Tag: vacation

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What does floating holiday mean? Guide + Template

Summary

  • A floating holiday is a paid day off that an employee can use at their discretion to substitute for a public holiday.

  • Employers have no legal obligation to offer floating holidays but do so to increase retention and make their benefits packages more attractive.

  • Carryover and encashment rules are usually up to employer discretion unless there’s state-based legislation that dictates how they should do so.

Aside from paid time off, some companies offer floating holidays to make their benefits package more competitive and appealing. But what is a floating holiday exactly, and how does it work?

A floating holiday is a paid day off from work that an employee can use at their discretion, typically serving as a substitute for a public holiday. There’s no set date to take one; hence these holidays “float.” Click the link below to see what a basic floating holiday policy looks like:

Floating Holiday Policy Template

Like paid time off, floating holidays are not legally mandated by law, so it’s up to the employers whether to offer them or not. And if they do, they also decide how to implement them unless state-based legislation tells them otherwise.

According to statistics, 48% of companies offer floating holidays, allowing employees to observe a holiday on any day of their choosing.

Floating Holiday vs. PTO

A common question regarding floating holidays is how they differ from paid time off. The main difference lies in how they are given to employees. 

Floating holidays are typically awarded at the beginning of each calendar year or as soon as an employee joins a company. In contrast, PTO is usually accrued over a period of time. Furthermore, some paid time-off credits are carried over the next calendar year and encashed once an employee resigns. Floating holidays, on the other hand, are typically not rolled over the next year and are not paid out upon termination.

Floating holidays also take the place of public holidays, unlike traditional PTO. So, for example, a single floating holiday credit representing Easter could be used on a random day in February – this would mean, however, that the employee would then need to work on Easter. PTO, on the other hand, can be taken whenever without replacing a holiday. 

When are floating holidays used?

Floating holidays are typically provided to offer more flexibility. Therefore, they are usually taken whenever an employee wants. They can be used to observe a religious or cultural holiday that’s not typically part of regular federal holidays, celebrate a birthday or special occasion, or take a break or recharge. 

Can floating holidays be used for federal holidays? It depends. If your business also goes on break during regular federal holidays and you pay time off for your employees, there’s no need for your employees to take a floating holiday. 

If you’re open during holidays like Thanksgiving or Christmas, employees who choose to work on those days can take a floating holiday another time. Remember that not all employees observe these holidays and may opt to work and take time off on a date that’s more relevant to them instead. For instance, a Muslim employee may opt to work on Christmas and take a floating holiday to observe Eid Al-Fitr. 

Webinar: How to Drive Engagement for Hourly Employees

Setting parameters for floating holidays

The key to implementing a floating holiday policy is to set clear parameters. Here are vital parts it should include.

Eligibility

Will it apply to all employees, or will there be exemptions like contractual or part-time workers? Typically, floating holidays are given to all employees to help improve retention. 

Hiring date is also another thing to consider. It’s common for companies to offer two floating holidays at the beginning of the year. For instance, new hires joining from January to June can receive both days. However, employees hired in the middle of the year can be entitled to only one floating holiday for the remainder of the year. 

Number of days

How many floating holidays are you going to offer? It’s typical for most companies to give two floating holidays a year, but it’s vital to consider the nature of your business to come to an ideal number. 

Approval process

Define how employees should file for floating holidays. Include how many days in advance they must give notice and what system to use to log their request. Having these details specified allows employees enough room to plan. 

Carryover and encashment rules

Indicate what will happen to unused floating holidays. For example, can they be carried over the next calendar year? In case of resignation or termination, will unused floating holidays be encashed?

Whatever you decide, make sure that it’s clearly discussed in the policy. Unused floating holidays are typically not carried over to the next calendar year nor paid out upon employee resignation. However, in California, floating holidays are somewhat treated as paid vacation leaves. This means employers should encash unused floating holidays upon termination and allow unused leave credits to roll over the next year. 

Blackout dates

Blackout dates refer to periods or dates when employees are discouraged from taking time off or floating holidays due to high demand or extra busy operations. Again, make sure that it’s clearly stated in your policy if this is something you implement. 

Benefits of floating holiday

Employers are not mandated to offer floating holidays, but there are advantages to doing so. Here are some of the top reasons why companies choose to include them in their benefits package:

A way to give importance to diversity and inclusion

Giving floating holidays is a way to promote diversity and inclusion in the workplace. It helps to recognize that employees have different cultural and religious backgrounds and that you allow them to freely practice their beliefs.

Survey shows that employees who feel included are three times more likely to feel excited and committed to their organizations. Furthermore, a company’s inclusiveness is a primary factor that different respondents look at when considering career decisions or moves.  

Flexibility

Floating holidays offer flexibility to employees by allowing them more control over how and when they would like to spend a holiday. Aside from religious and cultural holidays, employees can use this to spend time on a hobby, attend to other important things, or have a restful day at home.

Less admin burden in managing holidays

If inclusion is a priority for you, that doesn’t mean you must create an exhaustive list of holidays to account for all religions and cultures in your workforce. Instead, you can choose a few major federal holidays to include in your paid holidays policy and supplement these with additional floating holidays, which employees can use as they see fit. Aside from giving your employees flexibility, you also free up your HR team from the burden of maintaining and updating that list.  

A more competitive benefits package 

To retain and attract top talent, you must have a competitive benefits package. Floating holidays help do that.

The US is one of the more advanced economies, but 1 in 4 US workers have no paid vacation benefits. Furthermore, there’s no law mandating organizations to provide PTO. Having a PTO policy gives you a more competitive edge, but offering floating holidays can improve your chances of employee retention. 

Best practices for implementing floating holidays

Floating holidays are only effective when implemented correctly. Here are some best practices you can apply to get the most results from this policy.

Be clear with your policy

We can’t stress this enough. You need to eliminate any inch of ambiguity so that your employees will be encouraged to use their floating holidays. Since floating holidays do not roll over into the following year, any unused hours will go to waste – make sure your employees understand this with constant reminders. In addition, make sure that the policy is readily available to your team. It’s best to use an employee self-service platform to make this policy accessible to your staff at all times. 

Use a PTO tracking app

The best way to stay on top of PTO and floating holidays is to use a comprehensive leave management system featuring mobile PTO tracking. 

PTO tracking software is vital for efficiently managing leave requests and approvals. It ensures managers don’t miss requests or accidentally schedule staff who are on leave. 

But it shouldn’t just be helpful for managers. PTO tracking apps should be user-friendly for frontline staff; otherwise, introducing one will create even more confusion. Make sure basic tasks like viewing leave balances and floating holiday credits, submitting PTO requests, and seeing time off on schedules is as straightforward as possible for your staff. 

Encourage employees to use their floating holidays

This actually extends to all leave types. Statistics show that of US workers who have paid time off, only 54% of Americans say that they use it for vacation or holiday. 

The only way that you’ll see floating holidays positively impact your culture is if they are used by staff. It all boils down to communication and culture. Sometimes, employees need a little nudge or reminder that it’s okay to take a break and go on holiday.

Use labor forecasting to identify necessary blackout dates

The appeal of floating holidays is that employees can take them whenever they want. But blackout dates take a little bit of that away. The key is identifying only necessary dates when employees are discouraged from utilizing their floating holiday. 

Accurate labor forecasting looks at seasonal trends, historical sales data, booked appointments, foot traffic, weather, and other relevant information that can affect demand during any shift. Labor forecasting software shows you which days and shifts you can expect to be the busiest. Based on this, you can make calculated staffing level projections and narrow down the periods that need to be blacked out for leaves and holidays.

Webinar: How to Forecast Your Schedule Based on Demand

Stay compliant

While floating holidays are not legally mandatory, consider state-based legislation. As discussed, California looks at floating holidays like vacation days. Therefore, employees are required to encash remaining credits upon termination. Be careful of these specific rules to avoid violations and penalties.

It can be challenging to stay on top of compliance and how labor rules come into play with your benefits and policies unless you have a robust compliance engine within your HCM platform.

A good compliance feature automates labor compliance in every stage of workforce management—from onboarding, scheduling, administering benefits such as floating holidays, calculating payroll, and offboarding.

Floating Holiday Policy Template

If you want to get started on drafting a floating holiday policy for your company, here is a standard template to get you started: 

All (type/s of employees) are entitled to two floating holidays per year aside from (Company Name)’s regular paid holidays and time off. These two floating holidays can be used for any reason the employee deems necessary. It may be used for reasons such as birthdays, religious holidays, cultural festivities, or state and federal holidays during which [Company] remains open. 

Employees must submit a request at least five (number) days before they intend to use their floating holiday. It must be logged through the leave management system and approved by the manager. 

Meanwhile, floating holidays may not be used during blackout periods of (date range) due to high demand and seasonal events. 

Floating holidays are given at the beginning of the calendar year. Employees hired during the first half of the year will be entitled to two floating holidays. Meanwhile, employees hired in the middle of the year will receive one floating holiday. Floating holidays cannot be carried over to the next calendar year and will not be compensated upon termination.

Perks like floating holidays are just one of the many facets of managing a workforce. Make sure to implement them well with a robust system like Workforce.com. 

Aside from demand-based scheduling, labor forecasting, and time tracking, Workforce.com has an extensive leave management system that automatically tracks PTO and holidays while keeping you compliant with local labor laws in your state. 

See Workforce.com in action. Book a call with us today.

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PTO vs Vacation Time: Best choice for your company (2023)

Summary

  • Under a PTO policy, all leave time is lumped together into a paid time off bank. Vacation, on the other hand, is simply a specific type of leave categorized under a traditional leave policy. 

  • The pros of a PTO policy include fewer administration/accruals to manage, more flexibility for employees, and a more transparent relationship between employers and employees.

  • The cons of a PTO policy are that it may turn out to be more expensive, employees may work when they’re sick, and they may take a fewer number of actual days off.

  • While no perfect policy exists, creating the best one for you means you’ll have to evaluate state laws, consider your work environment (remote or on-site), and assess your software solutions.

Do you need to know why your employees are taking time off, or are you fine with them having autonomy over it?

Evaluating which leave policy suits your business requires careful consideration. Scheduling managers need to weigh the pros and cons of each type of leave policy, consider the nature of the business, take employee preferences into account, and pay attention to current trends. Only then can they make a decision on a leave policy that boosts employee productivity and optimizes payroll costs.

PTO vs. vacation time: What’s the difference?

PTO is standardized leave that covers all types of paid time off (sick leave, personal time, etc.) with no labels. Vacation time is leave specifically for vacation purposes. So, vacation is a type of PTO, but PTO may not necessarily be for a vacation.

Employers can find ways to retain employees by offering more flexibility around their leave. With PTO, employees don’t need to explain how they’re using their time off. Along with vacation days, employers may decide to offer other types of leave, which means employees have to take different types of leave for certain purposes, which can be restrictive.

The trend is definitely moving toward PTO banks. 63% of employees said they’d turn down a job offer if it didn’t include PTO. So it’s clear that a majority of employees would rather work for a company where they’re free to take personal days without having to state the reason why. Pandemic stress resulting in job reshuffling has only served to further highlight the importance of effective company policies for paid time off, as the workforce is prioritizing mental health now more than ever.

Kerry Wekelo, managing director of HR at Actualize Consulting in Reston, Virginia, switched to the banked PTO policy. She says, “We made the switch because our people were not using their sick time and were complaining about not having enough time off. So we combined to a total of four weeks’ paid time off versus two weeks’ vacation and two weeks’ sick time. Our people love this, and, even as we hire new recruits, they rave about starting at a firm with four weeks’ vacation.”

The pros and cons of a PTO policy

HR managers must consider the pros and cons of a paid time off policy to determine whether or not their business should offer one. Each type of policy involves costs and benefits to the business and its employees, and a thorough analysis can be insightful in determining which one is right for your company. Here are some pros and cons of a PTO policy:

Pros:

  • Less administration required/accruals to manage: Under the traditional leave policy, the employer needs to manage different types of leave, which involves administration costs. Under the PTO policy, none of this admin is required since all of the leave is lumped together. A PTO policy is easier to manage.
  • Offers more flexibility to employees: Employees can use PTO however they want, without explaining how they’re using it. More flexibility could keep employees engaged, and also reduce unscheduled absences. 54 percent of employers that implemented a combined PTO program said unscheduled absences dropped by up to 10 percent when they started the new policy.
  • Creates a more transparent relationship between employers and employees: Employees need not lie about being sick under the PTO policy since they can just state they need time off. Under traditional leave policies, employees may feel forced to use their sick days, so they might lie.

Cons:

  • It may turn out to be more expensive when the employee leaves: A company may have to pay more if the employee leaves, depending on state laws. This is because they may have to pay out all accrued paid time off if the state law mandates it, but under the traditional paid leave policy, they may not have to pay out sick leave to an outgoing employee.
  • Employees may show up to work while they’re sick: Since there’s no distinction made between the two types of leave, employees may show up to work when they’re sick in order to earn more PTO. This can infect other employees, which can ruin the overall productivity of the company.
  • Employees might get fewer days off: Depending on the accrual rate for PTO at your company, new employees may accumulate PTO more slowly than longer-term employees. Research also suggests that employers who adopt PTO may give employees fewer overall days than they had previously. According to SHRM, employers with PTO policies give employees an average of only 18 days, which is fewer than the number of days employees get under a traditional leave policy.

How to create a leave policy that works for you

If you pick the right leave policy, your employees will be happy and productive, and your company will optimize its resources. That’s why, for creating an effective leave policy, you need to take the following steps:

  • Review your state mandates regarding unused time off: Most states don’t require you to pay an employee for unused sick time when they leave the company, unlike PTO policies where payment is required for all time accrued. So, if your state requires you to pay unused PTO, a PTO policy may be more expensive. Review this, and evaluate if bearing the costs of a PTO policy is worthwhile for your business.
  • Consider whether you’re a remote company or an on-site company: A PTO policy is better suited to remote companies where employers cannot scrutinize the reasons behind every leave an employee takes. It’s impossible to know if someone is actually sick in a remotely distributed company, so there’s no point in having separate sick leave. Therefore, choose the leave policy depending on the type of company you are.
  • Evaluate your resources to see if you can administer your leave policy: Under the traditional leave policy, your company will have to maintain two accounting systems — one for sick leave and one for vacation time. Choose the traditional policy if you can make the time to administer the policy, and choose the PTO policy if you want lower administration costs and more efficiency. A good PTO policy should prioritize employee self-service, meaning it should be accessible via mobile app and should sync fluidly with your scheduling and time tracking systems. Requesting, viewing, and approving PTO should be seamless, quick, and integrated with your workforce management.
  • Ensure your policy covers the basics: Make sure you cover some basics in whichever leave policy you choose such as how an employee can request time off or how far in advance employees must request vacation time or planned PTO. Also, consider whether or not employees can carry over their PTO hours at the end of the year. Think about whether you’re going to send home employees who are sick under the PTO policy. Decide how much time off can be taken at one time and how the time off accrues. Finally, choose whether or not employees can carry over unused PTO at the end of the year.

Unlimited PTO: A possible solution

Another option is to switch to an ‘unlimited PTO’ policy. The unlimited PTO plan gives employees the freedom to take off as much time as they need, as long as it’s approved by their managers. But critics say that with unlimited PTO, employees actually take less time off since they rely on company culture to determine the right amount of time to take away. So clearly, there’s no one-size-fits-all leave policy, and you must decide the best policy based on your unique situation.

Making leave management easy

No matter the type of leave policy you choose, it needs to be easy to utilize. Luckily, recording things like PTO, vacation, and sick time on schedules and timesheets, is becoming easier thanks to recent advances in workforce management. Learn more about it by contacting us today – we’ll help make leave management a breeze for you and your staff.

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Calculate PTO Financial Analysis and Preliminary Design

paid time off, calculate PTO

After clarifying corporate objectives (Step 1), comes financial analysis and preliminary design (Steps 2 and 3). With financial analysis, you can better determine amount of employee paid time off (PTO). The following example will help illustrate critical planning steps and answer concerns raised by companies thinking about adopting a PTO policy.

Conduct financial analysis.
Assumptions about a hypothetical company’s program are as follows:

    1. Current Annual Leave:
Account

New Employee

5-Yr. Employee
Vacation

10 days

15 days
Sick

10 days

10 days
Personal

4 days

4 days
Total

24 days

29 days
  1. Average use of sick time is six days per employee.
  2. 1,000 eligible employees receive annual paid time off.
  3. Daily wage is $100.
  4. Direct sick time costs are $600,000. [1,000 employees x $100 (average daily wage) x 6 (average sick days per employee)]. Based on experience, other costs average 10% to 25% of direct costs. Therefore true unscheduled absentee costs range from $660,000 to $750,000.
  5. Company wants to lower sick time costs by two days per employee. The result is a minimum savings of $220,000 [1,000 employees x $100 daily wage x 2 days x 10% other costs].
  6. Proposed PTO Design:
Account

New Employee

5-Yr. Employee
PTO

18 days

23 days
CAT

6 days

6 days
Total

24 days

29 days

 

Create preliminary design.
The key features of the PTO program are as follows:

  1. Total paid days are the same (a new employee receives 24 days, while a fifth-year employee receives 29). What is different is the arrangement.
  2. PTO for a new employee is 18 days (10 vacation days, four personal days and four sick days).
  3. PTO for a fifth-year employee is 23 days (15 vacation days, four personal days and four sick days).
  4. Both employees now have two fewer sick days than the average of sick days used. This is how the company caps its sick time exposure. Now, if an employee needs more than four sick days, the employee uses what was vacation time. Therefore, the employee has an incentive not to abuse paid time off. Also, using vacation time for sick time reduces the company’s future vacation payout liability.
  5. PTO rewards employees with good attendance. These employees gain up to four additional days for scheduled time off. Scheduled time off is key: Planned absences are easier to provide coverage for. With PTO, employees are encouraged to give advance notice and supervisors are more receptive to working things out with employees and granting the time off. Knowing the employee will be absent gives the manager time to make alternative plans to maintain productivity.
  6. CAT (catastrophic account) is six days for all employees.
  7. Combination of PTO and CAT is the same as under the traditional system. Both total 24 days (new employee) and 29 days (fifth-year employee).
  8. CAT provides coverage in the event an employee has a short-term illness (out for more than five consecutive work days). For example, if an employee was out because of an illness for two weeks (10 days), the first five days would be deducted from the PTO account, the balance (five days) would be deducted from the CAT account. An option is to credit PTO accounts with five days (taken from CAT accounts) because the absence was for an illness. The reason is that under a traditional system, sick time would have been used as payment. This presumes there’s sufficient time in PTO and CAT accounts.
  9. Time credited to PTO and CAT is based on an accrual system. This means if an employee is paid bi-weekly, then the employee will receive 1/26 of annual PTO and CAT hours every pay period. In essence, you work and then get paid; you work and then receive paid time off. Payroll managers report ease in using the accrual system to account for time, and in complying with FMLA.
  10. Companies cap the amount of time accrued in both PTO and CAT. The PTO cap often is 125% to 150% of the annual allotment. If the annual amount is 24 days, then the cap would be 30 days (125%) to 36 days(150%). The CAP usually is equal to the waiting period for long-term disability. Caps motivate employees to take time, and give employees a way to accumulate time for planned long vacations. Caps also place a ceiling on the company’s PTO payout liability.
  11. Unused, earned PTO time is paid out at time of termination. CAT time is not paid out.
  12. Many companies place unused, earned balance of PTO and CAT time on an employee’s pay stub. This helps ensure accuracy of recordkeeping.

Personnel Journal, March 1996, Vol. 75, No. 3, p. 117.