What Are Floating Holidays? A Modern Perk for a Flexible Workforce

In workplaces where employee experience and well-being are central to talent retention, business leaders will continually revisit their benefits package to ensure it remains competitive. 

One perk currently gaining traction: floating holidays, a flexible form of paid time off that allows employees to take leave on days that matter most to them. According to recent surveys, nearly half (48%) of employers now offer some form of floating holiday—an increase of 10 points over the past decade. 

But what are floating holidays exactly? Unlike standard holidays, which are pre-set by the employer (such as Christmas, Thanksgiving, or Independence Day), floating holidays are discretionary and allow employees to choose when to take their time off. They also differ from traditional paid time off (PTO) in that they are specifically designated for use on days that might otherwise not be company-recognized holidays. This flexibility means employees can observe religious, cultural, or personal occasions without having to dip into their general PTO balance.

What Are Floating Holidays? A Key Component of the Modern Benefits Package

As the workforce grows more diverse, companies are recognizing that a one-size-fits-all approach to holidays does not serve all employees equally. Floating holidays provide a crucial bridge between traditional corporate PTO plans and the personal needs of employees. In doing so, they align with modern trends in HR that prioritize individualized benefits, work-life balance, and employee engagement.

“People need time off from work to recover from stress and prevent burnout,” says David W. Ballard, PsyD, MBA, who heads the American Psychological Association’s (APA) Center for Organizational Excellence. And that’s exactly what time off enables. The APA has found that Americans report post-vacation improvements in mood (68%), energy (66%), and motivation (57%). Additionally, more than half (58%) report that they are more productive and produce better quality work after taking time off.

In short, by incorporating floating holidays into their benefits package, companies signal their commitment to employee well-being while creating a more inclusive and adaptable work environment.

Work-Life Balance Tips: Flexibility and Personalization

One of the most significant advantages of floating holidays is the flexibility they offer. Unlike rigid, predetermined holiday schedules, floating holidays empower employees to decide which days hold the most significance for them. This flexibility is particularly valuable in accommodating religious and cultural differences. 

“[S]uch an approach to time off also allows more flexibility with regard to observance of religious and ethnic holidays and observances,” says Terry Henley, CCP, SPHR, director of compensation services at Employers Resource Association. Instead of forcing employees to take unpaid leave or use PTO for religious celebrations not recognized as federal holidays, floating holidays provide an equitable solution that respects varying traditions and practices. 

Beyond religious observances, floating holidays give employees the ability to take time off for personal reasons, whether for birthdays, anniversaries, or simply a mental health day to recharge. This added flexibility enhances job satisfaction and reduces stress, contributing to overall employee well-being. (For additional work-life balance tips, read our guide to 4 more work-life balance strategies).

The Business Case for Floating Holidays

From an employer’s perspective, offering floating holidays is not just about accommodating employee preferences; it’s an investment in productivity and engagement. A well-structured leave policy that includes floating holidays yields a series of stacking benefits:

1. Adding Floating Holidays to a Benefits Package Yields a More Comprehensive, Employee-Friendly Leave Policy. Incorporating floating holidays signals to employees that their personal and cultural values are respected. This fosters a positive work environment, increasing employee morale and loyalty.

2. A Good Leave Policy Encourages Better Work-Life Balance. Employees with the ability to take time off on meaningful days experience better work-life balance. When employees can recover from stress and exhaustion, they return to work recharged, leading to less absenteeism and lower turnover rates.

3. Improved Work-Life Balance Increases Employee Performance. Studies have consistently shown that a strong leave policy contributes to improved employee performance. According to an Ernst & Young study, for each additional 10 hours of vacation their workers took, their year-end performance rating increased by 8%. This underscores the direct correlation between time off and productivity.

In industries where burnout is a significant concern, such as healthcare, technology, and finance, floating holidays offer a valuable tool to mitigate stress and sustain high performance over the long term.

Implementing Floating Holidays Successfully

While the benefits of floating holidays are clear, implementing them effectively requires careful planning. Employers must consider key legal, administrative, and policy-related factors to ensure their floating holiday program supports both business goals and employee needs.

1. Policy Clarity and Communication: A well-defined floating holiday policy should specify how many floating holidays employees receive per year, how they can be used, and any restrictions (such as blackout dates during peak business periods). Clearly communicating these details ensures employees understand and can fully utilize the benefit.

2. Legal Compliance: Since floating holidays function as paid time off, they may be subject to employment laws, including those governing PTO payout upon termination. Employers should consult legal counsel to ensure compliance with both federal and state labor regulations.

3. Scheduling Considerations: To prevent scheduling conflicts or operational disruptions, employers may require advance notice for floating holiday requests. Implementing a simple approval process can help balance employee flexibility with business continuity.

4. Tracking and Integration with Payroll Systems: Employers should integrate floating holidays into their HR and payroll systems to ensure seamless tracking and compliance with paid leave policies.

A Smart Part of Any Benefits Package

Floating holidays represent a forward-thinking approach to paid leave, reflecting the realities of a diverse and dynamic workforce. As businesses strive to create more inclusive and employee-centric workplaces, this flexible perk is increasingly becoming a must-have component of a competitive benefits package.

By implementing floating holidays effectively, organizations not only enhance work-life balance but also drive employee engagement, reduce burnout, and ultimately improve performance. In a world where attracting and retaining top talent is more challenging than ever, offering a leave policy that acknowledges individual needs is a powerful differentiator. With nearly half of employers already offering them, it’s clear that this perk is more than a passing trend—it’s an essential feature of the modern workplace.

For more information on how to procure and craft a modern and maximally effective benefits package, take a look at CoAdvantage’s benefits services. As one of the nation’s largest Professional Employer Organizations (PEOs), we help small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more, contact us today. 

**The information provided on this website is for general informational purposes only and does not constitute legal advice. While we strive to ensure the accuracy and completeness of the information, we make no guarantees about its correctness, completeness, or applicability to your specific circumstances.  Laws and regulations are subject to change, and you should consult a qualified legal professional before making any decisions based on the information provided here.