What Is a Floating Holiday and Why Do Companies Offer Them?

Today's diverse workforce brings a richness of cultural and religious traditions that don't always fit neatly into a predetermined schedule. As a result, many organizations are growing away from cookie-cutter holiday calendars.

Enter floating holidays. This benefit enables a more customized approach to time off. They can allow companies to better support DEIB and flex work, but — of course — every PTO policy has its pros and cons. 

If you’re trying to decide if floating holidays will work for your organization, this breakdown can fill you in on all the details you need to evaluate this option. 

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What is a Floating Holiday?

A floating holiday is a type of paid time off that allows employees to choose when they take a day off within a certain timeframe, rather than being tied to fixed, predetermined holidays. Unlike traditional holidays like Christmas or New Year's Day, which are set on specific dates, floating holidays offer flexibility and customization to employees.

When creating a corporate holiday PTO plan, considering floating holidays helps acknowledge the diverse needs of a modern and multicultural workforce. They enable employees to celebrate holidays or special occasions that are personally significant to them, whether it's a religious observance, a cultural festival, or a family tradition. Floating holidays also empower employees to better manage their time and prioritize what matters most to them outside of work. Offering PTO benefits like floating holidays and flexible parental leave can be a way for organizations to improve on employee wellness.

How are Floating Holidays Different from PTO?

Floating holidays and paid time off (PTO) are both forms of paid leave, but they have distinct differences. In a nutshell, floating holidays are flexible, pre-allocated days off often used for cultural or personal observances. On the other hand, PTO is a reserve of leave days that employees accrue and can use for various purposes.

Flexibility vs Fixed Days:

Floating holidays are flexible days off that employees can choose within a defined range of dates. They are often used for personal or cultural observances. On the other hand, PTO is a bank of leave days that can be used for any purpose, including vacation, illness, or personal time. PTO is also typically accrued over time.

Accrual vs. Pre-allocated

Another primary difference is how these days of paid leave are used. Floating holidays are often pre-allocated to employees at the start of the year or after a certain period of employment. In comparison, employees accrue PTO over time based on their length of service or company policy.

Approval and Notice

Floating holidays and PTO may differ in scheduling, too. Floating holidays usually require advance notice for scheduling to ensure minimal disruptions to workflow and adequate coverage, though some short notice is not unheard of. It’s more common, however, for PTO to be used on shorter notice and is more adaptable for unplanned absences.

There are key benefits of PTO and floating holidays, but both contribute to work-life wellness. Floating holidays are ideal for celebrating specific cultural, religious, or personal events that fall outside the standard holiday calendar. Paid time off is more versatile and can be used for vacations, sick days, personal time, or any situation where an employee needs paid time off.

The Pros and Cons of Floating Holidays

Pros

Employees aren’t the only ones who can benefit from floating holidays. Here’s what employers can gain with this policy.

Improve Diversity and Inclusion

Floating holidays allow employees to celebrate their own cultural or religious holidays that may not be recognized as official company holidays. This demonstrates respect for the diverse backgrounds and beliefs of the workforce, promoting an inclusive atmosphere. When employees feel that their cultural or religious observances are respected and accommodated, they are more likely to be engaged and committed to their work. Employers that prioritize diversity and inclusion practices like this can often improve morale and avoid marginalization in the workplace.

Boost Productivity and Work-Life Balance

Floating holidays offer employees the flexibility to schedule time off when they need it most. This ability to take breaks at their discretion helps in reducing burnout and managing stress, which in turn improves mental health. When employees feel their employers care about their work-life wellness, the entire organization benefits from greater employee engagement. Wellhub' Work-Life Wellness study agrees, where a whopping 95% of workers say their emotional wellness impacts their productivity. Employees juggling work and home responsibilities can utilize floating holidays to better balance their commitments, perform better at work, and ultimately excel at their jobs.

Attract Top Talent and Improve Employee Retention

Companies that embrace diversity and inclusion tend to attract a more diverse talent pool and retain employees longer. Offering floating holidays can be a compelling factor for potential hires who value an inclusive workplace. Plus, employers that demonstrate care for the employee experience will also attract competitive candidates who expect an accommodating benefits package. In addition to talent acquisition, HR professionals are also boosting employee retention by using floating holidays. Flexible and competitive benefits like floating holidays not only compel employees to stay for the convenience but the values of the organization, too.

Cons

While a floating holiday policy can offer flexibility and accommodate diverse employee needs, there are some potential drawbacks to consider. It’s important to understand these factors so that, should you choose to implement this policy, you are aware of the possible blindspots.

Inconsistent Workforce Availability

Employees may choose to take their floating holidays at different times, which may lead to uneven workforce availability. This can pose challenges in maintaining a consistent level of workplace productivity. Leaders may have to carefully plan out availability times to make sure that critical tasks are adequately covered.

Scheduling Challenges

Similarly, managers may face difficulties in coordinating team schedules and projects due to a lack of predictability. Because it isn’t always clear when employees will choose to take their floating holidays, planning ahead isn’t always so simple. Plus, certain periods, such as the end of the year or summer months, may experience a higher number of employees taking time off. This may potentially impact workflow and project timelines.

Employee Equity Concerns

There is a risk of perceived inequity if some employees consistently take their floating holidays during peak times or popular seasons. This can leave other employees stuck with fewer and less desirable choices, depending on your unique workforce. It may take closely monitoring the distribution of floating holidays so that time off is given as fairly as possible.

What to Be Aware of When Offering Floating Holidays

Like many HR policies that put employee needs first, it takes collaboration and communication to keep both the workforce and the business running smoothly. These are factors to be aware of when using the floating holiday method.

Preparing for Short Notice Periods

Because no two people will likely have the same schedule, there may be times when teams deal with short notice from their coworkers. Short notice periods can disrupt workflows, but with clear policies, flexible arrangements, and contingency plans, employers can ensure a seamless transition when employees take last-minute time off. Here are some tips to consider in these situations.

• Clear Policies and Communication: Clear policies regarding how and when employees should request floating holidays give the policy the best chance to succeed. Encourage open communication, so employees feel comfortable discussing last-minute requests when necessary.
• Coverage Plans: It’s a good idea to develop contingency plans for short-notice absences. It’s always helpful to cross-train employees to handle essential tasks and maintain a list of available backup personnel who can step in during emergencies.
• Flexible Work Arrangements: Consider offering flexible work arrangements, such as remote work or adjusted schedules, to accommodate short-notice absences while ensuring essential tasks are still completed.
• Prioritization: Encourage employees to prioritize their tasks and delegate when necessary. This can help manage workloads during unexpected absences without compromising productivity.

Preparing for Busy Periods

Floating holidays may get a bit tricky during demanding periods when a team, department, or organization is especially busy. These are some common solutions to potential disruptions caused by floating holidays.

Advanced Planning: During peak periods, encourage employees to plan their floating holidays well in advance to minimize disruptions. You can consider implementing blackout periods where certain dates are off-limits for time off requests, but this can mean one group is less able than others to take advantage of the floating holiday.

• Fair Allocation: When coworkers are helping cover for others, consider using a fair allocation system for additional time-off requests. This could be implementing a rotating schedule or a lottery system. Doing so gives everyone an equal opportunity to take time off without overburdening specific individuals or teams. 
• Overtime and Incentives: You can also offer overtime pay or other incentives to employees who are willing to work during busy periods or on holidays when staffing is tight. This can motivate and reward employees to step up when needed while also providing valuable time away for others.

Creating a Floating Holiday Policy

These are the basic steps to consider during policy development:

1. Define a Floating Holiday

To create a comprehensive floating holiday policy, start by providing clear definitions to ensure employees understand their options and business expectations. Keep it simple; explain that it's a day off with pay that employees can use for personal or cultural observances outside of the standard holiday calendar. A great way to help employees understand is by offering specific examples to illustrate common scenarios when floating holidays can be used, which helps create transparency and consistency in policy implementation.

2. Define Start and End Periods for Available Floating Holidays

Next, it’s best to establish clear timeframes that employees can refer to when creating their own schedules. Specify the start and end dates for the availability of floating holidays. For example, you may decide that floating holidays can be used anytime within a calendar year or a fiscal year.

To create a collaborative environment while maintaining business needs, organizations can: 

• Consider peak workloads or busy seasons when defining the start and end periods.
• Communicate timeframes well in advance to employees so they can plan their requests accordingly.
• Encourage employees to discuss their intended use of floating holidays with their supervisors so that everyone is aligned on team and project schedules.

3. Define How and When Employees Must Request Time Off

Finally, explain the steps that employees are expected to take when they request floating holidays, which may include specifying who they should contact, what forms or documentation are required, and the preferred method of submission (e.g., email, a designated portal, or in person). Consider these tips for managing requests:

• Set a minimum notice period for requesting floating holidays, ensuring it allows sufficient time for scheduling and staffing adjustments.
• Encourage open communication between employees and supervisors and emphasize discussing planned time off well in advance.
• Establish a fair system for resolving conflicts if multiple employees request the same date.
• Clearly communicate the approval process, including timelines for responses and any factors considered in the decision-making.

Best Practices for Implementing Floating Holidays

Once you’ve established your policy, how do you implement floating holidays efficiently? Here are some best practices that your organization may use:

• Communication is Key: You can highlight the significance of transparent and clear communication about the floating holiday policy during the onboarding process, and then provide accessible written materials and FAQs about the policy the workforce can refer to.
• Tailor the Policy to Your Company Culture: Remind departments or teams to customize the policy within overarching guidelines to align with the organization's unique culture, values, and goals.
• Monitor and Adjust as Needed: Implementing a policy takes time and adjustments as you learn. Remember to periodically review the policy to assess its effectiveness and relevance in meeting the evolving needs of the organization and its workforce. Feedback from employees through performance feedback reviews is always a good way to evaluate your current policy.

Floating Holiday FAQs

Do Employers Have to Offer Floating Holidays?

No, employers are not obligated to offer floating holidays. The decision to provide this benefit is at the discretion of the employer. It depends on their organizational culture, policies, and the preferences of their workforce. Employers who want to emphasize employee wellness in the workplace may find floating holidays are the right fit!

Are Floating Holidays Carried Over into the Next Year?

Rollover policies vary by company, but unused floating holidays don’t typically carry over to the following year—that is often reserved for PTO.

Do Employers Have to Pay for Unused Floating Holidays?

Employers are not universally required to pay for unused floating holidays. However, some employers can choose to pay out employees in their compensation strategy for unused floating holidays when they leave the company.

Pros and Cons of Offering Floating Holidays

There are major benefits and potential challenges with a floating holiday policy. Many of the pros have been discussed, such as supporting a diverse workforce, encouraging inclusivity, improving work-life wellness, boosting employee satisfaction, attracting top talent, and complying with legal requirements related to religious observances. 

It’s also important to fully consider the cons of floating holidays. Managing multiple requests for floating holidays can be complex, potentially affecting workflow and coverage. When there are misaligned holiday requests, teams may deal with disruptions in business operations during critical periods. It’s also important to ensure fair allocation and to prevent interpersonal conflicts. Developing and administering a comprehensive floating holiday policy can be time-consuming, but understanding these factors can help you avoid stressful situations.

Combining Efforts with Wellhub to Maximize Employee Wellness

HR leaders empower employees to take charge of their work-life wellness and celebrate meaningful events with floating holidays. By implementing a thoughtful policy, some organizations have found it easier to improve their employee experience, as well as diversity and inclusion. In turn, organizations are also fostering engagement, retention, and a healthy culture.

Employee wellness is just as multifaceted as the individuals of the workforce, and Wellhub can help organizations celebrate this. The benefits of employee wellness programs, like those that Wellhub provides, can help keep your workforce healthy and happy. The data agrees—100% of HR leaders say wellness programs are important to employee satisfaction, according to Wellhub’ 2023 Return on Wellbeing Study. This improves retention while lowering the cost of talent management.

Talk to a wellbeing specialist today to take the first step towards a wellness-focused workplace.

References

• Wellhub. (2023, October 18). The State of Work-Life Wellness 2024. /en-us/resources/research/work-life-wellness-report-2024/ 
• Wellhub (2023) The Return on Wellbeing Study. Wellhub. /en-us/resources/research/return-on-wellbeing-study-2023/ 

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Key Terms:

What is an Employee Leave of Absence?
There are two main leave of absence (LOA) categories: mandatory and voluntary. Mandatory leaves of absence are situations when the employee has a right to take leave, per federal standards. A voluntary leave of absence is an employee benefit or perk. Read More.

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A mental health day is a day off from work, taken to prioritize mental well-being and reduce stress. It's about recognizing the need for a break to recharge and prevent burnout. Read More.

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Unlimited PTO is a company policy that lets employees take as much paid time off as they want so long as they get their work done. This policy gives employees more control over their schedules than the traditional 9-5. Read More.

What is a Sabbatical?
A sabbatical is an extended paid break from work, typically six to 12 months in duration, granted to employees periodically throughout their career. During this time, employees are relieved of their regular job responsibilities. They take time to rest, recharge, and pursue personal or professional development opportunities. Read More.

Flexible Time Off vs. Paid Time Off: What’s the Difference?
Flexible time off refers to plans that let employees take time off when for the reasons they choose, rather than having the days be allocated by sick days, vacation days, etc. Paid time off (PTO) is time a worker is compensated even though they are absent from work. Read More.