As an HR leader, you’ve probably spent hours refining PTO policies, balancing fairness with flexibility. But there’s one benefit that quietly checks both boxes: the floating holiday.

Once considered a nice-to-have, it’s now a strategic tool for promoting inclusivity, autonomy, and employee well-being without expanding total time off.

Today’s workforce expects more than a one-size-fits-all approach to paid leave. Be it religious and cultural observances, mental health breaks, or even personal milestone,  employees want the freedom to choose what’s meaningful to them.

Floating holidays make that possible, offering an equitable alternative to rigid PTO structures that often overlook diversity and modern work-life needs.

For HR teams, this isn’t just about keeping employees happy. It’s about staying competitive in a labor market that values personalization. When implemented thoughtfully using HR software, floating holidays can reduce burnout, strengthen engagement, and reinforce your company’s commitment to inclusivity.

In this article, we’ll look at what floating holidays really mean for HR teams, the benefits they bring to employees, and the tools you can use to make managing them seamless and compliant.

What constitutes a floating holiday (and what doesn’t)

Before we get into why floating holidays are becoming an HR must-have, let’s start with the basics: what exactly counts as one, and what doesn’t? While flexibility is the core appeal, it’s important to set clear parameters to avoid confusion.

Typically counts as a floating holiday:

• Personal or cultural observances not included in the company calendar
• Religious holidays not recognized nationally
• Personal milestones or mental health days, if approved under company policy

Doesn’t usually count as a floating holiday:

• Vacation days (these are planned leisure time under PTO)
• Sick leave (reserved for illness or medical reasons)
• Unpaid time off (since floating holidays are paid)

Establishing this clarity upfront helps employees plan responsibly and helps HR teams maintain fairness and consistency across departments.

Why floating holidays matter for HR leaders

For HR leaders, floating holidays are a reflection of how well your organization understands and supports its people. In a workforce defined by diversity, hybrid schedules, and evolving cultural identities, flexibility has become a key driver of retention and engagement. Floating holidays meet that expectation by giving employees the autonomy to decide which days are personally meaningful to them. It helps

• Promote inclusivity: Fixed holidays often reflect limited cultural traditions. Floating holidays allow employees to observe events that matter to them, from festivals to personal milestones.
• Build flexibility: Empower employees to choose when to take time off without disrupting team operations or increasing PTO allocations.
• Boost engagement and retention: Flexibility signals trust and respect, improving morale and strengthening employer brand perception.
• Support DEI initiatives: Offer equitable time-off options that reflect a diverse and global workforce.
• Enhance efficiency with software: Use HR or workforce management platforms to automate tracking, ensure compliance, and gain visibility into usage patterns.
• Control costs: Introduce flexibility without adding to your overall PTO liability or administrative workload.

How to implement floating holidays effectively

Rolling out floating holidays isn’t just about adding another time-off option. For HR leaders, the goal is to balance flexibility for employees with operational clarity and compliance.

But the fact of the matter is that there is no singular way to set floating holiday standards. Different businesses work in varying industries that have different peak seasons, standards, and needs. Here’s how to do it effectively:

• Define clear eligibility: Establish who qualifies for floating holidays, whether it’s full-time, part-time, or contract employees. Consistency is key. For example, if part-time staff are eligible, clarify whether their floating holiday hours are prorated. This transparency helps prevent confusion and ensures equity across your workforce.
• Set usage limits and rules: Decide how many floating holidays employees receive annually (typically one or two) and whether unused days roll over or expire at year-end. Define how far in advance employees must request time off and whether approval from managers is required. Having these rules in writing helps reduce policy gray areas.
• Align with compliance requirements: Check local and state labor laws, especially if your organization operates across multiple regions. Some jurisdictions treat floating holidays as earned wages, meaning you may need to pay them out upon termination. Building compliance into your policy from the start avoids potential legal complications later.
• Communicate transparently: Policy awareness directly impacts adoption. Publish your floating holiday policy in your employee handbook and HR portal, and highlight it during onboarding and internal communications. Use examples (“You can use this day for religious observances, personal milestones, or mental health breaks”) to make the purpose clear and approachable.
• Automate tracking with software: Use HR or workforce management software to automate accruals, time-off requests, and reporting. This reduces manual tracking errors, ensures visibility for managers, and provides insights into usage trends. Integration with payroll systems also ensures accurate time-off balances. If you’re exploring platforms to simplify time-off management, G2 can help. Browse verified reviews or chat with G2 AI to find the best-fit solution for your organization’s needs.
• Monitor adoption and engagement: Keep an eye on how employees are using floating holidays. Low utilization might indicate unclear communication, cultural stigma around taking time off, or process friction. Regular audits and engagement surveys can uncover barriers and help you adjust your messaging or policy.
• Gather feedback and refine: Treat your floating holiday policy as a living document. Solicit employee and manager feedback annually to identify gaps, like timing, approval challenges, or awareness and adjust accordingly. Policies that evolve with employee needs tend to see higher engagement and satisfaction rates.

What are some best practices for HR teams to follow? 

Once your floating holiday policy is live, the focus should shift to making it meaningful, not just functional. These best practices help HR teams maximize impact and cultural resonance:

• Lead with empathy and inclusion: Position floating holidays as a way to celebrate individuality and cultural diversity, not just as another leave type.
• Encourage awareness and participation: Promote the benefit during onboarding, all-hands meetings, and seasonal communications so employees actually use it.
• Empower managers to support flexibility: Train leaders to approve time-off requests fairly and handle coverage planning without bias or hesitation.
• Integrate with broader initiatives: Align floating holidays with DEI, wellness, and engagement programs to reinforce your company’s inclusive culture.
• Celebrate observances company-wide: Use internal channels to highlight how employees use floating holidays — spotlighting different cultural or personal milestones.
• Review and refine annually: Revisit the policy each year to ensure it continues meeting employee expectations and business needs.

Floating holidays FAQs

The question of time off and vacation days is a pressing one for employers. Let’s answer some questions regarding floating holidays that employers find themselves asking.

Q. What is the difference between a floating holiday and PTO?

A floating holiday is a paid day off that employees can use for personal, cultural, or religious reasons not covered by standard company holidays. PTO (paid time off) typically covers vacations or general personal days and often accrues over time. Floating holidays are usually granted separately, don’t accumulate, and may expire at the end of the year if unused.

Q.What are the rules for floater leave?

Rules depend on company policy, but most organizations offer one or two floating holidays per year. Employees usually need to request them in advance and get approval from their manager. Some employers allow floating holidays to carry over, while others reset them annually. The key is to clearly define eligibility, approval steps, and expiration rules in your HR policy.

Q. Is floater leave paid or unpaid?

Floater leave is typically paid; it’s an additional paid day off separate from vacation or sick leave. However, if a company offers unpaid observance days or flexible unpaid leave options, that distinction should be clearly stated in the employee handbook to prevent confusion.

Q. Am I required to offer floating holidays as an employer?

No, offering floating holidays is not legally required. It’s an optional benefit that employers can choose to include in their leave policies to promote flexibility and inclusivity. However, once you establish a floating holiday policy, you must adhere to it consistently and comply with applicable labor laws, especially if your jurisdiction treats unused floating holidays as payable upon termination.

Q. Why should I offer floating holidays?

One of the most prevalent reasons that employers will offer floating holidays is to embrace diversity in the workplace.

Besides the legality of it all, offering floating holidays is a great addition to your paid time off policy. It shows your employees that you care about work-life balance, their needs as a person, and a business run by a diverse group of people. Offering floating holidays as a benefit will entice candidates to your business, improve employee retention rates, and their experience at your company overall.

Q. Are there any disadvantages to floating holidays?

Disadvantages of floating holidays will only arise in certain situations. It all depends on how you, as an employer, handle it.

Depending on your industry, there will be some times that will be less favorable for certain positions to take time off. If you are inconsistent with dates you allow to be taken off and the people you allow to take floating holidays, employees will see that as unfair.

To reap the full benefits of offering floating holidays without making your employees feel uneasy, you have to find a happy medium that is fair and still conduct business.

Q. Is it important to keep track of floating holidays?

Short version, yes. For scheduling and payroll purposes, it is important to keep track of who is taking what days off. Also, to keep business going, you can’t let your office turn desolate. This is why the approval process is important. Make sure your employees are giving you notice so you can plan ahead and keep your office, and business, from becoming a ghost town.

Float on to holiday

Floating holidays may seem like a small benefit, but they can have a big impact on culture. They show employees that your organization values flexibility, inclusion, and real work-life balance, without adding administrative complexity.

If you’re looking to simplify how you manage time off, explore the best employee leave management software to streamline policies and support your people year-round.

This article was originally published in 2019 and has been updated with new information.