Floating Holiday vs. Vacation: Understand the Differences

Managing time off and paid holidays can be particularly challenging for small businesses trying to balance employee needs with operational demands. And understanding different types of leave—like floating holidays and vacations—is extremely important to creating policies that work for everyone.

So, for example, what’s the difference between those two? While vacation is a well-known part of the benefits package, floating holidays are a more flexible and slightly more unconventional kind of arrangement with employees. If you’re unsure which is right for your team—or whether a mix of both is best—this guide will break down the essentials.

By the end of this article, you’ll have a clear understanding of how floating holidays and vacations compare, their pros and cons, and how to implement a time-off policy that fits your business needs.

What is Vacation?

A vacation is a scheduled period of paid time off (PTO) that employees can use for rest, travel, or for personal activities. Unlike sick days or emergency leave, vacation days are typically planned in advance and often accrue based on tenure or company policy.

Common Uses and Types

Vacation policies vary widely, but they generally fall into these categories:

Accrued vacation allows employees to earn time off gradually, often based on their length of service. For example, an employee might accumulate a certain number of vacation hours each pay period, which gives them more time off the longer they stay with the company.

Unlimited vacation is a more flexible approach, where businesses allow employees to take as much time off as they need—within reasonable limits. This policy is often found in results-driven workplaces where employees are trusted to manage their time responsibly. It also became very widespread in startups. And survey after survey, employees show interest in it.

Fixed vacation days provide employees with a set number of vacation days per year. Some companies grant the full amount upfront, while others distribute days based on tenure or other criteria. Some businesses require employees to use their days within a certain timeframe, while others let them roll over unused days.

Different businesses handle vacation differently. Some companies require employees to use vacation days within the year—a “use-it-or-lose-it” policy—while others allow rollover or even offer payouts for unused time. The central issue is structuring vacation policies in a way that aligns with business operations while also supporting employee well-being.

What is a Floating Holiday?

A floating holiday is a type of paid leave. Specifically, it’s a paid day off that employees can use at their discretion rather than on a company-designated holiday. Unlike standard public holidays, which apply to all employees, floating holidays offer flexibility by allowing employees to take time off for personal reasons.

Floating holidays are usually not earned, they don't roll over to the next year, and are not paid out by the company if the employee leaves. These might be the fundamental differences with vacation.

Floating holidays are worth considering for businesses with diverse teams that need to embrace diverse cultures, where employees may celebrate different holidays or have different personal priorities. Plus, because floating holidays don’t require everyone to be off at the same time, they help companies keep up productivity while still giving employees some time away from work.

Are floating holidays PTO?

No, floating holidays are not PTO, or at least not typically. Floating holidays are a type of paid leave. They may be included within a company's overall PTO policy, or they may be offered as a completely separate benefit. This has a couple of implications in the administrative sense. For example, floating holidays are not earned, nor they become cumulative, and like we said before, they don't carry over once the year ends.

Read a Comparison of Floating Holidays vs. PTO →

Common Uses of Floating Holidays

Floating holidays come in handy for all sorts of reasons. Some people use them to celebrate religious or cultural celebrations that aren’t covered by the company’s standard holiday calendar. Others take them for personal milestones like birthdays or anniversaries. Some employees even use them to extend a long weekend around a major holiday.

Some companies also offer two floating holidays as a way to provide extra time off around major holidays, such as extending a long weekend for Thanksgiving, Christmas Eve or New Year's.

Holiday Pay

Employees who work on public holidays are often entitled to holiday pay, which is typically higher than their regular hourly rate. This type of pay is a common benefit that varies depending on the company’s policy and local labor laws. Offering holiday pay can push employees to work during particularly busy times.

Floating Holiday vs. Vacation: Key Differences

Floating holidays and vacation time both give employees a chance to recharge, but they work in very different ways. Here’s how they compare:

Eligibility and Allocation

Vacation days are usually earned over time—either as part of an accrual system or a set number of days given each year. Some companies offer unlimited vacation, but most have a cap on how much time employees can take. Floating holidays, on the other hand, are typically a fixed number of days employees can use for personal reasons, like a religious holiday or a special occasion.

Usage Rules

Taking a vacation usually requires advance approval, and some companies even have blackout periods when vacation requests aren’t allowed. Floating holidays are often more flexible—as they can be used at the employee’s discretion—though employees may still need to give some notice before taking the day off. The best way for employees to manage and request their days off is with a simple tool where they can check how many days they could potentially take—and redeem them with a click.

Flexibility

Floating holidays emphasize customization. Employees choose when to take them based on what works for their schedule, which makes them more adaptable than standard vacation days. Vacation time, on the other hand, tends to be more structured.

Policy Management

Tracking vacation days can get complicated, especially with accruals, carryovers, and different employee entitlements. Floating holidays are a bit easier to manage, but businesses still need clear policies on how many days employees get and whether they expire if unused. Without clear guidelines, things can get confusing fast.

Pros and Cons of Floating Holidays

Let’s go deeper into floating holidays’ pros and cons:

Pros of floating holidays: Why to adopt them

Increased flexibility is one of the biggest perks of floating holidays. Employees can choose when to take time off, and it's simply a great option for people who need breaks for personal or cultural reasons because it doesn't compromise the whole company's calendar. It also helps accommodate a more diverse team since different people may celebrate different holidays. This flexibility can also strengthen employee satisfaction and build a better work-life balance.

Cons of floating holidays: A case against them

On the flip side, floating holidays require clear guidelines. Without well-defined rules about how many floating holidays employees get, when they can use them, and whether they expire, things can easily get out of hand. A few employees would be happy to request some days off only to realize they actually couldn't because the rules were very sloppy.

Another issue is that floating holidays may lead to inconsistent scheduling if not properly tracked. When employees take off on different days, it can sometimes cause gaps in coverage that need to be planned for.

Pros and Cons of Vacation

And what about vacations’ pros and cons?

Pros of vacation

Vacation policies are generally easier to manage and predict. Having a set number of vacation days means employees know exactly what they’re getting and when they can take it. This makes it easier for businesses to plan ahead and maintain operational consistency.

Another advantage is that vacation policies have universal application. Everyone is on the same page when it comes to taking time off, which simplifies things for both HR and employees.

Also, and possibly most importantly, vacation time is consistently described as a very popular benefit among employees. So, if you're a company seeking to lure top talent, your benefits package should undoubtedly include vacation time.

Cons of vacation time for companies

The downside is that vacation policies can lack customization. If everyone gets the same number of days off, there’s little flexibility for, let's say, someone who needs to celebrate a special holiday.

Additionally, because vacation time is typically scheduled in advance, it offers less flexibility for employees who might need time off unexpectedly or for personal reasons. This could be limiting for employees with varying cultural events or personal needs.

How to Decide: Floating Holiday or Vacation?

Choosing between floating holidays and vacation really depends on several factors related to your business and workforce. These are some factors. However, the key question still remains: Should companies really select one of the two? Let's see:

Workforce diversity and needs

If you have a diverse team with different religious, cultural, or personal needs, floating holidays might be the better choice. They allow employees to celebrate holidays that are important to them without worrying about whether they align with the company’s official schedule. But then again—would this mean you have to skip vacations entirely?

Administrative capabilities

Consider your HR capacity. If you’re able to track time-off requests and manage more flexible systems, floating holidays may be a good fit. However, if you have a small team or limited HR resources, a standard vacation policy might be easier to handle. Truth be told, every kind of paid leave is easy to manage if you have the right tool, so admin capacity shouldn't be much of an issue.

Budget and resource availability

Both floating holidays and vacation days can impact your bottom line, so it’s important to evaluate your business’s budget. Then again, it's hard to attribute a more severe financial effect on any of the two. In any case, it's evident organizations should adopt at least holidays, or even the two benefits at the same time.

Combining both options for a hybrid policy

Many businesses opt for a combination of both. This is the most sensible approach. Offering a set number of vacation days along with a couple of floating holidays gives employees the flexibility to rest when they actually need it.

Implementing Floating Holidays and Vacation Policies

Now, let’s move on to how to successfully implement your chosen policy.

Being clear about what's what

Once you’ve decided on your floating holiday and vacation policies, the next step is making sure your team knows what’s what. Clear communication is mandatory. Make sure employees understand how many days off they’re entitled to, the rules around using floating holidays—e.g., advance notice—and any deadlines for booking time off. Don’t forget to address unused floating holidays in your policy to avoid confusion at the end of the year.

Consider offering written guidelines that employees can refer to and maybe even a quick training session or FAQ to clarify the details.

The easiest way to communicate is with a tool that can help them determine their days off on their own, though.

Tracking time off with an automatic counter

Tracking time off doesn’t have to be a headache if you set up an organized system. A good place to start is by having a centralized system—like TalentHR— where employees can check how many days off they have and then submit their vacation or floating holiday requests.

It’s also helpful to set up clear approval processes, so everyone knows who needs to approve their time off and how long it will take. And make sure there’s a way to track who’s out and when, so no one accidentally overlaps or leaves gaps in the schedule. HR tools like TalentHR come with these strategies as features.

Customize Your Time Off Policies with TalentHR

HR teams can ultimately create a vacation or a floating holiday policy that works for their company and can even combine both benefits. The key is telling the workers when they should engage with one or the other. While vacation provides a fixed span of time off, which typically includes some traveling, if you offer floating holidays, you'll be promoting one-off no-work days for more private or cultural occasions.

HR software is the easiest way to help employees distinguish—and engage with—their vacation, floating holiday, or PTO. TalentHR, an all-around affordable HR software, will make it easy to manage both vacation days and floating holidays. From your browser, you can set how many days each employee gets, and it tracks everything automatically. Employees can request time off directly in the system, which makes it easier for managers to approve or deny requests quickly.

The platform lets you customize your time off policies. You can adjust vacation days and floating holidays based on your preferences. It also guarantees that you stay compliant with local laws. Vacation days are legally required in some jurisdictions! (That holds true for most countries outside the United States).

Ready to simplify your time off management? Explore how TalentHR can help you track vacation days, floating holidays, and PTO. Register now for free!