The Difference Between Floating Holiday and PTO

By Kimberly Kafafian

As we enter the end of the year and many workers try to use, rather than lose, their paid time off (PTO), it’s the perfect time to address the difference between PTO and floating holidays. While both are forms of paid leave, it’s important to know the distinction between the two so you can build the right PTO policy for your organization. Below is a breakdown of both types of PTO, along with some FAQs.

What Is PTO?

PTO refers to all of the paid days off that employees can take from work, such as vacation, sick time, and personal days. Although the government does not require companies to provide PTO, this benefit has pretty much become standard among employers. The amount of PTO, however, varies as every organization sets their own PTO policies. 

There are two forms of PTO: fixed and unlimited. With fixed PTO, the employer sets the specific number of days, and the amount of PTO an employee receives is usually based on the length of time they have been with the company. For example, new hires may receive one week vacation, while a worker who has been with the company for ten years may receive four weeks.

With unlimited PTO, there is no cap on the amount of days you take off for vacation, sickness, or personal reasons. All days off come out of the same pot. In return for this generous benefit, workers are expected to keep up with their workload and not take off during busy times.

What Is a Floating Holiday?

A floating holiday is also referred to as an optional holiday. It’s a paid day off that each worker decides when to use. Providing floating holidays in addition to regular PTO is a great way to promote diversity and inclusion in the workplace as it allows you to accommodate different religions and cultures. For example, a worker may wish to use their floating holiday for days that are not typically federal holidays, such as for Kwanzaa or Good Friday. Or maybe they want to tack the floating holiday onto another paid holiday, like July 4th, to extend their time off. Perhaps they just want to use it as a personal day. The company sets the rules for floating holidays, and can include requiring specific reasons for taking the holiday, as well as blackout dates.

PTO and Floating Holiday 

In the course of helping companies develop their PTO policies, I’m often asked the following questions:

Do I need to pay employees for floating holidays they don’t use?

Whether or not an employer needs to pay for accrued floating holidays varies by state. Check with your HR team or general counsel to find out what your state requires.

Does unused PTO and floating holiday pay rollover?

Floating holidays do not roll over from one year into the next. If you don’t use them, you lose them. Whether or not an employee can rollover unused PTO hinges on the company’s policy.

Can I deny a floating holiday request?

Yes, it is up to the employer to approve PTO requests, and that includes floating holidays.