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 a leave benefit offered to employees above and beyond any paid time off (PTO), vacation, or sick leave. It is often offered as a way for employees to take time off on special occasions such as birthdays or religious and cultural holidays, when the business may still be open. Employees appreciate floating holidays because they have nearly full discretion about when to use the time without cutting into their PTO bank.
Floating holidays, just like PTO, are solely at your discretion. There is no federal law requiring you to offer employees any time off. However, you can attract and retain top talent in your industry by including a floating holiday policy in your small business’ benefits package. If you decide to implement a floating holiday policy, you can use this 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. Floating holidays, then, 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.
You will want to provide a list of the types of holidays that are eligible. They may include:
- Employee birthdays
- Immediate family member birthdays
- Cultural holidays
- Religious holidays
- Other holidays not recognized by your company’s time off calendar
By keeping the list of holidays short but broad, you give your team the ability to use their floating holidays as they see fit.
It is important to limit the number of floating holidays an employee may take. We recommend four floating holidays, essentially averaging one day per quarter, although they will be given in bulk at the start of the year. Floating holidays should be prorated, so, for example, if a new employee starts in March, their floating holiday allotment would be three.
Floating Holidays vs PTO
Floating holidays are similar to PTO, but there are key differences. Some companies offer PTO that increases with an employee’s years of service, whereas there are a set number of floating holidays offered to all employees regardless of tenure. Additionally, PTO often accumulates as the year progresses, while, as mentioned above, floating holidays are given at once at the beginning of the year. Floating holidays also reset every year, regardless of how many days the employee used; some PTO policies, on the other hand, allow for rollover of all or a portion of unused PTO.
Differences aside, PTO and floating holidays can work together to provide an attractive work-life balance benefit for employees. By offering floating holidays on top of PTO, your team can preserve PTO for truly rejuvenating time off. This can be an effective employee management tool, letting them take paid days off for holidays that have special meaning to them without cutting into the PTO they may be saving for longer vacations.
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 gives your employees the option 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. It will also be important for managers to be as consistent as possible in approving floating holiday requests to avoid hurting employee morale. 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.
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 simple and straightforward so there’s no confusion about how and when employees can use floating holidays.
Don’t list actual days when providing a list of holidays, but rather a general list like the one we included earlier in the article. This will ensure you don’t violate anti-discrimination laws. Be sure to check your state’s laws regarding time off, so you will know if you must pay out unused floating holidays.
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 (day after Thanksgiving, Christmas Eve). In most cases, this will limit the use of floating holidays to just one day at a time.
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 similar family event would be acceptable use.
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.
Consider time tracking tools to record how many floating holidays each employee has taken and ensure they don’t take more than their allotment.
Bottom Line
You can show your employees you value their efforts by offering floating holidays in your benefits package. By offering a competitive and above-average time off benefit, your small business will also be able to attract and retain top talent without sacrificing your company’s growth and profitability.
