Floating Holiday vs. PTO: What’s The Difference?
Need help onboarding international talent?
While both floating holidays and PTO are forms of paid time off, there are some differences between them that you should know to ensure you build the most effective leave policy for your organization.
PTO is used for time away from work for vacation time, sick days, or personal time. In contrast, a floating holiday is typically used for specific national holidays or cultural events.
While a PTO-only policy still covers all time off needs, providing floating holidays in addition to PTO is an excellent way for companies to accommodate different workers’ religions and cultures, boost employee morale, promote diversity and inclusion in the workplace, and attract and retain top talent. In this post, we look into both types of leave in detail.
What is PTO?
Paid time off (PTO) is a benefit employers provide to employees for many reasons, including recovering from an illness, going on vacation, or having a child. PTO is meant to cover all employee leave needs without allocating specific days for specific types of leave, such as vacation or sick time.
PTO can be accrued over time, provided in full at the start of each year, or be unlimited. Depending on local labor laws, not all PTO policies will be available everywhere.
What is a floating holiday?
A floating holiday is a benefit employers provide their employees to take time off work for national and religious holidays and cultural events that are not included on the company calendar. For example, suppose your company doesn’t include Good Friday on its holiday calendar. Employees who want to celebrate this particular day as part of Easter could use their floating holiday.
Some companies extend their floating holiday policy to allow employees to take time off for whatever reason they see fit, for example, to attend a wedding or celebrate a birthday. In some US states, state laws consider floating holidays to be the same as PTO.
Laws surrounding PTO vs. floating holiday
Laws surrounding PTO and floating holidays differ by country and state. PTO is a statutory requirement for full-time employees in many countries, whereas floating holidays are not. It’s crucial to understand what the law mandates regarding leave policies in your region or country to avoid compliance issues, which can carry costly penalties.
- In the UK, for example, an employer must provide a minimum of 28 PTO days by law but can choose whether or not to offer floating holidays as an extra benefit.
- In California, on the other hand, employers do not have a legal requirement to provide employees with PTO or floating holidays.
Using PTO VS floating holidays
PTO is more flexible than floating holidays. For example, an employee can request PTO for many different reasons, including:
- Vacation days
- Military leave
- Sick leave
- Maternity leave
- Paternity leave
- Public holidays
- Jury duty
- Bereavement leave
- Leave time for a family member’s illness
- Child care
- Personal leave (personal days can be used for different purposes and don’t necessarily need to be shared with their employer.)
In contrast, employees can typically only use their floating holidays to take time off work to celebrate or commemorate national or public holidays and observances outside government-recognized holidays. For example, suppose you operate in the US. In that case, you likely already include federal holidays such as Christmas, New Year’s Day, and Memorial Day in the company holiday schedule. Employees could use their floating holiday on other celebrations, like state holidays.
There are numerous special occasions or days commemorating important events celebrated worldwide that people may wish to observe depending on their religious, cultural, and political beliefs. Instead of giving employees paid holidays you think they want, floating holidays allow them to take off the holiday time they need.
How many days should a good time off policy offer?
The average number of floating holidays is two days per year, but no set number exists. Some companies provide many more floating holidays depending on their budget and workforce diversity.
Check out our free Unlimited PTO policy to see how it can provide flexibility and reduce burnout among your team.
Accumulating PTO vs. floating holiday
As we mentioned, regulations regarding PTO accrual vary from country to country. PTO typically increases the longer an employee works for a company. For example, an employee may start with a base amount of PTO and accumulate more over time. Any days not taken during a calendar year may roll over into the next year.
Floating holidays work slightly differently since they don’t accumulate over time. A new cycle of floating holidays starts at the beginning of the year and expires at the end of the year.
Moreover, an employer is not required to roll over or pay out unused days if the floating holiday is connected to specific dates, such as a religious holiday, cultural event, or the employee’s birthday. Employees can’t typically “cash out” their unused floating holiday pay at the end of the year or when they leave the company. For example, if a business offers a fixed number of floating holidays a year, and an employee only uses some, they can’t add an extra floating holiday to the following year.
The rules differ in US states like California, where unused PTO or floating holidays are not distinct, so they both must roll over from one year to the next. Further, businesses must pay for floating holidays if the employee leaves the company.
Getting paid for PTO vs. floating holidays
Again depending on the country or state, some employers offer to pay employees their full rate while using PTO. Others might pay a percentage of the employee’s rate while on leave.
In the US, floating holidays can be paid or unpaid unless the state specifically mandates payment. In California, for example, you must pay for the floating holiday unless it’s attached to a national holiday or cultural event, as explained in the section above.
Requesting PTO vs. floating holidays
Employers can set their own policies and processes for requesting PTO and floating holidays. However, with PTO, it is standard practice for employees to select any date of their choosing and submit it for approval from their supervisor or a member of human resources (HR).
There are some different options for requesting floating holidays. For example, employees can freely choose the holidays and events they want time off for or select them from a list of company-recognized holidays and events before submitting the request for approval.
What if a holiday falls on a weekend?
Again, how you choose to handle this scenario is down to your discretion. Generally, if a holiday falls on a weekend, there is an observance of the day on the Friday before or Monday after, depending on where you live. In this case, you could consider the observed day as a holiday.
Should you offer floating holidays?
While PTO is still one of a company’s most desirable benefits, employees typically expect it. In contrast, many employees consider floating holidays a bonus or perk.
Therefore, offering floating holidays on top of your PTO allotment can enhance your employee benefits package, giving you a competitive advantage in enticing candidates and improving employee retention rates and experience at your company.
Floating holidays also help employees achieve a better work-life balance and improve employee satisfaction and morale.
In addition, floating holidays are a convenient way to comply with country-specific holiday requirements for globally distributed companies. Instead of having fixed holiday options that adhere to every jurisdiction, floating holidays provide flexibility, relieving HR of the administrative burden of keeping track of local labor laws in each country you operate.
How can you integrate floating holidays into your PTO policy?
Firstly, if you don’t have a company policy for PTO, you should create one. Get started with our free PTO Policy Template. limited
Once you have a PTO policy, you can include a section about your floating holiday policy. The section should clarify the following:
- Who is eligible for floating holidays
- The number of floating holidays you provide
- The number of floating holidays a worker can take consecutively
- Whether or not the holidays must align with recognized national or public holidays somewhere in the world
- Guidelines on how you intend to manage holidays that fall on a weekend
- The rate of pay
Make sure to include your PTO policy in your employee handbook. This will ensure all your employees have easy access to all information regarding their right to time off and the processes involved in requesting it.
Boost your PTO and floating holiday management with Deel
Deel develops HR tools that make it easy to manage and approve PTO and floating holidays directly in Slack. These features, and more, are part of our PTO integration, which lets any user track and request Out Of Office time from their assigned manager.
Start streamlining your PTO processes today, and book a demo to learn more about Deel HR.