What is a floating holiday?
A floating holiday is a flexible paid day off that employees can take as a substitute for a public holiday. They are given to employees to observe any religious holidays, cultural practices, or special occasions. In some companies, these holidays are often referred to as ‘optional holidays.’ While they are used as a substitute for holidays and taken on a day chosen by the employee, they are different from public holidays. Public holidays are mostly mandatory, meaning that all businesses remain closed. On the other hand, floating holidays are not mandatory, and employees can take them from the company-provided list of holidays whenever needed.
For example, an employee who doesn’t want to take a leave on Diwali can exchange or substitute this holiday on his birthday or another holiday of his choice. This, however, depends on the company’s list of floating holidays and floating holiday policy. Some companies provide floating holidays for birthdays and special occasions as well.
Floating holidays and PTO
Paid time off (PTO) and floating vacations are similar yet different in several respects. For instance, PTO is awarded to the employees according to their experience and performance over time. In contrast, floating holidays are awarded when the employee joins the company and at the beginning of every year. Employees can accumulate PTO when not used and use it later, but floating holidays expire at the end of the year.
Benefits of offering a floating holiday
Floating holidays expire at the end of the year and do not accumulate. Companies must explain the floating holiday parameters to the employees before implementing the policy. Despite being a lesser-known perk, it has the potential to improve the benefits package. The 5 benefits of a floating holiday are:
- It keeps the business running during the holidays.
- Reduces stress and improves work-life balance.
- Promotes a diverse and inclusive workplace.
- Acts as a job perk that attracts and retains top talent.
- Shows employees that the company cares about their mental well-being.
Disadvantages of floating holidays
- Taking off in a certain period might be less favorable for the business for some positions.
- Inconsistency with the date and people allowed to take floating holidays can lead to miscommunications among team members.
- Not keeping track of floating holidays can affect the business.
Things to consider while developing a floating holiday policy
A floating holiday policy ensures that employees are not confused about floating holidays. They give an overview of the available floating holidays in the company and state the approval process. To create a floating holiday policy:
- Set an eligibility criterion and clearly mention who can use floating holidays
- State the number of days employees can take time-off as a floating holiday
- Provide a list of preassigned holidays
- Detail the specifications of leave carryover and encashment
- Explain the procedure for the approval process
- Restrictions on the usage of floating leave
Can HR increase Employee Retention with Floating Holiday?
Floating holidays are inexpensive, and a job perk most employees desire. Employees can take time off whenever they want from the company-approved list. There is no law that requires companies to provide floating holidays but companies that do offer this perk can boost employee morale and work-life balance. The main aim of offering floating holidays has much to do with employee satisfaction and workplace diversity. Ultimately, this promotes employee retention. Employees who would rather work on a specific holiday but take time off on another occasion can make use of this perk. They can spend time with their families or observe cultural practices on other days. By providing this perk, companies show that they care for the employees by having additional days off for personal and religious time. Hence, it’s rare for companies to provide such a perk which is viewed as an inexpensive benefit that employees appreciate.
Frequently Asked Questions (FAQs)
1. How does a floating holiday differ from regular holidays?
While regular holidays do not require employees to work, floating holidays are flexible and can be used whenever the employees wish to.
2. What holidays are generally considered as floating holidays?
Some holidays are considered as floating holidays because they do not fall on the same day next year. The date keeps changing and hence, they are considered as floating holidays. Additionally, special occasions, cultural, and religious practices days are also considered floating holidays.
3. How many floating holidays are allocated per year to employees?
Companies usually allocate 2 to 3 floating holidays per year to employees. These holidays are reset annually and do not accumulate.
4. Are there any legal or regulatory considerations we should be aware of when implementing floating holidays?
While offering floating holidays is not mandatory, there are a few legal and regulatory considerations companies should be aware of, such as:
- The rules regarding working hours, holidays, and leave entitlements
- Providing paid leave on national holidays
- Ensuring that providing floating holidays do not undermine the minimum leave entitlements prescribed by law
- No discrimination against any protected class
- Tax implications
5. Can floating holidays be carried over to the next year if unused?
The carryover of unused floating holidays to next year depends on the specific policies and practices of the company. There are no laws prohibiting the carryover of floating holidays.
6. Are floating holidays granted on a pro-rata basis for part-time employees?
While some companies grant floating holidays to part-time employees on a pro-rata basis, other companies don’t. This majorly depends on the company’s eligibility criteria for using floating holidays.
7. What is the difference between floating holidays and PTO?
Paid time off (PTO) covers sick days, casual days, and vacation time. On the other hand, floating holidays cover special occasions, cultural events, etc.
8. What happens if an employee leaves the company before using their floating holidays?
Some companies pay the employees for the unused floating holidays at the time of exit. However, some companies do not initiate encashment.
9. Can floating holidays be used to extend a vacation or a long weekend?
Floating holidays can be used to extend a vacation or a long weekend after using regular holidays or leave.
10. Can floating holidays be cashed out or exchanged for additional compensation?
While most companies don’t allow floating holidays to be cashed out or exchanged for additional compensation, some companies allow it as per their floating holiday policy.
11. How are floating holidays accounted for in the company’s attendance or time-tracking system?
Floating holidays can have a separate code in attendance or time-tracking system which can be requested and tracked. The system can also deduct the appropriate number of floating holiday hours from the employee’s leave balance.
12. What is the main difference between a floating holiday and vacation?
Vacation time is planned for rest, relaxation, travel, and personal reasons. On the other hand, floating holidays are used for cultural events, special occasions, religious holidays, and so on.