Floating holiday vs. PTO: what you need to know

Floating holidays vs. PTO: What’s the difference?

Floating holiday and PTO are both forms of paid leave, but they’re used for different reasons. Companies frequently offer both to their employees. PTO covers things like sick days and vacation time, while floating holidays are used at the employees’ discretion to celebrate special occasions, cultural events, and more.

Let’s take a look at each type of employee leave more closely.

What is PTO?

PTO refers to all the paid days employees can take off from work, and usually includes vacation time, sick leave, and personal days.

The US federal government does not legally require private employers to pay staff members for any time they are absent from  work, according to the Fair Labor Standards Act. Still, PTO has become a standard benefit in most corporate leave policies and is generally expected by most employees. 

Many companies provide some form of PTO, although the number of days a team member is entitled to—particularly vacation days—varies wildly depending on how long they’ve worked for the company and which industry they work in, as research by the Bureau of Labor Statistics shows.

Paid time off is typically offered in one of two ways:

• The amount of PTO an employee receives is set by the employer. In this arrangement, there is a pre-specified number of days off, for which the company is willing to pay their employees. For instance, as part of a benefits package, a company might tell a new or prospective staff member they’ll receive 10 vacation days, four sick days, and three personal days per year.
• The company has an “unlimited time off” policy. In other words, there’s no cap on the number of days a team member can take off for vacations, because they’re sick, or when they need a personal day. In return, the company expects the employee to keep up with all their work and deadlines and not fall behind—or take time off during busy periods or when they know something important, like a conference or project deadline, is coming up.

One final note: federal holidays are not taken out of PTO in the US. While private employers are not required to offer federal holidays to employees in the US, most private employers do offer some combination of these days off.  

With Rippling, you can customize a benefits package that includes paid time off, medical, dental, and more—for employees around the globe.

What is a floating holiday?

Floating holidays, sometimes called “optional holidays,” are a type of paid time off that is available to employees to use at their discretion. Unlike federal US holidays, which are set by the employer and typically include days like Christmas, Juneteenth, or Fourth of July, a floating holiday can be used by employees on any day they choose, such as personal or religious holidays, birthdays, or other special occasions.

To further illustrate the types of leave that wouldn’t fall under the PTO categories, here are a few examples of reasons an employee might take a floating holiday:

• They’d like to tack on an extra day to a federal holiday (e.g. taking off July 5th instead of just Fourth of July)
• They’re celebrating a non-US holiday (e.g. Boxing Day, Chinese New Year, etc.)
• They need a mental health day
• They’re celebrating a cultural event with their families

The number of floating holidays offered differs according to each individual company’s policies, but the average number is two per year. 

One final note: not all organizations are lenient when it comes to floating holidays. In fact, many companies have policies on acceptable reasons to take a floating holiday, so it’s crucial to check your company handbook and understand the business’s expectations and rules. Furthermore, be on the lookout for blackout dates, or specific times of year when taking a floating holiday is forbidden.

Frequently asked questions about floating holidays vs. PTO

While the basic definitions of PTO and floating holiday pay provide clarity on each type of employee leave, these definitions only scratch the surface. Below, we’ll answer some FAQs to clear this up and highlight some important legal regulations governing employee leave, both in the US and abroad. 

What’s the difference between a personal day and a floating holiday?

While floating holidays are generally used to add an extra day to a federal holiday celebration, participate in non-US holidays, and so forth, companies may provide personal days to cover different purposes. The reasons a staff member may take a personal day include:

• Military or jury duty
• Moving house
• Medical appointments that are expected to take a long time
• Family emergencies

While this list is far from exhaustive, it illustrates the differences between floating and personal days, which are easily confused and often sound the same. One more difference: personal days are given by companies worldwide, while floating holidays are just a US phenomenon. 

Does a floating holiday count as paid time off?

No, it doesn’t. Each employee is given a set number of permissible floating holidays they’ll be permitted to take during the year. In fact, floating holidays are not legally required, so, whether or not they are offered is entirely up to the employer. 

One final note: Can employees exceed the number of floating holidays the company sets? Let’s say they give two and an employee takes four that year; the employer is only required to pay the employee for the two that are part of their policy. Employees can still use their paid vacation leave to take additional time off if they need. 

Will employees still be paid for floating holidays they don’t use?

US federal law doesn’t require companies to pay employees who don’t use their floating holidays, so whether or not employees receive compensation for these days depends on the state in which they reside and the terms of the contract they signed when they started working.

The process of compensating employees for unused floating holiday is similar to how unused PTO is paid out: If they receive money, it will be when they leave the company and, crucially, if it’s a legal obligation on the part of the business when they signed the initial contract.

Please note, paying out accrued and unused PTO varies by state, so it’s important to check with employment counsel if PTO is required to be paid out in the state the employee resides in. 

Does unused PTO roll over? What about floating holiday pay?

Put simply, floating holidays do not roll over. If employees don’t use them, they lose them. The company will give them the exact same amount of optional holidays it did the year before. 

For unused PTO, the answer isn’t so straightforward. It really depends on the individual company’s policies. Sometimes, the answer is yes: employees can carry over unused paid time off, but there are limits on how much can be rolled over. Some companies are far more generous than others with the amount of unused time that can be rolled over and don’t impose a maximum limit, while others permit the practice but put a cap on how much can be rolled over 

However, not all businesses allow unused paid time off to be carried over and instead opt for the use-it-or-lose-it policy.

Can a company deny a floating holiday request?

Yes, they can, and they can do so for a variety of reasons. Here’s a quick list of why employee requests may be turned down:

• Companies are not legally required to offer floating holidays.
• If an employee works for a company that has strict rules about what constitutes an acceptable reason for requesting a floating holiday and their event falls outside of those rules, their request may be turned down. 
• Additionally, remember the blackout dates mentioned earlier? Any request to take a floating holiday during that time period will be automatically rejected. (Businesses generally set up blackout dates during their busiest times of year.) 

If it’s not legally required, why have many companies included floating holiday pay in their employee leave policies?

Younger generations of workers—Millennials and Gen Z, in particular—have different priorities than their predecessors when it comes to their ideal workplace. Notably, flexible schedules that allow them to maintain a healthy work-life balance.

In fact, a whopping 88% of people surveyed by the Harvard Business Review said flexibility was a top quality they looked for when searching for new employment.

In response to the changing priorities of today’s workforce, many corporations have responded by offering floating holidays with the goals of:

• Attracting and retaining talent
• Ensuring staff members have a healthy work-life balance
• Creates opportunities to make your company more diverse and inclusive
• Keeping workflow running smoothly during the holidays by having staff members who don’t celebrate certain holidays, like Christmas or Thanksgiving, come in when the majority of the team will be out
• Giving employees a more flexible schedule that allows them to take a day off for unforeseen reasons, such as tending to an elderly family member or taking care of their children if there’s no one else to help out that day

How does PTO differ from country to country?

When it comes to paid time off, the US offers some of the worst policies and the least amount of days. Here’s a quick rundown of the PTO policies of several countries:

• UK: The UK government classifies a broad category of people with jobs as “workers.” These individuals are entitled to just under six weeks of paid leave each year.
• Australia: Employees with a full-time job receive four weeks of PTO each year (although, generously, that number could increase to five or six when you factor in paid public holidays). If an employee accrues leave during their tenure and didn’t take it, their employer will pay them for the days they didn’t use when they leave the company.
• France: France is known to be one of the most progressive nations when it comes to time off. In addition to their legendary 35-hour work week, the French receive paid public holidays, at least five weeks of PTO per year, and, if they work in a certain profession, that number may increase to as many as six to 10 weeks of time off each year.
• India: India is surprisingly similar to the US in terms of PTO. Some employers offer unlimited PTO, provided the staff member keeps up with their work, just like in the United States. Most employers allow staff to roll over any PTO they didn’t use into the next year. However, here’s where it gets a bit complicated: Generally, Indian employees receive 15 days of paid time off each year if they work in the private sector and if they work in specific states.

With Rippling, you have everything you need to run HR, IT, and Finance globally. Manage your team’s benefits—from health insurance to retirement plans—in one integrated system, and customize policies by country.

To learn more, schedule a demo with Rippling today.

Disclaimer: Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advise. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.