There are two main benefits to creating a Holiday time off type:

Allows a Holiday time off balance to be recorded.
Holidays are not normally considered working days. Therefore, holidays are not usually included in time off balance calculations, even if a user makes a booking that includes a holiday. For example, July 4 is a holiday in Sam's holiday calendar. Sam makes a Vacation time off booking for Monday, July 3 to Thursday, July 6. In this case, only three days will be subtracted from Sam's Vacation time off balance for this booking; the July 4 day off will not be subtracted from her available Vacation days.

However, users must still enter hours worked on holidays to ensure minimum timesheet hours validation rules are met, and to track holiday time off. The "holiday" time off type behaves just like any other time off type when it is used to book off a non-holiday working day. But if it is used to book off a holiday, those time off hours will be included in time off balance calculations for the "holiday” time off type.

Allows users' Holidays to be automatically populated with their hours per day.
The administrator can specify that the users' hours per day should be automatically added to the holidays in their timesheets. This saves users from having to manually enter holiday hours, and ensures holiday time off is entered against the correct time off type. The holidays are those specified in the user's assigned holiday calendar.

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