What is a Floating Holiday? What to Know for Your Leave Policy

Offering floating holidays for employees can be a great way to boost productivity and employee engagement. As a result, HR teams should consider implementing floating holidays whilst ensuring compliance

In this article, we’ll answer the question of ‘what is a floating holiday?’, the benefits it provides for employers and employees, and how to create a floating holiday policy. 

What is a floating holiday?

A floating holiday is a paid day off from work that employees can take in addition to paid time off (PTO) and public holidays. The day the employee decides to take off is up to them. Employees can use it as a substitute for a public holiday or to celebrate special events like religious holidays, festivals, birthdays, etc. 

The beauty of floating holidays is their flexibility. However, company policies may give certain restrictions, such as requiring advance notice or restricting employees from using it during peak business periods. Clear communication of these policies will ensure clarity.

For example, an employee who follows a religion that is not widely practiced in their area can use a floating holiday to honor a major religious festival, such as Deepavali or Hari Raya Puasa. This allows the employee to participate in cultural rituals and family gatherings, demonstrating that the employer values their religious commitments without affecting their annual leave or sick leave.

Another example of a floating holiday is celebrating a personal milestone or a significant family event, like a graduation ceremony. This flexibility acknowledges the importance of their personal life while not impacting their regular paid time off.

What is the difference between a floating holiday and a public holiday?

what is a floating holiday

When answering the question of ‘what is a floating holiday’, it’s important to discern the difference between a floating holiday and a public holiday. 

A floating holiday is a day off that employees can take at their discretion. In contrast, a public holiday is a day designated by the government as a non-working day for the general population, usually to commemorate a historical or cultural event. 

Although public holidays are fixed and observed nationwide, floating holidays are much more flexible and can be used based on individual preferences or needs, often requiring prior approval from the employer. 

What is the difference between a floating holiday and paid time off?

Paid time off (PTO) and floating holidays may seem alike since they are both benefits that offer employees a day (or days) without work. However, the distinction lies in the scope of each benefit. 

PTO is a comprehensive term that encompasses various types of leave, such as vacation days, sick leave, and holidays. Unlike PTO, which can typically be carried over into the following year, most companies do not allow employees to carry over floating holidays.

Depending on your state’s PTO regulations, if a floating holiday is not associated with a specific event, you may be required to compensate employees for unused floating holidays upon their departure. Not all states mandate this, so it is essential to familiarize yourself with local regulations.

For example, some companies offer floating holidays for occasions like Christmas Eve, allowing employees to choose whether or not to utilize them. However, if an employee resigns in August, they would not receive compensation for the Christmas Eve holiday, as it is contingent upon remaining employed until the holiday occurs. 

Is it mandatory for employers to provide floating holidays?

When understanding the concept of what is a floating holiday, an essential aspect to consider is its mandatory nature. In short, employers are not obligated to offer floating holidays.

Whether or not a company gives its employees a floating holiday is determined by its internal policies and practices and any applicable state or local regulations. Some employers can choose to offer it as part of their benefits package to provide employees with greater flexibility, but it’s not a legal requirement in most places.

Read next: HR’s Guide to Employee Leave Management

Benefits of a Floating Holiday

There are a lot of employers and employees alike who stand to gain from creating a floating holiday policy. Here’s why: 

For employees

  • Increased flexibility: Employees who take floating holidays have the freedom to choose when they take time off, allowing them to better align their personal needs with their work responsibilities. 
  • Improved work-life balance: Every employee values work-life balance, and having the option to use a floating holiday gives them a chance to better balance personal commitments without sacrificing their professional responsibilities.
  • Feeling valued and trusted by employers: Providing this benefit for employees shows their employers value their well-being and it creates a more motivated work environment where employees feel appreciated and respected, leading to higher job satisfaction.

For employers

  • Attracting and retaining top talent: Getting top talent to apply and stay with your company is possible through floating holidays. For employees who value work-life balance, they may be more likely to stay with employers who offer more flexible paid time off options. 
  • Improved employee engagement and satisfaction: When employees are aligned with company values, they put in their best work and the freedom they have to manage their schedules makes them more engaged and satisfied with their work, leading to lower attrition rates
  • Accommodating diversity and inclusion needs: Allowing your employees to take time off for cultural or religious events that are meaningful to them shows respect for their identities and beliefs, promoting diversity and a more inclusive work environment.
  • Spreading our time off: Offering a floating holiday can allow employees to spread out their time off throughout the year, rather than being limited to fixed holidays. This can ensure workload is effectively distributed, prevent absenteeism and employee burnout during important work seasons.

Things to Include in Your Floating Holiday Policy 

floating holiday

1. Number of floating holidays

To ensure clarity about when employees can take a holiday, define the number of days they can take in your policy. Here are two important factors to consider: 

  • Industry standard: Depending on the industry and work tasks, some may have more floating holidays than others. For instance, in the creative sector, offering more paid time off benefits can be a way to attract and retain top talent, given the emphasis on work-life balance and flexibility. 
  • Company size and budget: Company size and budget constraints should be considered when setting a policy. Larger companies with more resources may offer a more significant number of floating holidays as part of their employee benefits package. 

2. Blackout periods

You should establish blackout periods, typically during busy business seasons, when employees are not allowed to take floating holidays. This helps the company avoid being understaffed during important cultural events.

It’s also important to properly state any restrictions you have on when or how employees can use the holiday. Define things like how many days they can take at a stretch or the maximum number of employees that can take their holidays within a period.

3. Advance notice for requests

Your floating holiday policy should balance flexibility with scheduling needs. Employees should be required to inform employers in advance, making planning work around employee absence easier. Exceptions for a shorter notice period can be allowed for urgent situations. 

Incorporating into the policy the requirement for employees intending to take floating holidays during busy periods to complete their work in advance can help alleviate the workload for their colleagues.

4. Approval process

The approval process is important in a floating holiday policy as it helps with orderliness and smooth operations within the organization. 

Typically, employees are required to request their desired floating holiday from their manager and HR team. The request is then assessed by their manager to ensure it fits with the team’s current operating situation, and it is either approved or denied.

Once approved, employees will be notified. Proper documentation is then completed, usually using HR tools, to ensure accurate tracking of employee time off and compliance with payroll regulations.

Read next: What is a Leave Management System? Why Every Business Needs One

5. Carry over or encashment

Most floating holiday policies don’t contain carryovers from one year to the next. Although some companies offer it, it’s not against the law. Companies that allow employees to carry over their holiday may also provide them the option to encash their unused floating holidays. 

Encashment can benefit employees who prefer extra income or have difficulty scheduling time off due to workload or other commitments. You can include this in your policy if it aligns with your overall company goal. 

6. Tracking and scheduling

Employers should establish clear guidelines for tracking and scheduling employees’ floating holidays. Employers can use HR software to log employees’ time off requests, and managers can review and approve them. 

It’s important to specify in the policy the importance of maintaining transparency and consistency in leave management. This helps ensure that employees use their allocated days off appropriately.

7. Communication

Nothing beats clear communication regarding workplace relations. Employers can educate and train employees on what is a floating holiday and the existing policy, holding Q&A sessions to help them understand their rights to the benefit. 

If you, as an employer or HR manager, are unsure where to start with your policy, we’ve got you covered with a fully customizable, downloadable employee handbook template to guide you on creating your floating holiday policy. 

Building a Thriving Workplace with HR Tools

With Omni’s time off management capabilities, managers can approve floating holiday applications on the go, and keep track of who’s in and out of the office with at-a-glance scheduling. Our employee self-service portal enables employees to submit their time off requests, which are automatically routed to the appropriate manager thanks to customizable approval workflows. Our user-friendly mobile application further simplifies the process, allowing employees to apply for time off requests on the go. 

For further leave management ease, Omni seamlessly integrates with your team’s well-loved work tools such as Slack, enabling managers to manage time off approvals with a simple push of a button. With automated calculations, employees and managers can easily view leave balances in real-time, and track how many floating holidays they have left without having to go through HR.

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