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What is a floating holiday?

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Flexibility has become a buzz word in employee retention efforts, and floating holidays are one way to offer flexibility. If you’ve heard this term before, you may have questions. What does floating holiday mean? How do floating holidays work? What are some floating holiday examples? Here’s what you need to know about floating holidays.

Religious or Cultural Holidays and Employer Policies

What counts as a holiday? According to the Cornell Law School’s Legal Information Institute, the following 11 days are considered federal holidays:

  1. New Year’s Day
  2. Martin Luther King Jr. Day
  3. Washington’s Birthday
  4. Memorial Day
  5. Juneteenth
  6. Independence Day
  7. Labor Day
  8. Columbus Day
  9. Veterans Day
  10. Thanksgiving Day
  11. Christmas Day

Although these holidays are federally recognized, federal law does not require private sector employers to give workers these days off or to pay them extra for these days. States may establish their own list of holidays, and these lists may differ from the federal list, but state laws don’t typically require private employers to observe holidays, either. There are some exceptions, but in most states, holiday policies are generally left up to the employer.

Nevertheless, many private sector employers give their workers these days off or provide time-and-a-half pay for working on these days. Paid holidays can be an attractive part of an overall compensation package.

Despite the generosity, some employees may not be completely satisfied by a standard employee compensation plan. The list of official holidays covers a lot of important days, but it doesn’t cover everything. Where’s Good Friday and Valentine’s Day? What about Diwali, Chinese New Year and Eid al-Fitr?

Holidays are deeply impacted by religion and culture, and different people celebrate different holidays. Floating holidays offer a flexible way to let people take off the days that matter to them.

How does a floating holiday work? Floating Holiday Examples

A floating holiday is a type of benefit that allows employees to decide which day or days to take off as a holiday.

For example, let’s say a worker celebrates a religious holiday that is not recognized as an official state or federal holiday. The company is open that day, and employees are expected to work, but the worker who celebrates the holiday would like to take the day off. A floating holiday can be used to do this. Or maybe another employee wants to take off the day of her birthday. Her birthday is not an official holiday, but a company’s floating holiday policy may allow her to take it off.

Floating holidays are often paid days off, but some employers may decide to offer them as unpaid days off. Although workers will not receive pay, they still benefit from the flexibility to request the day off.

Employers that offer floating holidays typically allow one or two floating holidays per year, but some may offer more.

Floating Holiday vs. PTO

A floating holiday may sound a lot like a fancy term for paid time off. In both situations, the employee gets to select a day to take off and still be paid for the day.

However, there is a key difference that goes beyond the name. At most companies, workers don’t get paid time off on their first day. They have to accumulate it over time, and it must be monitored by management to ensure compliance. Floating holidays, on the other hand, are often awarded to all employees at the start of the year. New workers may also have access to floating holidays immediately upon hire, although the number of floating holidays available in the year may be reduced if the worker is hired after a certain date. For example, if a company awards two floating holidays a year, a worker who starts in the second half of the year may only have one floating holiday to use that year.

Imagine a worker starts a new job one week. A major holiday in his religion happens to fall on the following Monday. He probably doesn’t have any paid time off yet, but if he has a floating holiday, he can use it to take the day off so he can observe his holiday.

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What happens to unused floating holidays?

In many cases, unused floating holidays may be lost. However, this will depend on both the company policy and state law.

For example, some states have laws against “use it or lose it” vacation policies. If state law says that vacation time or other paid time off can not be forfeited, and if floating holidays qualify as vacation or paid time off under state law, then it follows that floating holidays cannot be forfeited in that state.

When creating a floating holiday policy, it’s important to address what happens to unused days, and it’s also important to make sure that these policies follow all relevant local, state and federal laws.

Should you offer floating holidays?

Floating holidays may boost employee satisfaction and work life balance. By offering floating holidays, you’re giving your workers the flexibility they need to craft a schedule that works for them.

Floating holidays can also support your diversity and inclusion efforts. For example, in the U.S., many companies observe Christmas, but not all workers celebrate Christmas. At the same time, there are so many different holidays worldwide that it would be difficult for an employer to recognize all of them. Floating holidays are a practical way to let workers take off the days that are important in their religion and culture.

However, floating holidays might not make sense for all employers. For example, if your company offers unlimited time off to all workers, you may not need to offer floating holidays as well.

Creating Your Floating Holiday Policy

If you’re offering a floating holiday to your workers, you need to develop a written floating holiday policy to include in your employee handbook. When writing your policy, make sure you address the following questions:

  • Who qualifies for floating holidays? Do they have to be full-time employees? What about seasonal or temporary workers?
  • Is the floating holiday paid?
  • How many floating holidays do eligible workers receive each year?
  • When do the floating holidays become available? How do floating holidays work for new employees hired during the year?
  • How should workers request floating holidays? How much notice is required?
  • What happens to unused floating holidays? Do they carry over to the next year? If so, is there a cap to how many floating holidays a worker can accumulate? Make sure this policy adheres to all relevant state laws.

While you’re creating a floating holiday policy for your company, it may be a good time to review your overall employee benefits plan to make yourself more competitive and attract the best workers.

Putting Together Your Employee Benefits Package

Floating holidays can be a part of a strong employee benefits package, and these floating holiday examples and tips can help you create your own policy. Higginbotham offers employee benefit services to help you attract and retain top talent. Learn more.

Not sure where to start? Talk to someone who wants to listen.

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