If you're looking for a way to attract and retain top talent to your startup, offering an attractive employee benefits package is an effective way to do so. In fact, 82% of respondents to a PeopleKeep survey said that the benefits package offered by an employer is important in helping them decide whether to accept a job offer from a company.
Paid time off (or PTO for short) is a particularly popular benefit among employees, as PeopleKeep also found that PTO is very or extremely important to 93% of the workers surveyed. Floating holiday leave, on the other hand, is a new alternative to PTO that works especially well for companies with diverse workforces.
If you plan on offering paid leave to your employees, read this guide for everything you need to know about these two types of leave, including:
- What is paid time off?
- What is floating holiday leave?
- How does paid time off work?
- How does floating holiday leave work?
- Considerations for implementing paid time off at your startup
- Considerations for implementing floating holiday leave at your startup
- Four best practices for creating the right leave policy for your organization
- Simplify the way you manage employee benefits with Warp
What is paid time off?
Paid time off is a comprehensive paid leave policy that combines all of the days employees can take off from work into one bank that employees draw from as needed. Rather than restricting how employees use their leave by offering a set number of days off for vacation, sick days, and personal time, a PTO policy allows employees to use their time off as they see fit.
Although the federal government does not require employers to offer PTO, PeopleKeep found that 79% of employers still do so. As a result, this benefit has become almost expected by job seekers today.
What is floating holiday leave?
A floating holiday is another type of paid leave that employees can use when they choose. Unlike paid holidays, which generally align with US national holidays and occur at the same time each year, floating holidays can be taken whenever an employee wants.
This policy takes different forms depending on the company offering it, but it's typically considered separate from both PTO and the paid holidays that are already a part of the employer's work calendar (like Thanksgiving and Christmas, for example).
Although many companies use this type of leave for important cultural, religious, or national events, others place fewer restrictions on how employees use their floating holidays. Workers at these companies might use them to celebrate their birthday or extend their Fourth of July weekend, for instance.
Floating holiday leave can be especially helpful for companies with diverse workforces or offices in different parts of the world. It allows employers to honor the diverse needs of their employees and ensure they all have the flexibility to celebrate the events and traditions that matter most to them --- especially if they don't celebrate traditional American holidays.
How does paid time off work?
Paid time off is generally measured by the hour, allowing employees to take a few hours off work for a doctor's appointment or days at a time for a family vacation. Employees submit a PTO request for the number of hours they wish to use, and their manager or a member of the HR department approves or denies the request based on the company's needs.
PTO policy details differ from country to country and company to company. Employees typically accrue PTO at a set rate over time or receive their full PTO allowance at the start of the calendar year. The longer employees stay with a company, the more PTO they receive. Some companies, most notably in the tech industry, have an unlimited time off policy, where employees can take as much paid time off as they want during the year as long as they keep up with their responsibilities.
Companies differ on whether they allow unused paid time off to be carried over and paid out as well.
Many businesses allow employees to roll over unused paid time off into the next year, which can encourage them to accumulate PTO for personal leave or a lengthy vacation. To combat the lapse in productivity this practice can cause, some companies enact a maximum limit on how much PTO can be rolled over. Others pay employees for unused hours upon retirement, termination, or at the end of the calendar year.
How does floating holiday leave work?
Depending on the demographic makeup of your workforce and the specifics of your policy, implementing floating holidays can ensure your business stays operational all year round --- even if your busy season aligns with a major US holiday.
Say, for example, a startup typically shuts down from Christmas until after New Year's Day. With a floating holiday policy implemented, employees who don't celebrate these holidays and prefer to keep working can ensure the company continues to operate that week. Workers who spend the holidays with their loved ones can do so without feeling guilty or anxious about the work awaiting them on their return. Meanwhile, those who worked through the break can use their floating holiday leave on days that are more preferable or meaningful for them.
As mentioned earlier, some companies adopt a less restrictive approach to their floating holiday policies. Employees can take time off, not just for cultural or religious holidays, but any event or occasion that is important to them.
Others implement blackout dates during the busiest parts of the year or designate what holidays employees can use their days off for. For example, one startup might put together a list of approved holidays based on the demographics of its workforce and its annual calendar, and employees must choose from that list when using their floating holiday leave.
Unlike some PTO policies, unused floating holidays don't roll over into the next year. Employees must use up their floating holidays by the end of the year or lose those days off.
Considerations for implementing paid time off at your startup
If you're implementing a leave policy for the first time, PTO may be the easier option to start with. Since it covers a broader range of uses than its floating holiday counterpart, it's well-suited for new startups still establishing themselves.
The widespread adoption of PTO also means that most employees already understand how this type of leave works, reducing confusion so you can successfully implement it sooner. Then, down the road, you can think about expanding your leave policy to include benefits like floating holidays.
Note that some states have laws employers must follow when creating and administering PTO policies. Several require employers to offer certain types of PTO to their workforces, while others have guidelines on how PTO is accrued, used, carried over, or paid out. Before enacting a PTO policy, read up on the relevant paid leave laws that apply to your startup.
Paid time off is also a requirement for employers in many countries outside the US, so if you plan on hiring employees overseas, you'll need to look into and adhere to the paid leave regulations in those countries too.
Considerations for implementing floating holiday leave at your startup
Because companies treat floating holidays differently from paid time off, they generally aren't required to pay out unused holidays when employees leave the company unless specified in the leave policy or employment agreement.
However, states like California treat floating holiday leave the same as PTO, which means that both types of leave are subject to the same regulations and guidelines. In these jurisdictions, for example, employees who still have unused floating holidays when they leave the company may be entitled to compensation for those days --- just like with paid time off. This may result in increased staffing costs for your startup.
If your startup is located in one of these states, take this into consideration when deciding whether to offer floating holidays to your employees.
Ultimately, floating holiday leave works best with globally distributed or diverse workforces. This type of leave can help your startup meet the varying paid leave requirements of different countries and states without putting a huge administrative burden on your HR department.
Keep this in mind, though: Implementing a floating holiday leave policy can introduce certain diversity and inclusion-related complications for startups as well.
HR teams must ensure that all employees are treated fairly, especially when some requests are granted and others aren't. Otherwise, this could be seen as a violation of anti-discrimination laws in the workplace. So, when devising a floating holiday policy, set clear standards and guidelines that apply equally to everyone.
And if you're unsure whether your company can accommodate all of your employees' floating holiday requests, consider offering your workforce a different benefit instead.
Four best practices for creating the right leave policy for your organization
1. Take leave laws and industry expectations into account
The federal government doesn't require employers to offer workers paid leave or paid vacation. Some states have requirements that employers in their jurisdictions must adhere to, so it's important to do your due diligence before implementing a leave policy at your startup.
However, generous paid leave policies are highly sought after by top talent, so many companies offer paid leave that far exceeds any requirements set by the government. If you want your leave policy to attract and retain competitive workers, consider creating a policy that meets or exceeds your industry's standards. So, if you're in the tech industry, this might mean offering unlimited PTO as part of your benefits package if you're able to.
But remember, PTO and floating holidays aren't your only available options. Aside from compensation, 81% of tech professionals consider flexible work schedules the most compelling benefit a company can offer.
Founders who are interested in the freedom that PTO and floating holiday leave offer but perhaps don't have the bandwidth to manage it may want to consider alternatives like flexible schedules, hybrid work arrangements, or four-day workweeks.
2. Keep your policy simple and specific
A leave policy that requires workers to meet a long list of conditions before they can request time off will negatively impact employee satisfaction and morale.
So, keep your policy simple and easy to understand for employees --- but aim to get specific with the policy details too. Policies that are easy for employers to administer and easy for employees to understand are much more scalable for fast-growing startups.
Explain what processes workers must follow to request time off, any restrictions they should be aware of, and how to navigate the tools or software used to administer this benefit (if applicable).
If you offer floating holidays, for example, specify what holidays or events they can be used for. Will you have a list of pre-approved holidays to choose from? Are there blackout dates employees should be aware of? Can workers use floating holidays for personal reasons, like celebrating a child's birthday or extending a long weekend?
Decide whether employees must meet certain requirements to become eligible for paid leave or whether they become eligible for benefits immediately upon hire. If you have part-time, seasonal, or temporary workers on payroll, determine whether they're eligible for these benefits too.
Keep in mind that, although there are no federal paid vacation mandates to adhere to, you are required to follow the details of the leave policy you implement --- just like your employees are. So, before you finalize the details of your policy, ensure that you're willing and able to uphold every aspect of it.
3. Get employee feedback on your leave policy
If you're unsure what type of leave policy would be the best move for your organization, consider asking employees directly for their input. What option would benefit them the most? How would it impact their work-life balance? Do they have any suggestions or concerns to help guide your decision-making?
Also, consider conducting a test run of your leave policy to see firsthand how it would work in your organization and whether there are other options that could work better. After all, if you learn that it doesn't work well for you and your employees, you can simply try something else.
After conducting each trial run, send surveys to employees to gauge their satisfaction with the arrangement and see if there are any suggestions on improving the policy before you finalize it.
4. Promote your leave policy to employees and job applicants
Once you've finished creating your leave policy, now it's time to inform employees about the new benefit they have access to. Schedule a company-wide meeting to explain the details of the leave policy and respond to any questions or concerns people may have. And don't forget to add it to your employee handbook so they can review the policy on their own time if needed.
You'll also need to get the word out about your new policy if you plan on using it to attract new talent to your business. One easy way to do so is simply by updating your company website --- particularly the Careers page, if you have one --- with details about your leave policy. Then, add this information to any job posts you currently have and any listings you publish in the future.
Simplify the way you manage employee benefits with Warp
Enacting a paid leave policy is one of the best investments you can make in your business's viability as far as employee benefits go. Not only will it help you attract and retain top performers, but PTO and floating holiday leave can also improve productivity, workplace diversity, employee satisfaction, and work-life balance.
If you want to supplement your benefits package with perks like health insurance and 401(k) retirement plans, look no further than Warp. The Warp Pro plan offers startups automated payroll and tax compliance, plus health and 401(k) benefits for a low monthly fee.
Request a demo of our software today to find out why we're the payroll platform founders turn to to simplify their operations.
