Floating Holiday vs PTO: Here’s everything you need to know

A new year calls for a new to-do list.

It also calls for a new set of floating holidays. 

Particularly for HR teams, there are so many administrative tasks to do in the very first month, and they are time-consuming, to say the least. They need to send holiday gifts to employees, set up the holiday calendar, reset the PTOs for the year, and so on. While setting up the PTOs for the new year, a couple of thoughts can cross their minds; how many floating holidays should be provided in the year? Moreover, how are floating holidays different from the regular PTO we provide? 

If it has crossed your mind too, you have come to the right place. In this blog, we answer some of the frequently asked questions about floating holidays vs PTO and touch upon why it is important to provide floating holidays in your company. 

Floating holidays vs PTO: Frequently asked questions

Let’s break down floating holidays and PTO to understand how they differ from one another, how they should be treated, and the various benefits they have to offer. 

What is the difference between PTO and floating holidays?

The floating holiday is more of a benefit for employees that helps them observe their cultural holidays which do not fall in the regular holiday calendar. Companies usually provide 2-3 floating holidays at the beginning of the year, that can be used at the employees’ discretion or not, and cannot be carried over to the next year. On the other hand, PTO is paid leave are of several types (sick, casual, maternity, etc) that do not fall on a particular date. Employees can get them in a lump sum at the beginning of the year/ accrue and earn them over the year. 

Floating holidays: Ideally, Floating holidays are holidays that do not fall on a particular date. Also known as optional holidays, in some companies, it is at the discretion of the employees to take it when they see fit. In some others, companies provide a list of cultural, religious, or government holidays for the employees to choose from to exercise their floating holiday privileges. These holidays are provided in a lump sum at the beginning of the year to help employees plan their vacations. 

PTO: Paid time off or PTO are the leaves employees are allowed to take without loss of pay under the company’s PTO policy. It consists of a split of different types of leaves; casual, sick, floating, marriage, bereavement, and so on. Some companies let the PTO accrue over the course of the year (monthly/quarterly/half-yearly), while some allocate the yearly quota of PTOs at the beginning of the year. An increasing number of companies are considering unlimited PTOs too!

floating holiday guide

Are floating holidays considered PTOs?

No. Unlike PTOs, floating holidays are provided in lump sum at the beginning of the year itself. PTOs can be provided in lumpsum or accrued over the course of the year. PTOs can be incentivized and earned during an employees’ tenure, whereas floating holidays are fixed. Moreover, PTOs can be carried over, but Floating holidays work on a use-it-or-lose-it basis. 

Benefits of floating holidays vs PTO

Floating holidays:
A floating holiday is a great way to attract diverse talent. That explains why 42% of the companies give floating holiday benefits to their employees, according to a 2015 SHRM survey. 

It gives your employees the space to celebrate their special days and holidays, boosting their morale and happiness quotient. As an employer, you respect the diverse sentiments of your employees and become an accommodating and inclusive company

PTO:
There are plenty of benefits that both employers and employees can enjoy on providing paid time off. The benefit that tops the list is work-life balance. PTOs provide the employees the work-life balance they seek, which is substantiated by a report by Flexjobs which says that 4 out of 5 parents rank work-life balance over salary 

People are increasingly looking for jobs that let them handle their personal obligations with ease. This helps in reducing stress and burnout, getting to do things for themselves such as hobbies which they otherwise cannot prioritize, or spending some time with family and friends. All of these lead to improved happiness, which manifests into better performance at work

Are they mandatory?

Are Floating holidays mandatory?

No. Although there are no laws that mandate floating holidays, on average, companies choose to provide 2 days of floating holidays a year, according to the SHRM 2017 report.

Are PTOs mandatory?

It depends on the country you are working in. For instance, the US does not mandate paid time off; it offers 10 public holidays where employees can work if need be. That said, most companies choose to provide an average of 10 days as paid time off in a year so that they get an edge over their competitors for great talent, and also to motivate and retain existing employees. 

Holiday Carryover

Do Floating holidays carry over?

No. Floating holidays are reset annually and most companies have a use-it-or-lose-it policy around floating holidays.

Do PTOs carry over?

Yes. It certainly depends heavily on your PTO policy on how much of your PTO can be carried over – your eligibility, availability of the option, and so on. Usually, the company lets tenured employees accrue their PTOs, or set a limit to the number of PTOs that can be carried over to the next year. 

Leave encashment.

Can you cash out floating holidays? 

It depends on the state in which the office operates. If floating holidays are treated the same as PTO that employees can avail whenever they like, employees can encash these holidays upon termination. But in other cases, it can’t.

Can you cash out PTO?

Paid time off can be cashed out during the resignation or termination of the employee. However, the procedure for encashing it, how many PTOs can be encashed, eligibility, etc, depends on the company PTO policy and the state labor laws.  

 

Creating a PTO policy for your company is no joke. It is the go-to handbook for your employees that helps them make the right PTO choices. Therefore it is vital that your policy addresses all the concerns and FAQs your employees might have. An efficient way to implement this policy is to use a smart vacation tracker or a leave management software. Freshteam allows organizations to plan and manage their employee absence efficiently through it’s time off management software. Read how Sunculture saved 80% of time spent on leave tracking.

In this blog, we have addressed some common concerns regarding Floating holidays and PTO. Do let us know if we have missed anything, we’ll get our experts to help you with it.