While companies have long understood the value of providing ample vacation time to their employees, they’re increasingly offering a floating holiday, a type of PTO that can help attract and retain top candidates, improve team morale, and make the workplace more inclusive.

There’s no shortage of benefits you can offer your employees, but the best are the ones that give your staff what they value the most. And just like in all times of the past, what employees of all ranks and ages value today is time off to spend with their families, take a trip, or just have a much-needed day of rest at home.

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What is a Floating Holiday?

It’s easy to misunderstand the floating holiday meaning and separate it from other kinds of paid time off. It sounds so similar to vacation time that companies often group them together, but there are some key differences.

A floating holiday is an employee benefit similar to a “personal day” or personal time off. It is a day off that employees can take at their discretion. Staff members can use a floating day for whatever reason they see fit so long as they give sufficient notice. This day won’t up their vacation time or other types of paid time off, such as sick leave.

It’s a benefit that provides your employees with an added dose of flexibility in their schedule, which all workers value but is of greater importance to younger workers. According to a study conducted by Harris Poll, millennial employees would take a pay cut, change jobs, and give up a promotion to have greater control over how they spend their time. That’s an impressive commitment to flexibility! And one that all companies should keep in mind.

Floating Holiday vs PTO

A key difference between a floating holiday vs PTO is how they’re both accrued. Unlike vacation time, which is typically connected to the amount of time an employee has worked for the company, floating holidays are provided as an immediate benefit that any staff member can use, regardless of how long they’ve worked for the company.

And while vacation time usually rolls over from one year to the next, floating holidays usually reset each year. However, this is something you can decide when you’re putting together your policy.

Floating Holiday Meaning: How Do Floating Holidays Work?

Floating holidays are a perk that can attract the best candidates. But they also communicate a broader message about your company’s commitment to diversity and inclusion — and not just in a symbolic way, but in a “we recognize and value your needs, here’s a paid day off” way.

Suppose you have employees who observe holidays and other days of importance that fall outside of the United States’ official holidays. In that case, a floating holiday will allow them to celebrate those days without using up their vacation time.

For example, without a floating holiday policy, Muslim employees might have to use up one of their vacation days to celebrate Eid Al-Fitr, one of the most important dates in the Muslim calendar. A Christian employee could observe Christmas Day because that’s a national holiday and still retain all of their vacation time.

In this sense, floating holidays function to honor and celebrate the diversity of your workplace and to recognize that not everyone’s needs are in tune with the observed holidays of the United States.

This type of paid time off doesn’t just boost your company’s inclusivity credentials and reflects a commitment to your employee’s work/life balance. It also develops the level of trust between employer and employee, since it shows you have faith that your staff knows how to use their free time better than you do.

Floating Holiday Policy: How to Set One Up

If you’re thinking about initiating floating holidays at your business, then you’ll need to develop a robust floating holiday policy. Doing so will make it easier to manage on your end and produce less confusion on your employee’s side. While floating holidays have been around for a while, they’re still relatively obscure.

That’s why it’s important to clearly state your company’s floating holiday rules: what they are and how they can be used will make it easier for everyone. This will also prevent 100 “what does floating holiday mean?” emails coming your way.

So what should your policy include? Let’s take a look.

When Can an Employee Use a Floating Holiday?

Since this is a benefit that gives employees greater flexibility over their schedules, most companies don’t have any blackout dates when a day may not be used (since that kind of goes against the whole point of offering the benefit in the first place).

However, this approach isn’t appropriate for all employers. You may decide to restrict floating holidays during especially busy working periods. If you choose to have one or two restrictions, clearly communicate what they are in your policy.

Who is Entitled to Floating Holidays?

All employees should be entitled to floating holidays, but you may want to make some caveats in your policy. For instance, if a new employee begins in the second half of the year, they may only be entitled to one day that year. If they start in the first half of the year, then they will have two.

How Should Employees Schedule Floating Holidays?

Your primary motivation is to create a perk for your employees. However, you’ll also need to think about keeping your business operations at full speed, too. In your policy, communicate how much notice must be given in advance of the time off. Since this is all about flexibility, it’s best not to have too many requirements; a few days or more should be fine.

There are a few options to consider that can help you keep track of paid time off requests. Using an excel PTO tracker can help you to manage different types of time off requests coming your way. Additionally, a PTO accrual calculator is a useful tool to make sure all PTO is accounted for.

The easiest and most straightforward route is using PTO tracking software. With time off management software, you can clearly visualize who will be out of the office and when. This will save you hours of hassle, confusion, and unnecessary paperwork.

How Many Floating Holidays Will You Provide?

It’s important to remember that the needs of every business are different. There are no legal requirements, and like unlimited PTO vacation policies, this is something that you’ll develop in-house. The vast majority of companies that have a floating holiday policy offer two a year, according to a 2018 SHRM report.

Do Floating Holidays Carry Over?

Most companies don’t roll their floating holidays. If you offer two floating holidays in 2022, the employee will also have two the following year. This is regardless of how many they have already used. If the employee still has one floating day remaining at the end of the year, you can pay them for that day.

Floating Holidays in California

In the US, laws governing PTO differ from state to state. In most states, the employer dictates their floating holiday policy, not the law. However, that is not the case in California, which has its own rules.

According to the California Division of Labor Standards Enforcement, a floating holiday in California is the same as vacation time. As such, the laws that apply to vacation time also apply to floating holidays. Any unused floating holiday days must roll over from one year to the next.

Further, businesses must pay them out if the employee leaves the company. This law does not apply to floating holidays tied to a specific date, such as a holiday, cultural event, or employee’s birthday. In this case, the employer is not required to roll over or pay out any unused days.