Managing Floating Holidays Effectively as a Small Business

A floating holiday policy is one of the most flexible ways to ensure that your employees take time off and feel valued as individuals at your organization.

Small business owners in the U.S. aren’t actually required to provide paid time off (PTO)—but PTO can make your business a more appealing place to work. A great, flexible time-off policy helps attract high-quality employees and keep them developing their careers with you for longer. Supporting your people to take the time off they need without losing pay could raise morale and even make your workers more loyal and productive.

In this article, we’ll explore exactly what floating holidays are, how they work, and how they could benefit your business—as well as our top tips for implementing them.

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What is a floating holiday?

A floating holiday is an additional day that employees can take off work without affecting their annual leave entitlement. Employers add floating holidays to their PTO policy to allow employees to observe significant personal or cultural events (see examples below).

Unlike fixed holidays (e.g. Christmas or Independence Day), a floating holiday isn’t prescribed by the employer or the standard holiday calendar, but chosen by the employee. Sometimes, people also use the term to refer to holidays that move every year, like Thanksgiving.

Examples of floating holidays

Thanks to their flexible nature, floating holidays look different depending on the business and the employees. However, people typically use floating holidays for:

• Religious or cultural holidays that aren’t recognized by the standard U.S. holiday calendar, such as Seollal (Lunar New Year's Day in Korean culture)

• Volunteering, e.g. participating in a local community fundraiser
• Birthdays or important anniversaries
• Wellness days, such as spa visits or therapy hours

How do floating holidays work?

Floating holidays should be requested in advance, just like any other PTO. Typically, employees are given a set number of floating holiday hours every year, which they can take off in addition to PTO and federal public holidays.

For example, you might already offer 10 days PTO as well as Christmas Day and New Years Day. In addition, you could choose to give every employee a two floating holidays to observe events that are significant to them.

Some employers set restrictions on booking certain dates to avoid staffing issues. Imagine you’re a food and drink vendor near a large stadium. You might not allow floating holidays to fall on the same day as major sporting events—you’ll need all hands on deck to deal with increased footfall on those days.

We’ll discuss more considerations for writing your holiday policy below. But first, let’s explore why you’d consider this benefit at all.

How floating holidays benefit your business

Nearly a third of employees (32%) feel their manager doesn’t care about their wellbeing. Staff benefits (like a great holiday policy) can help show them that the opposite is true.

Floating holidays aren’t just a perk; they’re a building block for a workplace culture that respects diversity and promotes work-life balance. They can also impact the efficiency and profitability of your business, as we’ll discuss here.

Here are a few benefits of a floating holiday policy:

• Reduce unscheduled absences: Sometimes, employees will take unscheduled leave in order to meet personal commitments. If your time off policy is more flexible, everyone will be able to plan ahead and schedule the leave they need in advance.

• Flexible staffing: Managing staff around fixed holidays can be a challenge for small businesses. You could replace the entire public holiday allowance with floating holidays. That way, some employees might choose to work Christmas Day, so that they can celebrate Diwahli instead—and your business will be staffed all year round.

• Save money on staff benefits: Your business might not have the budget for commission schemes, health insurance or gym membership, but that doesn’t mean there are no perks to being an employee. A floating holiday policy is a relatively low-cost way to improve the value of your staff benefits package.

• High employee satisfaction: A floating holiday policy recognizes the diversity of your workforce, meaning individuals from all cultural backgrounds feel valued and respected. This may have a powerful knock-on effect: When employees feel positive about their employer, they can become more engaged and more productive too.

• Boost company reputation: In a competitive job market, employees expect more flexibility and better work-life balance. Being known for a great vacation allowance could therefore improve recruitment. Plus, a floating holiday policy indicates a more inclusive work environment for employees from diverse backgrounds, which makes your business a more attractive place to work.

How good is your team’s culture? Take the team culture quiz to find out where to improve.

What to consider when creating a floating holiday policy

One of the great things about a floating holiday policy is you can tailor it to your unique business and the best interests of your employees. As you think about how your PTO policy should look, consider the following:

How many days to make available

The first thing to consider is how many days of leave to include in your floating holiday policy. Some organizations choose to offer a single day, e.g. birthdays, while others will give a set number of days for the employee to use as they see fit.

There are typically 10 federal public holidays in a year. In addition to the standard PTO allowance, you could allow employees to take 10 days of floating holidays, so they get to observe the cultural events that are most significant to them. Some might stick to the prescribed federal holidays, but others will be grateful for the flexibility.

So long as the time off is requested in advance, this shouldn’t impact employee scheduling too much. Mind you, if you’re worried about scheduling you could use a tool like Homebase to auto-schedule based on the team’s latest availability (as well as sales forecasts and labor targets).

What additional rules should shape the policy

To protect business operations and set staff expectations, it helps to establish clear regulations to shape your floating holiday policy.

First, find out if your scheduling or time tracking tool can help you implement your time-off policy. For example, Homebase users can adjust time off settings, create policies, and manage time-off requests all in the app.

With Homebase, you can also set blackout dates to prevent any time off being booked on those busy days. That way, your people will always be supported to take time off in line with the policy, meaning fewer scheduling headaches for you.

When creating your policy, make sure you factor in the following:

• Blackout dates. Are there any dates where employees cannot take time off? If you know that Boxing Day is your busiest day of the year, set this as a blackout date to prevent understaffing.

• Notice periods. Another way to avoid understaffing is to limit the holiday that employees can take during their notice period. Otherwise you may find you have unexpected vacancies that harm your operations.

• Rollover options. Does unused leave roll over to the following year? Letting employees carry over leave is generous, but you might want to set some rules to avoid staffing issues. Some employers limit the number of days that can carry over, while some require unused leave to be booked within six or eight weeks.

• Multiple requests. Depending on the size of your team, you might have a “first come first serve” approach that means only a limited number of employees can book leave on any given day.

How you’ll track time off

How you track floating holidays depends on the systems you already have in place for time tracking and scheduling. There are plenty of tools that can make this hassle free for you and your employees. If you don’t have one already, consider a scheduling app that integrates with your payroll system and is accessible across devices (including cell phones).

Tracking different types of leave separately can be necessary for effective workforce planning (and compliance—since sick leave is a legal requirement in some jurisdictions). That’s why it’s important to consider how you’ll track floating holidays. Over time, you’ll be able to spot trends in leave patterns which helps allocate resources more effectively.

Whether unlimited paid time off is an option

If floating holidays are an option for your team, it’s worth considering unlimited PTO as an alternative benefit. With unlimited PTO, you don’t need to worry about a specific floating holiday allowance. Instead, employees can take whatever leave they need provided there’s cover for their work.

Most employers require PTO to be approved by a manager, so it’s still possible to protect your business from understaffing. You could also use an app like Homebase that gives employees accountability over their shifts. This empowers your team to pick up and trade shifts, manage their availability, and request time off as it suits them—while you get to set blackout dates and time-off policies to help with resource management.

Employees with unlimited PTO actually report the best work-life balance, so it could work in your favor to consider this policy. However, it’s not right for every business. It’s worth weighing up the challenges of floating holidays vs unlimited PTO and deciding which model best suits your operational needs.

For example, floating holidays might lead to scheduling conflicts if some employees want the same days off. Meanwhile, unlimited PTO can lead to uncertainty about what’s an acceptable amount of holiday to take, leading to disproportionate usage across the team.

How you’ll communicate the updates to your team

How you communicate updates is a big consideration for any policy rollout. Effective team communication will help avoid confusion and make sure everyone is getting access to the new benefit.

For example, you could send around an email newsletter describing the update and sharing the new policy. Or you could use Homebase’s free messenger tool to send messages to individuals, groups, or an entire team—making sure no one gets missed.

But communication can begin before you even implement the policy. Consider asking for staff feedback on the idea of a floating holiday policy, particularly if you’re weighing your options between this and unlimited PTO.

Including your team in decision-making from the get-go ensures that this work benefit is relevant to your team and won’t go to waste. It will also show them that you’re invested in their wellbeing and could increase their engagement at work.

Before you jet off

As a small business owner, embracing floating holidays could be a game changer for you and your employees. Not only do floating holidays offer your team more flexibility, but this policy can also help position your business as a modern, employee-centric, and inclusive place to work.

Be sure to consider how you’ll implement and manage floating holidays. Will you replace all federal public holidays with floating holidays or will you offer them in addition to those days? Will you set blackout dates or other restrictions to protect the business during busy periods?

Either way, the key to writing a great time-off policy is balancing operational requirements with employee needs, ensuring a great outcome for both.

Don’t forget, Homebase can help you launch your new policy successfully, by allowing employers to adjust time-off settings and write policies directly in the app. With Homebase, employees can schedule leave easily, all within the parameters set by you.