It is getting increasingly difficult for companies to retain employees and improve their morale.

More and more organizations are introducing the floating holiday policy in a hope to not only decrease employee turnover but to attract new employees as well.

But, one question remains to be answered.

Can floating holidays really enhance employee engagement and motivate them to keep working for you?

You need to consider the merits and demerits of floating holidays, especially if you already offer handsome rumination package to your employees including a generous holiday policy.

Floating holidays may or may not help you achieve your objectives.

You have to take many variables into account before making a final decision, just like anything else in life.

There are, in fact, different types of floating holidays you can offer to your employees.

The final result of the floating holiday policy depends on the method you choose and the way you proceed.

In simple terms, you can benefit heavily from your decision or it can backfire and inflict serious damage to your business interests and your reputation as a leader.

Watch the video to learn what a floating holiday is, how you can create rules for floating holidays, and how to maintain floating holidays overall.

You can let your employees determine the type of holiday they want or you can decide yourself?

Can an employee take his holidays to the next year if he does not take any holiday in the current year?

Will you keep a record of floating holidays the same way you track Paid Time Off (PTO).

There are many other important questions you have to answer before proceeding with your plan.


It is just another type of Paid Time Off (PTO) companies offer to their employees to make the working environment and conditions a bit more flexible.

All the companies in the world offer paid holidays.

There is nothing extraordinary about it.

PTO allows an employee to enjoy a holiday while still receiving his payment. However, the PTO should fall on a scheduled workday for an employee to receive his pay.

Similarly, companies permit all of their employees to take paid holidays on religious, traditional and civic days such as Christmas and Independence Day.

The floating holiday, on the other hand, can fall on any day of the year other than the paid holidays. They offer the same benefits like paid holidays.

The only difference is that the employee decides which day to take as a holiday.

For example, a Muslim employee may need three floating holidays to celebrate Eid al Fitr and Eid al Adha, each of which lasts for three days.

He will have to take a vacation or any other type of paid holiday if no floating holiday policy is in place in his company.

Therefore, you offer a lot of flexibility to your employees and honor their diverse needs by implementing a floating holiday policy.

Even employees who normally don’t need a floating holiday will appreciate your decision.

For instance, Alexander will be able to celebrate his daughter’s birthday and Fiona will join a family reunion without worrying about deductions from their salaries.

According to a survey of 2,000 U.S. workers conducted by Harvard Business Review, more time off is the third most highly valued benefit by the jobseekers.

Therefore, your company can attract highly talented individuals by implementing a solid floating holiday policy.

Job Seekers

Image source: Fractl Survey of 2,000 U.S. Workers by Harvard Business Review


We have asked some questions about the floating holidays in the above lines.

You will have to consider many other factors if you decide to add these types of holidays to your employees’ benefits package.

These are all valid questions which you need to answer.

Carry on reading this article and we will provide answers to each and every one of these questions.

1. What is a floating holiday?

The first question you may be asking is what in the world a floating holiday is. We have already provided a detailed answer to this question. We are summarizing our answer once again for your convenience.

It is a benefit or privilege companies offer to their employees in addition to paid leaves and vacations. In most cases, it is just another paid day off offered in lieu of a public holiday.

However, the employee has the discretion to choose the day he wants to take a holiday on, unlike a public holiday.

2. Why should You Implement a Floating Holiday Policy?

Modern workplaces are very diverse, featuring employees from different backgrounds, races, and regions. Companies try to honor this diversity through floating holidays.

As mentioned above, floating holidays make your workplace more flexible and diverse.

For example, there are many employees such as Muslims, Hindus, and Jews who celebrate festivals which are not part of the mainstream culture.

Most companies do not have these festivals and holidays on their holiday calendar.

However, you can allow these employees to take a paid day off other than the scheduled PTOs and let them enjoy their religious holidays.

Similarly, some businesses do not commemorate certain public holidays such as the President’s Day or the Martin Luther King Jr. Day with a paid time off.

Floating holidays will allow your employees to observe these holidays if they want to.

Some companies even accept marriages and birthdays as floating holidays.

You are under no obligation to offer floating holidays to your employees according to the Fair Labor Standards Act (FLSA).

But, you can appreciate the efforts and hard work of your team by offering benefits like floating holidays.

It not only makes them feel valued but also improves their morale and encourage them to work more diligently.

More importantly, floating holidays help them preserve their paid time off for events such as sick days, vacations, parent-teachers’ meetings, and to cater to other personal needs.

3. What is the Difference between PTOs and Floating Holidays?

Apparently, there is no difference between these two types of holidays.

They look exactly the same on the surface. An employee does not have to attend office on any of these days.

However, a floating holiday is a mixture of a paid time off and an actual public holiday, such as Christmas and Fourth of July, which makes it even more confusing and difficult to understand for some.

For example, your employee must avail the floating holiday for you to pay for it. Secondly, it should not be associated with a certain event such as Easter or Christmas. You must also consider your state’s laws as well as your own PTO policy in this regard.

Whether or not you have to pay for PTO depends on the state in which you are running your business. Some states require you to pay for PTO while others don’t.

Therefore, it is necessary for you to keep abreast with all the applicable state laws regarding PTOs.

The scenario changes significantly in the case the holiday is in fact linked to a certain occasion such as Thanksgiving Day.

An employee who terminates his contract or employment in July is not eligible to receive any payment for Thanksgiving Day. This is quite baffling for most people.

Why isn’t he eligible to pay out for Thanksgiving Day after all? It is because he has to be an employee through Thanksgiving Day to have any right to receive the payment for this particular floating holiday.

In layman’s terms, his right of payment was directly associated with his employment through Thanksgiving Day.

The following video explains the difference between paid time off/floating holidays and vacations.

4. How to Define Employees’ Expectations?

Defining employees’ expectations is of the utmost importance. It is a difficult nut to crack but you have to do it sooner rather than later.

You should clearly explain what the employees are going to get from this policy right at the start.

Can they take a holiday on designated days only? Or, they can choose any day they want?

For example, some of your employees can decide to take Monday, 24th of December as a holiday if Christmas is on Tuesday, allowing them to enjoy a long weekend.

Similarly, let us suppose the Memorial Day falls on Thursday. Your employee can decide to take Friday as a holiday, once again converting a single holiday to an extra-long weekend.

In the end, you have to make a policy which suits your business requirements while offering maximum flexibility to your employees.

Different organizations have different requirements and circumstances.

For instance, you cannot let everybody take leave the day after Thanksgiving Day if you have a tight deadline to meet the demand.

In this case, you will want everyone working on the plant day and night because this is the only way to keep up with the demand.

These are some of the factors which determine whether or not floating holidays will yield desired results for you.

And, never forget to communicate your message clearly to your employees in addition to mentioning it in your PTO policy and employee handbook irrespective of whatever you decide.

5. Are there any Disadvantages of Floating Holidays?

There are many side effects of floating holidays.

Most important of these side effects is inconsistency in an employee’s performance and efficiency which can adversely affect your business’s performance.

On the other hand, employees may feel hard done by if you refuse them a floating holiday due to any reason.

We will go back to the example of the manufacturing plant. You are no doubt under extreme pressure to keep up with the demand.

Therefore, you may also ask or even order your workers to surrender the floating holiday in the busy season due to mounting work pressure.

After all, you have to make sure your plant keeps running all the time.

However, the employees who have staggered their holiday may perceive it as unfair because they have to work the day after Christmas, Thanksgiving, Fourth of July or any other public holiday.

This may make sense for you or your business, but ultimately it will have a negative impact on employee’s morale and productivity.

Therefore, it is your duty to determine how to fully accommodate your employees while taking maximum care of your business.

There is also a financial aspect to the floating holidays which you should always consider before making any decision.

It is imperative for you to designate specific dates within which the employees have to use their holidays.

In this case, an employee will not be entitled to any payout if he leaves the company without using his floating holidays. If you don’t, you may have to pay an employee even for unused holidays.

Let’s suppose your employees are entitled to have ten paid holidays in a year.

These holidays also include Memorial Day and a floating holiday. Miranda decides to quit her job a day before Memorial Day.

Miranda cannot expect to be paid for Memorial Day because she resigned from the job one day before this particular company-observed holiday.

However, it is a totally different story if you have not specified the dates within which your employees must take their holidays.

In this case, you have to compensate Miranda even if she has not taken the holiday.

Once again, do check your respective state’s laws regarding floating holidays.

6. Can Employees Carry Unused floating Holidays to the Next Year?

This is one of the most common questions employers ask.

The decision solely rests with you because you’re the boss, the business leader everybody looks to.

Some employers even formulate their own policy as long as it complies with the state’s laws.

For example, your employees can avail three floating holidays every year.

It means your employees will accumulate three holidays annually, but they don’t lose them if they don’t use them by the end of the year.

However, they cannot accumulate more than three holidays in the next year either.

The bottom line is that it is entirely up to you whether or not you allow your employees to carry their unused floating holidays to the next year.

There is no hard and fast rule which you have to follow.

7. How should you Implement the Policy?

Once again, it is totally your call.

Sometimes, the policy does not look much different from a hotel menu. It clearly mentions which are the public holidays employees won’t get any payment for.

Then it is up to the employees to choose any day of the year as their floating holiday.

For instance, there may be a lot of employees in your company which celebrate Good Friday as a part of Easter.

They can take a leave on Good Friday as a floating holiday if you don’t have this particular event on your holiday calendar.

You may even extend your list of floating holidays by including days and events, such as school holidays, banks’ days, marriages, birthdays and much more.

8. How Important it is to Keep Track of Floating Holidays?

It is very important to keep track of every holiday, including floating holidays. You cannot simply tell your employees they are going to get floating holidays and then forget about them.

You have to do some sort of maintenance and monitoring to avoid any kind of problem.

First of all, it is essential for you to properly manage all the holidays for payroll as well as scheduling purposes, just like the paid company holidays or paid time off.

Otherwise, you may end up giving a paid time off to all of your employees in the middle of your busiest season.

The example of our manufacturing plant fits perfectly to this scenario as well.

Similarly, if you fail to keep an accurate record of actual hours your employees have worked and taken off, you could have a payroll nightmare to remember.

Floating holidays are not difficult to track. All you need is a good attendance and time system. It is just like keeping track of company-paid public holidays, sick time, and vacations, etc.

Watch the video to learn how you can easily keep track of employees’ holidays in Excel.


Floating holidays are an excellent option if you want to make your employees “happy”, enhance their morale, improve their performance and most of all, keep them engaged with your company.

However, you have to communicate your expectations clearly to your employees and be consistent with the implementation.

Otherwise, chaos will prevail in your workplace, doing more harm to your business than good.

The most important thing is to write a good policy to make everyone understand what is expected of them.

Floating holidays, if used properly, do keep your employees contented and your business running profitably.

Finally, you should consult a Human Resource (HR) person who has in-depth knowledge of your state’s rules and regulations before finalizing your floating holiday policy.

He may be able to give you a better insight about which laws are applicable to you and which are not. He will also give valuable advice and feedback you could use to write the final policy for your company.

More importantly, it will save you a lot of legal trouble and money in the long run if anything does go wrong.

Practical answers to 8 FAQS about floating holidays

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