What Is a Floating Holiday? [+ Free Policy Template]
Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll.
A floating holiday is an extra paid day off for employees outside the traditional allotment of paid holidays. Unlike those traditional holidays, which are set by the company, floating holidays are more flexible and can be used to accommodate individual needs and preferences. Companies often offer it as a way for employees to take time off on birthdays or religious and cultural holidays when the business is still open.
Many businesses offer floating holidays (48% is a popularly reported stat), but federal law does not require you to offer employees any time off. So, providing that perk is solely at your discretion; however, including a floating holiday policy in your small business’s benefits package can help you attract and retain top talent in your industry.
You can use our floating holiday policy template and modify it to fit your company’s needs:
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What Holidays to Float & How Many to Offer
Your small business can choose major holidays (New Year’s Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, and Christmas Day) as the official holidays for the company. Meanwhile, floating holidays will provide employees with the opportunity to fill in the gaps on other holidays that are important to them. As a result, you won’t have to come up with a long list of holidays your company will observe, but rather let your employees decide what works best for them.
In your floating holiday policy, you will want to provide a list of eligible holiday types. This may include:
- Employee birthdays
- Immediate family members’ birthdays
- Cultural holidays
- Religious holidays
- Other holidays not recognized by your company’s time off calendar
Keeping the list of holidays short but broad gives your team the ability to use their floating holidays as they see fit while still keeping it within reason. Ultimately, it’s up to you to determine acceptable reasons for taking a floating holiday.
Limiting the number of floating holidays an employee may take is important. We recommend four floating holidays, averaging one day per quarter, although they will be given in bulk at the start of the year. Floating holidays should also be prorated—if a new employee starts in March, for example, their floating holiday allotment would be three.
Pros & Cons of Floating Holidays
| PROS | CONS |
|---|---|
| Improves diversity and inclusion | Adds administrative burden |
| Boosts employee retention and satisfaction by enhancing work-life balance | If approvals are inconsistent, it can reduce employee morale |
| Attracts high-quality talent | Could leave you understaffed on popular holidays |
| Good compromise for holidays when your business stays open | To combat scheduling issues, not all requests can be approved |
| Gives employees freedom to choose the holidays that matter most to them | Some state laws may require you to pay out unused days |
Even if you have an existing PTO policy, consider adding a floating holiday policy to embrace diverse cultures and religious beliefs. Offering floating holidays allows your employees to celebrate special cultural days, which may not be included on your company’s calendar of days off.
Floating holidays can also provide an acceptable compromise for those federal holidays on which you’ve chosen to keep your business open. Employees for whom the holiday is meaningful can take off while other employees keep your business open, functional, and revenue-generating.
On the flip side, another policy does, of course, add to your administrative tasks. Managing floating holiday requests and ensuring compliance with applicable laws and regulations can be cumbersome and time-consuming. It will also be important for managers to be as consistent as possible in approving floating holiday requests to avoid hurting employee morale or putting the company in legal jeopardy. If too many employees request the same holiday off, you will be forced to deny some requests or operate with reduced staffing. Lastly, some states (like California) may require you to pay out unused floating holidays.
Tips for Setting Up Your Policy
You have almost limitless control over how you set up your floating holiday policy—although it should not be complex. Keep it straightforward, so there’s no confusion about how and when employees can use floating holidays.
Don’t List Actual Days in the Policy
Instead of listing out what specific days an employee can use their floating holiday leaves, provide a general list, like the one we included earlier in the article. This will ensure you don’t violate anti-discrimination laws. Also, check your state’s laws regarding time off, so you will know if you must pay out unused floating holidays.
Indicate the Limitations in Your Policy
As we noted earlier, you should limit the number of floating holidays you grant each year and note that in the policy. Additionally, don’t allow employees to take too many floating holidays at one time. Employees should only use floating holidays for actual holidays, family events, or days connected to a holiday (the day after Thanksgiving or Christmas Eve, for example). In most cases, this will limit the use of floating holidays to just one day at a time, though employees can use general PTO to make for longer periods of time off.
There are situations where two consecutive days may be appropriate. If an employee and their spouse have birthdays on consecutive days, you could allow your employee to take two floating holidays—one for their birthday and one for their spouse’s. While not technically a holiday, letting employees use a floating holiday for their birthday or a similar family event would be acceptable use.
Establish an Approval Clause
Your policy should also state that a request does not guarantee approval. As a small business, you have many competing factors to consider when determining whether to grant a request for a floating holiday.
You may want to consider using time tracking software to record how many floating holidays each employee has taken and ensure they don’t take more than their allotment. If you don’t think software is right for you, then check out our in-depth guide to tracking employee time for other options.
Floating Holiday Policy Frequently Asked Questions (FAQs)
A well-designed floating holiday policy should include clear guidelines and expectations. Make sure you state who’s eligible, how to request and use, and if there are any limitations. Using our template will give you a good start.
Floating holidays are technically a type of PTO. However, there are differences between floating holidays and general paid time off. Some companies offer PTO that increases with an employee’s years of service, whereas a set number of floating holidays are offered to all employees. Additionally, PTO often accumulates as the year progresses, while floating holidays are given at once at the beginning of the year.
Yes, you can—but you should do what’s best for your company and employees. If you already have an attractive PTO policy, and you’re offering a few days of floating holidays, then consider a use-it-or-lose-it policy for the floating holidays. This way, you won’t have people accruing weeks upon weeks of time off. If you have remote employees, make sure this fits with their home state’s labor laws, as some states no longer allow use-it-or-lose-it time off policies.
You could, and this definitely has its advantages. Adding more PTO days instead of implementing a floating holiday policy can be a more straightforward solution. There’s less administrative burden, as you already have an existing PTO policy, and there’s consistency across employees. However, depending on your organization’s specific needs and desires, a floating holiday policy may still be the best option for meeting your priorities.
Your floating holiday policy needs to be like all your other policies and compliant with labor laws, both federally and in the state where your employees work. The big items to keep in mind are:
- Non-discrimination
- Overtime
- Accrual and payout
- Notice and blackout dates
Yes. Like any other type of time off, you should track how many days employees have available and how many days they’ve used. In the event of a dispute about floating holidays, you’ll have detailed records to back you up.
Bottom Line
You can show your employees you value their efforts by offering floating holidays in your benefits package. Providing this on top of PTO allows your team members to preserve PTO for truly rejuvenating time off while still taking paid days off for holidays that have special meaning to them. This can be an effective employee management tool, helping you attract and retain top talent without sacrificing your company’s growth and profitability.
