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Should You Offer Floating Holidays?

Skye Schooley
Skye Schooley
Staff writer

Learn what a floating holiday is and how it can benefit your company.

  • A floating holiday is a paid day off that an employee can take at any time during the year (as outlined in their floating-holiday policy).
  • Floating holidays can help your company promote diversity and inclusion, improve employee satisfaction, and attract and retain top talent.
  • Before you implement your policy, make sure to define your floating-holiday parameters and explain the policy to your employees.
  • This article is for small business owners and HR managers who want to know what floating holidays are and how to implement them.

One of the best ways to attract and retain top talent is by offering a comprehensive employee benefits package. Although there are some employee benefits you must offer, there are several other benefits you can choose to provide as a way to set your business apart from the competition.

For example, one lesser-known perk that may improve your benefits package is a floating holiday. There are a few parameters and guidelines to be aware of before you offer a floating holiday to your employees. To determine if this perk is right for your business, it is important to understand what a floating holiday is, what the benefits are and what to consider when developing a floating-holiday policy.

What is a floating holiday?

A floating holiday is a day of paid time off (PTO) that an employee can use in addition to their vacation time, sick leave or other PTO during the calendar year. An employer can either offer a floating holiday as a substitute for an unobserved public holiday or let the employee choose which day of the year they want to take off.

In option one, the employer creates a list of holidays for which the company doesn't currently offer paid time off, and the employee chooses their floating holiday from that list (e.g., Good Friday, Black Friday, Christmas Eve). In option two, the employee chooses any day of the year to use their floating holiday.

Employees are typically eligible to use their floating holiday immediately, which often isn't the case for other types of PTO that may require accrual.

Key takeaway: A floating holiday is an extra day of paid time off that an employee can use in addition to their vacation and sick time.

Why should your company offer a floating holiday?

Floating holidays are advantageous for both businesses and employees. Here are some of the benefits:

1. It can keep your business running during the holidays.

Some businesses automatically give their employees time off during certain holidays, which may fall in line with some companies' busiest seasons. Instead of losing out on revenue, companies can offer floating holidays to allow some employees to take time off while continuing to keep the business open during that time. This type of policy is beneficial for both your business and your employees.

"This is a nice policy, specifically for people who do not celebrate Christmas or don't travel for Christmas, because they can choose when to use their holiday time," Alison Pearson, head of human resources for Hal Waldman and Associates, told Business News Daily.

Keep in mind that you may have to set floating-holiday restrictions on how many employees can take off the same day.

2. It can reduce administrative burdens.

Choosing an inclusive holiday schedule that accommodates every employee can be taxing. To minimize these scheduling issues, you can offer floating holidays. This allows you to choose which primary public holidays you want to include in your standard PTO policy and lets your employees choose which other holidays work best for them.

3. It gives employees more flexibility and a better work-life balance.

Everyone loves taking PTO, but not everyone's life fits neatly into the same time-off schedule. Instead of forcing employees to take days off during a time they would rather be working (and vice versa), a floating holiday schedule gives employees flexibility, which can reduce stress and improve work-life balance.

"Many employees use floating holidays in tandem with other vacation days to maximize their PTO," said Chris Abrams, founder of Abrams Insurance Solutions. Floating holidays "don't pigeonhole employees into taking days off" when they are overloaded with work, he said.

Floating holidays can also be especially helpful for working parents who need to stay home with children during certain days throughout the year.

4. It builds an inclusive work culture.

Creating a diverse and inclusive workplace is at the top of many organizations' to-do lists, and for good reason. Diversity and inclusion efforts can help improve employee performance, satisfaction and retention. Adding a floating holiday to your employee benefits plan is a great way to support those initiatives. There are many religious and cultural celebrations that most organizations don't recognize as paid holidays, and floating holidays allow employees to observe the celebrations that matter to them.

"Using floating holidays is a great way to be more inclusive," Abrams said. "An employee may prefer to celebrate a religious holiday that isn't part of mainstream culture."

5. It helps attract and retain top talent.

A floating holiday is an inexpensive and desirable benefit that can help your company attract top talent and retain current employees.

"Floating holidays can be a huge perk for prospective employees," Abrams said. "You should include this information in job postings and onboarding documents alongside health insurance, retirement plans and other benefit information."

Instead of giving employees all of the paid holidays you think they want, you allow them to take off the time they need. This benefit encourages employees to take time off as needed, and it shows that you care about their mental health, culture and work-life balance.

Key takeaway: Including floating holidays in your benefits package can increase revenue, reduce scheduling problems, improve employee work-life balance, promote an inclusive workplace, and help you attract and retain top talent.

How to develop a floating-holiday policy

Abrams said the key to developing a successful floating-holiday policy is to set clear expectations. Your employees should know all of the details of your policy before you implement it. Be sure to clearly outline the guidelines for how the policy works, and encourage employees to take advantage of it. Abrams recommended holding a Q&A session about the policy and providing workers with a contact person to answer their questions.

"Workers should feel empowered to take days off," Abrams said. "By failing to set the right expectations, employees may feel afraid to request time off or forget to use their floating holidays altogether."

Because every team has different needs, a floating-holiday policy should be unique to your business. However, there are a few standard steps that every employer or HR manager can take to develop a successful floating-holiday policy.

Pearson created this five-step process for developing a floating-holiday policy:

  1. Schedule your paid holidays. Determine which days the office will be closed and everyone will take off.

  2. Select a number of floating holidays. Determine how many floating holidays the company will offer. Remember, these are paid days off when the office is open.

  3. Set floating-holiday parameters. Determine which days can be used as floating holidays and whether they can roll over to the next year. (Usually, they do not roll over.)

  4. Create and distribute your time-off policy. Create a PTO memo that clearly defines holiday time, floating holiday time, vacation time and sick time, and explains how employees will request the different types of PTO. Add this policy to your employee handbook, and give the resource to all employees.

  5. Set up separate pay codes. A floating holiday may be full or partial pay. 

Key takeaway: Set the parameters and guidelines for your floating-holiday policy, add it to your employee handbook, discuss it with your employees and set up pay codes.

Floating holiday FAQs

When can an employee take a floating holiday?

Employees can take a floating holiday any day of the year, or as otherwise outlined in their floating-holiday policy. For example, some companies make employees select from a list of floating holidays (e.g., Good Friday, Presidents Day, birthdays, anniversaries). 

Can employees carry over unused floating holidays to the next year?

Unused floating holidays do not typically carry over to the next year. However, some employers do pay employees for unused floating holidays when they leave the company. However, these requirements often vary by state and the conditions of your particular policy.

The specific guidelines for how floating holidays work are up to the employer (in accordance with state laws) and should be outlined in the floating-holiday policy.

Do companies have to provide floating holidays?

No, companies are not required by law to include floating holidays in their employee benefits packages.

How important is it to keep track of floating holidays?

It is very important to keep track of floating holidays for employee scheduling and payroll purposes. Keeping up-to-date records on which days each employee intends to use for their floating holidays helps you ensure that you have enough staff to keep your business running and that you pay each employee accurately. Many time-and-attendance software systems allow you to track employees' floating holidays.

Image Credit: fizkes / Getty Images
Skye Schooley
Skye Schooley
Business News Daily Staff
Skye Schooley is a staff writer at business.com and Business News Daily, where she has written more than 200 articles on B2B-focused topics including human resources operations, management leadership, and business technology. In addition to researching and analyzing products that help business owners launch and grow their business, Skye writes on topics aimed at building better professional culture, like protecting employee privacy, managing human capital, improving communication, and fostering workplace diversity and culture.