There are a variety of ways you may give your employees time off from work. Some of these include paid time off such as vacation, sick, or holiday time. And if you offer holiday time, there may come an instance when a holiday overlaps with a day an employee would already have off from work. If that occurs, you might consider giving your employees a floating holiday. So, what is a floating holiday?
Floating holiday meaning
Say you offer your employees a paid holiday for New Year’s Eve and New Year’s Day. Both days fall on Saturday and Sunday, respectively. You decide to observe New Year’s Day on the following Monday. But, what should you do with the day you would have given off for New Year’s Eve?
You have three options available to you:
- Set dates on the calendar to give employees both days off (e.g., the Friday before the holiday and the Monday after)
- Waive the time off for the holiday entirely
- Give employees a floating holiday
What is a floating holiday at work, exactly? A floating holiday is a paid day off an employee can use at their discretion. This day “floats” because the employee can use the day anytime throughout the year.
How do floating holidays work? Consider the example where New Year’s Eve and New Year’s Day fall on a weekend. You give employees a floating holiday for New Year’s Eve to use at their discretion. Employee A chooses to use their floating holiday for their birthday in July. The holiday “floats” and becomes a day in July.
Many employers give floating holidays to replace paid holidays that occur on non-work days. You may also decide to give your employees an additional floating holiday each year as an extra day off from work.
What are the typical paid holidays?
In the USA, employers generally observe at least six federal holidays:
- New Year’s Day
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving Day
- Christmas Day
Some employers also give employees a paid holiday for the day after Thanksgiving (i.e., Black Friday) and Christmas Eve.
Some employers choose to follow federal legal holidays and provide 11 paid holidays each year.
If a paid holiday falls on a non-work day, employers may observe the paid holiday on the workday before or after the holiday.
There are no federal laws requiring employers to provide paid holidays or floating holidays. State laws may vary. Check with your state before providing paid holidays or creating a floating holiday policy (which we’ll get to later).
How do employees use floating holidays?
If you decide to give employees a floating holiday, you need to determine the company’s guidelines for using it. Create a written policy for your employees before you offer floating holidays. This way, you ensure that your employees know how to use it before requesting time off.
Consider asking yourself the following questions:
- Can employees use floating holidays at any time?
- Do you have blackout dates where employees cannot use pre-planned paid time off?
- Will you limit the use of floating holidays to specific cultural, religious, or government holidays you do not already give holiday time for?
- How much advance notice should employees give when requesting to use their floating holiday (e.g., two weeks)?
- Who qualifies for floating holidays (e.g., full-time employees only)?
- How long must new employees wait to receive a floating holiday?
- When will you make the time off available (e.g., beginning of the year)?
- Does the floating holiday expire? If so, when?*
*State laws may prohibit use-it-or-lose-it policies with all paid time off, including floating holidays. Check with your state government before deciding if a floating holiday can expire.
Say your business’s busy season comes during the summer months of June and July before tapering off in August. Aside from Independence Day, you blackout June and July and do not allow employees to use paid time off, such as vacation. In your floating holiday policy, you can specify that employees also cannot use their floating holiday in these two months.
Need to stay in the know about all things payroll?
Get the latest payroll news delivered straight to your inbox.Subscribe to Email List
Example of a floating holiday policy
Your business decides to offer a floating holiday in addition to the other standard paid holidays you provide. The floating holiday policy you add to your employee handbook might look like this:
- Full-time employees receive one eight-hour day of paid leave to use at their discretion.
- The months of June and July are blackout months. Employees may not use their floating holidays during these months.
- Employees must submit a time-off request to their supervisor no later than two weeks before the planned leave.
- The company provides access to the floating holiday on January 1 each year.
- New full-time employees receive their floating holiday after 90 days of continuous employment.
- Employees must use their eight hours of floating holiday before December 31 or forfeit the hours.
- The eight hours of a floating holiday must be used consecutively and cannot be divided across multiple days.
What is floating holiday pay?
Decide to give your employees a floating holiday? Great! Now, how do you pay employees when they decide to use it?
Pay floating holidays like you would any other holiday that an employee does not work. Consider using a special holiday hour code when running payroll to differentiate between floating holidays and typical holidays. That way, you can track which employees have and haven’t used their floating holiday.
Say Employee A uses their floating holiday during the pay period of February 1 through February 14. They work 72 hours during the period and use eight hours for their floating holiday to equal 80 hours (72 + 8). The employee earns $15 per hour. Their gross pay looks like this:
Regular Hours = 72 X $15 = $1,080
Floating Holiday Hours = 8 X $15 = $120
Gross Pay = $1,080 + $120 = $1,200
Withhold taxes from the paid floating holiday hours like you would the employee’s regular wages. Calculate federal income, Social Security, Medicare, and state and local income taxes, if applicable. Also pay the employer payroll taxes like Social Security, Medicare, and federal and state unemployment taxes, if applicable.This is not intended as legal advice; for more information, please click here.