A floating holiday is a paid day (or days) 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 religious and cultural holidays when the business is still open.
Download our floating holiday policy sample and modify it to fit your company’s needs:
Types of Floating Holidays
Most companies choose major holidays as the official holidays for the company, like New Year’s Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, and Christmas Day. Floating holidays, then, provide employees with the opportunity to fill in the gaps on other holidays that are important to them.
The typical types of floating holidays to include in your policy include the following:
- Cultural holidays
- Religious holidays
- Public holidays not included in current PTO policy
- Federal or state holidays not included in current PTO policy
- Other holidays not recognized by your company’s time off calendar
- Employee birthdays (although you may want to offer a separate PTO day for birthdays, instead of including these as a floating holiday)
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 paid floating holidays for actual holidays 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.
We recommend no more than four (4) floating holidays, one day per quarter. Floating holidays should also be prorated, so, for example, if a new employee starts in March, 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 | Can reduce employee morale and appear discriminatory if approvals are inconsistent |
| Attracts high-quality talent | Could leave you understaffed on popular holidays |
| Is a 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 |
A floating holiday policy can be an effective employee management tool, helping you attract and retain top talent without sacrificing your company’s growth and profitability. With it, you can show your employees you value their efforts for the company and prioritize their health and work-life balance. 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.
What to Include in Your Floating Holiday Policy Template
A well-designed floating holiday policy, in addition to your paid time off policy, should include clear guidelines and expectations. Make sure you state who’s eligible, how to request and use time off, and if there are any limitations. Using our template will give you a good start.
Include the following in your floating holiday policy example:
- Introduction: Include a paragraph at the top that states what the policy entails.
- Eligibility: Outline who is eligible to participate in the policy and how many floating holidays each will receive per year. You can choose to include both full-time and part-time employees in your policy.
- Approved Use: Explain what type of floating holidays are approved (religious, cultural, etc.)
- Limitations: If you have any limitations, include them here. For example, floating holidays do or do not roll over to the next year. If floating holidays are accrued, make that clear in your policy.
- Payout: Check your state’s laws regarding time off, so you will know if you must pay out unused floating holidays.
- Blackout dates: Your policy should include any dates that are unavailable for paid time off so there are no discriminatory reasons an employee cannot take time off.
- Request & Approval: Notify employees how to request a floating holiday and what the approval process entails.
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 paid floating holidays.
Embrace Diversity
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.
Keep the Policy Legal
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 antidiscrimination laws.
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. Laws to keep in mind are as follows:
- Title VII of the Civil Rights Act of 1964: This protects employees from discrimination, such as race, age, religion, and natural origin.
- California Rollover and Payout Law: In California, unused PTO and floating holidays roll over from year to year and must be paid out if an employee leaves the company.
- Employment Contracts: If you have a contract with an employee that mentions the inclusion of certain holidays, then you must abide by the language in your contract.
Be Consistent
Another policy adds to your administrative tasks. Therefore, it will 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 may be forced to deny some requests or operate with reduced staffing.
Frequently Asked Questions (FAQs)
Floating holidays are technically a type of PTO. It is an opportunity for your employees to celebrate their choice of holidays with a paid day off. A floating holiday can be an observance of any holiday that is not officially part of the company’s paid holidays.
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. Make sure this fits your employee’s home state’s labor laws, as some states no longer allow use-it-or-lose-it time off policies.
No. Since the policy in place for floating holidays should stipulate that they be requested in advance, they cannot be used in lieu of a sick day. Plus, in some states, you are required to allot a certain number of sick specific days and track them.
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.
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
Many businesses offer floating holidays, 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.
