Floating holiday: what is it and why is it important

Last updated:
October 11, 2022
October 12, 2022
min read
Gem Siocon
floating holidays
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Including floating holiday perks in your benefits package is an excellent way to promote your organization’s DEI initiatives.  Many cultural and religious events aren’t recognized as national holidays. So offering floating holidays allows underrepresented groups in your organization to celebrate these special days. 

Adding floating holidays to your vacation policy may seem redundant, but it makes people from different backgrounds and cultures feel accepted and valued. This small token of recognition can help attract and retain diverse employees. 

What are floating holidays?

Floating holidays can take a number of different forms including: 

  • additional paid time off or vacations employers provide to their staff as part of their compensation and benefits package
  • public holidays that don’t fall on the same date every year, such as Thanksgiving, Good Friday, or Black Friday
  • or substitutes for public holidays - employees can choose what date to take for special events, birthdays, and religious or cultural holidays

Employers can offer floating holidays as part of their company’s DEI efforts. It is also a great way to amplify employee retention. 

What is the difference between floating holidays and PTO?

At a glance, floating holidays and PTO look the same because they allow employees to take personal time off. 

Floating holidays are a mix of public holidays and vacations because employees often use them to celebrate birthdays and religious or cultural holidays. Sometimes a person can use them for personal or family emergencies or even if you have exhausted your entire paid time off.

But where some employers offer unlimited PTO (discretionary PTO) where a person can be absent from work,  there are only a maximum of 2 floating holidays per year.

Traditional PTO is often given either monthly or quarterly to new employees, with a limit that may increase as employee stays longer with the company.

On the other hand, floating holidays start at the beginning of the year, expire at the end of the year, and don’t accumulate over time. For instance, if a person uses only one floating holiday in the current year, they don’t get another floating holiday next year. 

What are the benefits of floating holidays?

Unsure whether to consider having floating holidays as part of your work perks? 

Consider the following benefits: 

Promote diversity and inclusion (people celebrate different holidays based on their culture) 

A floating holiday allows employees from diverse backgrounds or cultures to feel ‘included’ and recognized within their organization. It gives them the opportunity to take time off to celebrate their cultural or religious holidays without using their PTO. 

They can use the additional day off to fly back home and celebrate with their families. 


Want to know how to create an inclusive workplace culture?

Read our guide

Retain employees 

Floating holidays are effective in boosting employee morale and retention. 

It shows that the company cares for its staff’s well-being by having additional days offs on top of vacation and sick leaves. Numerous studies consistently show the health benefits of vacation time, like lowered stress, improved productivity, and enhanced overall health. 

Attract highly-qualified candidates 

Beat the rest of your competitors by offering floating holidays in your job postings. It’s an easy way to attract highly-qualified candidates

Floating holidays can be a big work perk in your compensation and benefits package, alongside competitive salary, health insurance, and remote work.

Support work-life balance 

Empower your employees to make their work fit their lifestyle.  Instead of pressuring them to take holidays that do nothing for them, give them the flexibility to select dates to celebrate events that are meaningful to them. Or allow them to choose holidays they would instead work on and vice versa. 

Many employees combine their floating holidays with their PTO to maximize their vacation time. This is especially helpful for working parents who want to spend more time with their children. Or working students who wish to take extra time off from their hectic work-studies schedule.


Want to know more about employee well-being and supporting your employees?

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Ensure your business operates smoothly. 

It's common for people to take their vacation during Christmas or Thanksgiving. For retailers, these holidays are peak selling season for many countries, potentially producing the highest sales in any given year. 

So instead of experiencing revenue losses, employers can offer floating holidays where some employees interested in earning can work during this time. And then, they can choose to offset that with their date of choice. This is a win-win for employers and employees because everyone is happy and getting money. 

Cut down on administrative bottlenecks 

Picking an inclusive holiday schedule that caters to each person can be overwhelming. 

Floating holidays are the perfect solution to avoid these scheduling challenges because employers can choose which national public to include in the standard PTO policy. Meanwhile, employees can select which other holiday work fits them. 

How do you write a floating holiday policy?

It's important to remember that employers customize their floating holiday policy based on their business needs.  There is no clear-cut rule for this.  

Suppose you’re a manufacturing company whose factory requires all your staff to work during the peak season in November. In that case, you can’t have everyone working in the plant taking the day after Thanksgiving Day as a floating holiday. You need to have all shifts covered to keep up with the demand. 

Before you go jumping drafting your floating holiday policy, here are a few things to keep in mind:

  1. Think about the number of floating holidays you offer to your employees. These are paid days off when your company is open on these days. 
  2. Consider your company’s specific paid holidays where the company is closed, and everybody takes a day off. 
  3. Determine which days can be used as a floating day off and if you wish to carry them over to next year.  Define restrictions on how or when a floating may be used or requested. 
  4. Decide how long a new staff hired during the year must wait to qualify for floating holidays. 
  5. Redefine your PTO policy to include floating holidays. To avoid confusion and misuse, be clear about which constitutes holiday time, PTO, vacation, and a floating holiday. Explain how employees can request different kinds of PTO. Include in your vacation policies that floating holiday conditions may change if the employee is found guilty of violating company policies and their services are terminated.  Make sure to include this in your employee handbook.
  1. Create separate pay codes for each holiday. A floating holiday may be paid for in full or partially. 

Once you’ve decided to include floating holidays in your company’s vacation policy, there are important questions you need to address, such as: 

• Decide who is eligible for a floating day 

For example: Typically, full-time, regular employees are eligible for floating holidays.

• How many floating holidays should employees receive a year?

According to SHRM, all full-time, regular employees receive two floating holidays per year in addition to an organization's regular paid holidays.  Employees can use their floating holidays at the start of each calendar year. 

A new employee hired before the end of the first six months of the calendar year will get two floating holidays upon being hired, while those employed during the last six months will receive only one floating holiday upon hire. 

• Specify the periods when floating holidays can be used

Employees can specify the religious/cultural event for which they request floating holidays.  The request must be scheduled and approved in advance by the employee’s manager. 

The organization decides on the specific days a person can take their floating holidays. Individuals can either take them when the company remains open during cultural or religious events or whenever they want without restrictions. 

• How floating holidays can be approved

It's up to the employer’s discretion to decide how far in advance individuals should request their floating holidays. But often, it must be requested at least 5 business days before the specified leave date and approved by their respective managers. 

HR uses the same software/system to track and approve floating holidays to schedule sick days, PTO, and vacation days. 

• What happens once the employee leaves

Floating holidays are treated like PTO or vacation days, so employers must pay their staff with unused floating holidays when they leave the organization. Pay is based on prorated basis each year when they resign. 

In the US, this policy varies by state.


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 • Can floating holidays be carried over on year to year basis?

Unused floating holidays are not usually carried over to the following year. It is the employer's discretion if they want to carry over floating holidays to the following year.

Be sure to specify these details in your floating holiday policy. 

• What happens to unused floating holidays?

Usually, unused floating holidays are forfeited, but it depends on the company policy and state law. 

For instance, some states have laws prohibiting ‘use it or lose it’ vacation policies. If state law mandates vacation time or PTO can’t be forfeited and floating holiday is classified as vacation time or PTO under state law, then floating holidays can’t be forfeited in that state. 

When creating floating holidays policy, cover unused days, which complies with local, state, and federal laws.

• Can you ‘cash out’ floating holidays? 

When a floating holiday is not linked to a particular event, employers must pay it out when the person leaves the organization in compliance with applicable state laws and your PTO policy. 

On the other hand, if a floating holiday is attached to a particular event like Christmas eve, then an individual who terminates her employment in August is not entitled to a payout for Christmas Eve. Their right to pay for Christmas eve was attached and conditioned upon their stay with the company through Christmas eve. 


Useful tip:

Useful tip:

Hold a Q&A meeting to answer questions related to your floating holiday guidelines. Designate a contact person to answer follow-ups if there are questions after the meeting. You can also discuss your floating day off with new hires during onboarding. 

Lastly, know your state’s law about vacation policies. 

Mostly, government rules are about paid time off, so you can design your floating holiday policy around this. For example, the state of California offers unrestricted and restricted floating holidays. Unrestricted means a person can take them any time of the year, while restricted are tied to specific events only. 

How to keep track of floating days?

HR should monitor floating holidays to avoid issues with workforce schedules and payroll. 

Maintaining updated records that indicate the days employees requested for their floating holidays is crucial in ensuring you have enough people running your business every day without hitches.

Employers can use employee scheduling or attendance software to track floating holidays.  Have an employee vacation tracking calendar that automatically monitors people on floating holidays on a particular day, calculating floating holiday pay, adjusting rollover policy (based on your policy), and more. 

Here are some tips to keep track of your employees' floating holidays: 

  1. Create a schedule to review the eligibility of employees for floating holidays. Eligibility depends on when the person started with the company and how long the person stayed with the company. 
  2. Review employee details to ensure accuracy. Conduct periodic reviews to guarantee that you always have the correct information. Review is critical, especially when monitoring if the employee used up all their available floating holidays or when they’re eligible for cashing out unused ones when they leave the company. 
  3. Monitor the number of employees taking floating holidays per date to avoid understaffing, especially on busy days. Understaffing means missing out on critical deadlines, increased expenses from delayed tasks, decreased productivity, and lower sales. 
  4. Avoid payroll errors when floating holidays are correctly tracked. You don’t want multiple employees complaining about pay deductions because you failed to note their floating holidays. Or overpaying an individual when they’ve used their floated day offs. 


Adding floating holidays to your company vacation policies has multiple benefits like promoting inclusion, employee retention, and attracting the best talent. 

When developing and implementing your floating holiday benefit, it's crucial to be organized and consistent to avoid schedule conflicts and understaffing. Communicate your rules clearly with your employees to keep them happy and your business on the right track. 

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