employees the flexibility to pursue their own interests, such as volunteering in the community.

What's more, it actually may create a more favorable impression of you, the employer.

Potential Drawbacks of Floating Holidays

  • Perceived fairness 

    Perceived fairness is something employers always need to consider carefully before introducing any new benefit. For example, several employees may want to use their floating holiday for the day before or after an officially recognized holiday. That may not be possible for companies that require daily staff coverage in certain departments. Employees in those departments may not feel the benefit is of equal value to them.
  • Equitable system

    Companies that decide to implement floating holiday pay need to develop an equitable system to determine who gets first priority to use the additional time off if multiple people request the same day.
  • State requirements for payment of unused time

    Another potential downside to offering this benefit is that, under certain circumstances, some states require employers to pay unused floating holiday time when an employee exits a company.

RELATED: 6 Ways to Effectively Manage Vacation Requests >>

5 Employer Considerations When Implementing a Floating Holiday Policy

Taking the process from idea to implementation requires a careful review of several factors to ensure the policy is right for everyone. Below are the key considerations for employers aiming to craft a balanced and attractive floating holiday policy.

  • How many days should each employee receive?

    Employers should determine how to fairly distribute floating holidays among employees according to their start date.
  • Do floating holidays need to be used during the same calendar year or can they carry over and accumulate?

    While each employer is free to set its own floating holiday policy, they may want to avoid allowing employees to carry unused days over for several years and then add them to PTO for extended time off. 

    If employees having extended time off would be a challenge for your business, the easiest solution is to require employees to use their floating holidays the same year of issue. 

    Another solution is to agree to pay unused days out at termination to avoid paying for an extended time away from work, such is the case when combining PTO with floating holiday pay.
  • Will there be restrictions?

    Some employers are completely flexible on when workers use this benefit while others limit it to certain days. The employee’s birthday and official but non-paid holidays are common examples of when an employer may decide to restrict this benefit's use to certain times.
  • What is the best way to establish floating holidays in the payroll system?

    Payroll representatives will need to adjust the current time and attendance system to include floating holidays, along with sick time, vacation time and general PTO. Department managers also need to track each employee’s time away from work in every category to ensure nobody abuses the system and that employees know how much time they have available.
  • What will the process be to request a floating holiday?

    Businesses need to include details on the process of using a floating holiday in their policy. This should include information on how many days in advance the request must be made and whether they need verbal or written approval from their manager.  

Above all, employers must remember that fairness and consistency are key to receiving employee buy-in on floating holiday pay procedures.

RELATED: Why Employers Should Support Time Away From Work >>

Floating Holiday vs PTO

Understanding the difference between a floating holiday vs PTO can be tricky to explain to employees. Floating holidays fall somewhere between an actual observed holiday and PTO.

Companies that do not require employees to use their floating days for any specific event would need to pay out unused days upon employee termination. They would not need to do this if company policy ties floating days to holidays such as Christmas Eve or the day after Thanksgiving.

After going through the advantages, disadvantages and considerations of offering this benefit, the next step is to put the new policy into writing and communicate it to employees. Employers should allow adequate time for employees to ask questions to ensure company-wide understanding of the new policy.

Axcet HR Solutions: Your Employee Benefits Experts Since 1988

In the evolving landscape of workplace benefits, floating holidays emerge as a versatile tool that can boost employee morale and flexibility. However, like any policy, its success lies in the details of its implementation. It's essential for businesses to weigh the benefits against potential disadvantages and craft a policy tailored to their unique workforce.

Should you have any questions or need guidance on establishing a policy that works best for your organization, the HR experts at Axcet HR Solutions are here to assist. Reach out to us today to ensure your team enjoys the balance and flexibility they deserve.

PEO small business employee benefits

Get HR Updates

Table of Contents

Hybrid Work: A Fleeting Fad or a Fixture in Our Future?

hybrid work model
HR certifications

Setting Standards: Why HR Certifications Set PEOs Apart

Let us know what you think...