Floating holidays

A floating holiday — also known as an unscheduled holiday — is a paid leave benefit that you can offer over and above your standard holiday allowance. The dates aren't fixed; rather, they “float” or shift depending on your employee's needs, and can be taken at their discretion.

As companies strive to create more flexible and accommodating work environments, floating holidays are becoming increasingly popular. They allow employees to observe important cultural and personal events without having to dip into their paid time off (PTO), such as: 

• Religious holidays

• Cultural celebrations

• Indigenous Peoples' Day events

While both PTO and floating holidays ensure compensated time off, there are some distinct differences between the two.

PTO typically includes vacation time, sick days, and personal days (and may also cover bereavement or family leave). It's a more general pool of time off that comes under the umbrella of fringe benefits, and can be limited or unlimited. 

It’s designed to provide employees with paid time away from work for rest, recreation, and personal matters, without the employee needing to give a reason. 

Conversely, floating holidays are intended to allow employees to observe personal, cultural, or religious events.

In many countries, providing PTO is a legal requirement (although the specifics of PTO policies can vary by company). However, floating holidays are not compulsory. You can choose whether you want to include them in your benefits package or not.

Floating holidays can give your workplace a more inclusive feel, which can — in turn — increase employee morale. It can also be appealing to potential hires, giving your business a competitive edge when it comes to attracting and retaining top talent. 

There are other benefits to floating holidays, too. These include:

• An improvement in work-life balance and overall employee wellbeing

• Less unplanned absences

• A more cost-effective way to enhance your employee benefits package compared to other perks

• A more simplified way to track leave and policies for HR and payroll

• Proof that you appreciate individual traditions, religious beliefs, and identities, which helps create a sense of belonging and inclusivity

To set up a floating holiday policy, follow these steps: 

Clearly define ‌your policy

With HR (and, if necessary, legal), draw up a floating holiday policy and include it in your employee handbook. Ensure that you clearly define:

• What floating holidays are for

• What the floating holiday pay rate is

• How many floating holidays employees get each year

• Whether or not they can be carried over

Establish a request process 

Develop a standard operating procedure (SOP) that outlines the steps for submitting floating holiday requests. If possible, aim to automate the process to reduce administrative burden.

Lead by example 

Encourage managers and senior personnel to take advantage of floating holidays. This can help hesitant employees feel more comfortable using their own.

Consider the needs of your remote employees

If your team is globally distributed, ensure the floating holiday policy accommodates diverse cultural and religious observances across different locations. 

It’s a good idea to involve representatives from various cultural backgrounds and determine their specific needs and perspectives. This feedback can inform the number of floating days to be offered, eligibility criteria, and acceptable use cases relevant to different regions. Encourage ongoing dialogue, too, to continuously improve the policy's effectiveness.

This is up to you, although you should clearly state whether or not employees can carry over unused floating holidays in your policy. 

Some companies have a strict "use it or lose it" rule: if employees don't take their floating holidays by the end of the year, they’re gone. Others allow employees to carry them over.

In most cases, employees don’t get paid for accrued but unused floating holidays as they are not part of the standard paid leave entitlement. Again, this should be clarified in your policy and your employment agreement. If you’re unsure about the laws around paying out in your employee’s location, seek HR and legal advice.