Floating Holiday vs. PTO: How To Choose Them for Your Company

Human resource managers have a lot to consider. Every choice they make can shape how their company operates and dictate their company’s culture. For example, decisions surrounding paid time off (PTO) and floating holidays can significantly impact employee satisfaction and operational efficiency.

Understanding these policies’ differences, legal requirements, and practical applications is crucial for HR professionals aiming to create a perfectly balanced and compliant work environment.

In this article, we’ll break down PTO, floating holidays, and how Mosey can help you manage leave laws and state compliance.

What Is the Difference Between Paid Time Off and Floating Holiday Time?

PTO and floating holiday time can serve similar purposes. The most significant difference is that PTO can generally be used at any time, while floating holiday time is intended to be used specifically for special holidays or cultural occasions.

What Is Paid Time Off (PTO)?

Paid time off is a comprehensive paid leave policy that consolidates various types of leave, such as vacation days, sick days, and personal days, into a single bank of days that employees can use at their discretion. This flexibility allows employees to manage their time off according to their individual needs, whether for leisure, illness, or personal matters.

What Is a Floating Holiday?

Floating holidays are additional days off that employees can take at their discretion, typically to observe holidays not included in the company’s standard holiday calendar.

Unlike PTO, which combines different types of leave, floating holidays specifically address the need for flexibility in celebrating diverse cultural or religious celebrations that may not be recognized universally.

Floating holiday time is an inclusive policy intended to recognize employees who do not celebrate major American holidays, which most employees have off by default, like Christmas or Thanksgiving.

Other holidays may be more religious or culturally significant to people from different backgrounds, and floating holiday time is designed to hold traditions less commonly observed to a similar standard of importance.

Are Employers Required To Offer Paid Time Off or Floating Holidays?

Paid time off and floating holiday time aren’t federal requirements. Some states require employers to offer paid sick leave (PSL), which is different from leisurely paid days off. PTO and floating holiday time are unique and optional incentives.

Paid Time Off (PTO) Rules

In the United States, federal law does not mandate private employers to provide paid vacation or holidays. However, many employers voluntarily offer PTO as part of their benefits package to attract and retain top talent.

State laws may vary, and employers must comply with applicable regulations regarding accrual, usage, and payout of PTO. If you offer PTO, you may be required to pay it out when you end your relationship with an employee.

Floating Holiday Rules

Similarly, federal law does not require employers to provide floating holidays. The decision to offer floating holidays is at the employer’s discretion, often influenced by factors such as company culture, employee demographics, and inclusivity initiatives.

Employers should ensure that policies regarding floating holidays are fair and nondiscriminatory to avoid legal issues. An employee can claim workplace discrimination if you recognize certain holidays or occasions for floating holiday time but fail to acknowledge others.

It’s important to create a floating holiday policy that includes everyone. If you don’t know if you can accommodate all holidays, it’s best not to utilize floating holiday time. Remember, it’s completely optional to do so in the first place.

How Does Paid Time Off Work?

Companies are flexible in how they implement PTO and write PTO policies. However, be careful with state compliance regarding unused PTO, especially when your relationship with an employee ends.

Accruing and Using Paid Time Off

PTO policies typically involve accrual based on an employee’s duration of employment or a fixed accrual rate per pay period. Using PTO requires advance notice and approval from supervisors. HR managers try to grant PTO in a way that won’t interfere with their company’s operations or leave them shorthanded.

Payout and Carryover for Paid Time Off

Employers may have policies regarding PTO payout upon termination, retirement, or the payment of unused PTO at the end of the year.

Some companies allow employees to carry over unused PTO into the following year, while others enforce a “use it or lose it” policy to encourage employees to use what they have rather than accumulating a very lengthy paid leave that disrupts productivity.

You are required to follow your written policy. However, as long as it complies with state law, you can write it however you’d like. Just make sure it’s enforced equally for everyone and that you’re prepared to uphold your end of the agreement.

How Do Floating Holidays Work?

Managing floating holiday time can be more complicated than managing PTO. HR managers who implement floating holiday time will have unique considerations to make, especially if many of their employees would utilize this benefit.

Eligibility for Floating Holidays

Floating holidays are typically granted based on the company’s holiday calendar and employee eligibility criteria. Employees may be required to work on certain designated holidays and are compensated with floating holidays that they can take at their discretion within a specified period.

For example, you may have an employee who doesn’t celebrate Christmas. If your company can be productive or open on Christmas, you may ask them to work on that day. In exchange, they’ll get to take their holiday off on a more significant day to their culture or religion.

Managing Floating Holiday Time

HR departments manage floating holidays by documenting accrual and usage. Floating holidays will be different for everyone who uses them unless your workforce is significantly composed of a specific demographic.

For example, if you have a significant number of employees with Chinese ancestry, they may want to take their floating holiday time around the Chinese Lunar New Year. It’s customary in China for most employees to take two full weeks off during the Lunar New Year.

HR managers must plan and prepare accordingly, as navigating floating holiday time in certain situations can be tricky. Clever scheduling solutions may be required to ensure coverage during holiday periods.

What To Consider for Paid Time Off at Your Company

HR managers have much to consider when choosing to use traditional PTO or floating holiday time. The best solution is the choice that addresses the needs of the majority of your workforce. Let’s start with some top considerations for PTO:

Flexibility and Employee Needs

PTO provides flexibility for employees to manage their time off for various purposes, which promotes a better work-life balance.

Easy Implementation

Consolidating different types of leave into PTO simplifies taking leave for various purposes. Employees can choose what they use their leave for and may schedule vacations or personal time whenever it works best for them.

Accrual Challenges

Accrued PTO can impact your payroll budget and scheduling if requests aren’t approved appropriately. Consider how PTO may affect your budget and productivity.

What To Consider for Floating Holiday Time at Your Company

Now that we’ve reviewed which factors to consider when determining PTO, let’s shift gears and focus on floating holidays:

Inclusivity

Floating holidays accommodate diverse cultural and religious practices. Floating holiday time can indicate that you regard everyone with equal importance.

Compliance and Policy Clarity

Clear policies on eligibility, accrual, and usage of floating holidays ensure fairness and compliance with labor laws and your company culture. Make sure floating holiday decisions aren’t viewed as discriminatory.

How To Choose Between PTO and Floating Holidays

The decision between PTO and floating holidays ultimately depends on your company’s culture and workforce demographics. Consider your team’s needs carefully before making a decision. If you’re unsure, you can always hold a meeting with employees to ask them how they feel.

Employee Needs Come First

Policies designed to promote work-life balance should respect your company’s needs, but they’re primarily designed to make your employees’ lives easier. Consider your team’s preferences and demographics. What would work best for everyone?

Consider Compliance Issues

Ensure your leave policies comply with federal, state, and local accrual, usage, and discrimination laws. You may need to pay out for unused time. You may also have to respect various cultural and religious practices when using floating holidays.

Assess the Impact

Implementing and managing PTO or floating holiday time is the responsibility of the HR department. Which scenario is more feasible for your department? Do you have the time, resources, and capabilities to implement the leave policy you’ve chosen?

Stay Compliant with Mosey

HR managers regularly make decisions that shape the employee experience. One such decision is choosing between PTO and floating holiday time, but the right choice is always the one that works best for your team. Be mindful of state and local compliance issues and how they may impact your company’s policies.

Mosey can simplify state and local business compliance. Our compliance management platform can help you keep track of the rules and laws your HR team must follow using advanced compliance automation. Schedule a demo with Mosey to learn how we can make life easier for HR teams.

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