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Differences Between PTO (Paid Time Off) and a Floating Holiday

Updated: Feb 29

floating holiday vs PTO

As the world continues to explore the importance of a good work-life balance, more and more companies have implemented floating holidays into their employee benefits packages. 

But what is a floating holiday? How does it differ from paid time off (PTO)? And how can it be integrated into an existing PTO policy? 

In this comprehensive guide, we'll demystify the terminology, uncover the unique characteristics of each benefit, and guide you through understanding the varied ways these leave options can shape work-life balance for employees

Table of Contents

Is PTO the Same as a Floating Holiday?

While PTO and floating holidays share many similarities, they are generally treated as separate employee benefits. 

PTO is defined as time taken away from work while still receiving regular pay. 

While PTO covers several types of leave, floating holidays are a specific type of time off within that PTO framework. A floating holiday may be used at the employee’s discretion and may be paid or unpaid, depending on the company’s policy. 

Paid time off (PTO) describes any period of time during which an employee continues receiving compensation while taking leave from work. This may include: 

  • Vacation time

  • Sick leave

  • Mental health days

  • Bereavement leave

  • Parental leave; or

  • Jury duty

According to the US Bureau of Labor Statistics, 76% of employees from private companies in the US are offered some form of PTO. 

The most common PTO formats offered by employers include: 

  • Unlimited PTO – This is a leave policy where employees are not given a set number of vacation days. Instead, they have the freedom to take time off as needed as long as it does not interfere with their work responsibilities. 

  • Accrued PTO –This refers to the accumulation of paid leave over time. The rate of accrual varies by company. In general, employees may earn a certain amount of PTO hours for each month or year worked. 

  • PTO Bank – Instead of having separate categories for sick days, vacation leave, and personal days, a PTO bank consolidates these hours into a single pool. This policy gives employees more flexibility to take time off as needed. 

While PTO is designed as an all-encompassing policy for leave, it can be limiting. Floating holidays are designed to fill in the gaps so employees can fully enjoy holidays, cultural events, birthdays, or other special occasions without using their PTO. 

What Is a Floating Holiday?

A floating holiday allows employees to take a day off at their discretion. Unlike traditional holidays with fixed dates, a floating holiday allows employees to choose when they want to observe a holiday of their choosing or celebrate a special occasion of personal value, such as: 

  • Birthdays

  • Anniversaries

  • Cultural events

Policies surrounding floating holidays vary widely depending on the company, location, or length of employment. These days may be paid or unpaid and may or may not be considered PTO. 

Are Employers Required To Offer PTO and Floating Holidays by Law?

The United States remains the only developed economy that does not require companies to offer PTO or floating holidays to their employees.

The Fair Labor Standards Act (FLSA) governs workplace practices involving employee wages, health, and safety. It establishes federal minimum wage and overtime pay but does not set guidelines for employee benefits. 

How Many Companies Offer Floating Holidays?

Even though floating holidays are not a standard inclusion in employee benefits packages, they are becoming increasingly popular thanks to increased demand from millennials and Generation Z. According to research by Zippia, around 48% of US companies currently offer floating holidays for employees. 

How Many Floating Holidays Do Employees Receive Per Year?

Like PTO, the number of floating holidays offered may vary depending on the type of job, company size, and an individual’s length of employment. 

According to a 2022 employee benefits survey by the International Foundation of Employee Benefit Plans, around 18 percent of US companies offer one day per year, and 17 percent offer two days per year. 

Accumulating PTO and Floating Holidays

PTO accumulation may vary from company to company. Some companies implement a use it or lose it policy, and some allow them to roll over. Floating holidays, however, do not typically roll over or accumulate. Floating holidays open at the beginning of the year and expire if not used by the end. 

Requesting PTO vs. a Floating Holiday

Companies generally have their own set of policies and processes for requesting PTO and floating holidays, which are often defined in the employee handbook. 

When requesting PTO, employees will usually select their intended day or days of leave and receive approval from their supervisor or HR. 

The standard process for requesting a floating holiday is similar. Employees may choose a birthday, anniversary, or company-recognized holiday before submitting the request for approval. 

Getting Paid for PTO vs. a Floating Holiday

In the United States, floating holidays are an optional benefit and can be either paid or unpaid. Some states, such as California, consider floating holidays as PTO. Therefore, floating holidays must be paid out at the end of employment. 

Can You Cash Out Floating Holidays?

Unfortunately, floating holidays usually do not accumulate like PTO, so there is nothing to cash out. Many companies establish a use it or lose it policy for floating holidays. However, with careful planning, floating holidays can be used to maximize your other employee benefits

4 Benefits of Offering Floating Holidays

#1: Flexibility and Work-Life Balance for Employees

In 2019, the World Health Organization (WHO) officially recognized job-related burnout as a significant mental health concern

The WHO describes burnout as chronic workplace stress that has not been properly managed. It is characterized by:

  • Low energy or exhaustion

  • Mental distance from one’s job

  • Cynicism related to one’s job; and 

  • Decline in productivity

PTO and floating holidays are a great way for companies to reduce the risk of employee burnout. According to the American Psychological Association, taking a holiday can result in several mental health benefits. Holidays promote improved work-life balance and reduce stress, depression, and anxiety. 

#2: Inclusive Work Environment

Floating holidays contribute to a more inclusive and diverse work environment by providing workers with greater flexibility and respecting employees' diverse cultural and religious backgrounds. 

A 2022 Harvard Business Review found that companies with universal policies for sick leave, PTO, floating holidays, flexible scheduling, and other benefits had more diversity among management roles. 

#3: Attracting and Retaining Top Talent

Including floating holidays in your benefits package is a great way to show that your company values a healthy work-life balance, which is very attractive to job seekers.

In a competitive job market, unique benefits set employers apart. Floating holidays can be a distinguishing factor that makes a company stand out when searching for top talent. 

#4: Maximizing PTO

While you may be unable to cash out your floating holidays, you can use them to help maximize your PTO

Employees can take advantage of expiring floating holidays and accumulate PTO in the process. These extra PTO days can be saved in preparation for the vacation of your dreams or advanced with Sorbet. 

Sorbet allows employees to access PTO payouts at any time. Ready to make the most of your benefits? Calculate your estimated PTO payout today.

Integrating Floating Holidays Into Your PTO Policy 

Are you ready to implement floating holidays into your PTO policy to help maximize benefits offerings for your employees? First, you’ll need to establish clear policies on eligibility, accrual, usage, and tracking. 

Your employee handbook should answer the following questions regarding floating holidays:

  • Will floating holidays accumulate or not? Will they accumulate separately? Or will they be included in the PTO accrual?

  • Who will be eligible for floating holidays?

  • How many floating holidays will be provided?

  • How will floating holidays be allocated? Will they begin at the start of the year, on work anniversaries, or another approach?

Once you’ve clearly defined your floating holiday policy, establish a process for employees to request PTO and floating holidays. Outline how requests will be approved, considering operational needs. Be sure to implement a record-keeping process to help manage workload and ensure smooth operations in the workplace. 

Use Your Floating Holidays To Accumulate PTO for a Sweet Cash Advance With Sorbet

If you don’t happen to live in a state that considers floating holidays as PTO, don’t sweat it. Fully utilizing your floating holidays every year allows you to accumulate the PTO needed to turn your benefits into cash with Sorbet. 

Sorbet calculates the value of your future PTO payout from your employer upon termination and allows you to advance a portion of that payout in as little as one week. Sorbet’s application process is simple, safe, and secure. 

Ready to get started? Find out more today.   

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