Unlimited PTO vs Floating Days: A Complete Guide

Last Updated on June 30, 2023 by VantagePoint

Encouraging employees to take time off from work can have a positive impact on both their physical health and mental health, while also being advantageous for the business. When employees return to work after taking a break, they are likely to feel more refreshed and motivated, leading to increased creativity and productivity. Furthermore, adopting such vacation policies also communicates that the organization cares about workers’ well-being and is dedicated to reducing the dangers of employee burnout.

Many employers offer both paid time off (PTO) and floating days as part of their leave policies, but it can be challenging to differentiate between the two. So what exactly are floating days, and how do they differ from standard PTO and unlimited PTO? We cover this and more, below.

Comparing Floating Holidays vs PTO: How Are They Distinct Benefits?

PTO refers to a predetermined number of days that employees can take off from work with pay. We’ve discussed paid time off policies in another article, give it a read if you haven’t already. 

So, paid time off can be used for vacation, sick leave, and personal days. In contrast, a floating holiday is a flexible day off that can be taken at any time of the year for observance of a specific holiday or celebration.

Floating holiday pay may refer to a separate bank of paid days off that employees can take whenever they choose, as long as they give appropriate advance notice. These floating holidays are in addition to employees’ standard PTO allotment. So floating holidays do not count as part of unlimited PTO, they are considered a separate benefit.  Employers may choose to offer floating days in addition to unlimited PTO or as a separate benefit altogether. However, the specifics of the policy will depend on the employer’s policies and practices.

Typically, floating holidays are determined by the organization and can be offered in place of traditional holidays to accommodate employees’ diverse beliefs or cultural backgrounds.

While floating holiday pay is not technically considered PTO, many companies include it as part of their overall leave policies. However, the specific regulations and rules may vary depending on the industry.

What is Unlimited PTO?

According to the Bureau of Labor Statistics from December 2022, a typical private sector worker gets just 8 sick days and 11 vacation days per year, much lower than in European countries. 

The trend of offering unlimited paid time off (PTO) as an employee benefit, once popular mainly among startups and tech companies, has now spread to organizations across industries. Glassdoor found that employee reviews mentioning unlimited PTO have skyrocketed 75% compared to the pre-pandemic era, indicating the perk has gained significant traction among all types of businesses seeking to attract and retain talent.

Unlimited PTO, or unlimited paid time off, is a type of leave policy where employees have no predetermined limit on the amount of vacation, personal, or sick time they can take off from work. Instead of a fixed number of days, employees are allowed to take as much time off as they need or want, subject to the company’s policies and approval from their manager.

Under an unlimited PTO policy, employees do not have a predetermined number of paid days off at the start of the year. Instead, they can request time off from their manager, who has the authority to approve or reject such requests.

The idea behind unlimited PTO is to give employees more flexibility and autonomy in managing their time off. It also eliminates the need for employers to track and manage accruals and balances, which can be a significant administrative burden. Additionally, unlimited PTO can be a valuable employee benefit that can attract and retain top talent. It’s important to note that there is a lack of transparency around unlimited PTO since there are no official policies around accruing or carrying over days. This can lead to confusion and worry among employees. 

Whether your policy is already in place or you are planning to make changes, VantagePoint can offer you professional guidance and a user-friendly system.

Key points about Unlimited PTO policies

Unlimited PTO policies can vary from company to company and may have some limitations. For example, some companies may require employees to get approval from their manager before taking time off, and others may have blackout periods during busy times of the year when taking time off is not allowed. 

Unlimited PTO can work well for some companies and employees, especially those who value flexibility. But for others, it may not provide the clarity and reassurance of a standard PTO policy with allotted days.
While seemingly generous on the surface, unlimited PTO policies have some potential drawbacks, according to the Society for Human Resource Management. It depends a lot on company culture, management approach, and employee preferences as to whether this model is beneficial for a specific organization.

Unlimited PTO and federal leave laws

Unlimited PTO policies do not exempt companies from complying with state and federal leave laws, such as FMLA (which requires employers with 50+ employees to provide up to 12 weeks of unpaid, job-protected leave for specified family and medical reasons, such as caring for a newborn or ill family member. Only about 60% of U.S. workers are eligible for FMLA) or paid sick leave (The Affordable Care Act requires employers with 50+ full-time equivalent employees to provide eligible workers with up to 80 hours of paid sick leave per year for specified reasons). These laws must still be followed. 

Then there are state and local leave laws which provide protections beyond federal minimums, such as California’s Paid Family Leave and paid sick leave law. When providing leave to employees, employers must adhere to and follow all relevant federal, state, and local laws regarding leave. These laws set a minimum ‘floor’ that employers should provide, but companies can and often do offer more generous leave benefits as well.

Floating Holidays Explained: Understanding This Additional Paid Time Off Benefit

Unlike traditional holidays, which are typically set by the employer and are often based on cultural or religious observations, a floating holiday is a day that an employee can choose to take off at a time that is convenient for them.

Floating holidays can be used for a variety of reasons, such as to observe a personal holiday or a religious event that is not recognized by the company’s standard holiday schedule, or to take a day off for any other reason that may be important to the employee.

Employers may offer floating holidays as part of their employee benefits package to provide more flexibility and work-life balance for their employees. The number of floating holidays an employee receives may vary depending on the company’s policies and the employee’s job level and tenure. Incorporating floating holiday benefits into your employee benefits program is an effective approach to advance your organization’s diversity, equity, and inclusion (DEI) efforts.

Essentially, the key elements of floating holidays are that:

• Are a separate bank of paid days off in addition to standard PTO allotments

• Can typically be taken at the employee’s discretion, with appropriate notice

• Do not count against employees’ PTO balances

• Represent an additional benefit offered by some employers to give workers more flexibility, a benefit that both Millennials and Gen Z’s really appreciate, as per Harvard Business Review. 

Can floating days be carried over to the next year?

Whether or not floating holidays can be carried over to the next year depends on the company’s policies. Some allow employees to carry over unused floating holidays to the next year, but others don’t. For example, an employer may allow employees to carry over up to two days of unused floating holiday time to the next year but require that those days be used within the first three months of the new year.

Are there any legal requirements for companies to offer floating days?

The United States has laws that require employers to provide a certain amount of unpaid time off for specific reasons, such as the Family and Medical Leave Act (FMLA). Floating holidays are one common type of paid leave offered, though they are not legally mandated. Some employers may be required to provide specific paid time off benefits under collective bargaining agreements or other employment contracts.

What are some alternatives to floating days that employers can offer?

To enhance harmony between professional obligations and personal needs of employees, employers can provide various alternatives to floating holidays. Besides PTO, here are a few examples:

1. Compressed Workweeks: Compressed workweeks allow employees to work longer hours for a certain number of days per week, and then take an additional day off. For example, an employee might work four 10-hour days per week and have Fridays off. 
2. Telecommuting: Telecommuting or remote work allows employees to work from home or another location outside of the office. This can provide employees with more flexibility in their work schedules and reduce commute times and costs.
3. Flextime: Flextime allows employees to set their own work schedules within certain parameters set by the employer. For example, an employee might be required to work from 10 am to 4 pm, but have the flexibility to choose when they start and end their workday within that window.
4. Sabbaticals: Sabbaticals are extended periods of time off from work, usually ranging from a few weeks to several months. Sabbaticals can provide employees with an opportunity to pursue personal interests or professional development and can help prevent burnout.

How can employers determine the number of floating holidays and PTO days to offer?

There is no one-size-fits-all answer to how many floating holidays and PTO days to offer, as it depends on the company’s policies, industry, and employee needs. Employers can consider factors such as employee tenure, industry standards, and budget when determining the number of days to offer. They can also gather feedback from employees and use benchmarks to ensure they are offering a competitive benefits package.

How does a personal day differ from a floating holiday?

Personal days are a limited number of unpaid days off for any reason, while floating holidays are additional paid days off that employees can use at their discretion as mini “vacations” throughout the year. Both serve as valuable benefits that employers can offer as part of their retention strategies.

Compensation for Unlimited PTO vs Floating Days

Pay for floating holidays is more straightforward and predictable since companies know the exact expense upfront. Unlimited PTO compensation is variable and difficult to accurately budget since companies do not know how much time employees will actually take off. Tracking compensation costs for unlimited PTO requires manual monitoring of employee time off requests. With floating holidays, companies just pay employees for the set number of days they are allotted. A benefits administrator like Vantage Point can help companies with navigating these complex issues.

Does unused unlimited PTO rollover? What about floating holiday pay?

In general, with unlimited PTO policies, there is typically no cap on the amount of time off an employee can take. Still, it does not necessarily mean that unused PTO will roll over into the next year. Some companies may have a “use it or lose it” policy where any unused PTO at the end of the year is forfeited, while others may allow employees to carry over a certain amount of unused PTO into the next year.

As for floating holiday pay, this is also subject to the specific policies of the company. Some companies may allow employees to carry over unused floating holiday pay into the next year, while others may have a “use it or lose it” policy.

Whether you need HR outsourcing, benefits administration, TPA services, payroll processing, or retirement plan management, VantagePoint has the solution. Our integrated system allows you to manage your employees’ health insurance, retirement plans, and other benefits in one place while customizing policies to suit your needs. Schedule a demo with our HR experts to see firsthand how VantagePoint can simplify your day-to-day.