How Does PTO Accrue? Rates, Calculations, and Why You Should Encourage Employees to Take PTO
Do you understand how hours accrue for PTO? How do you accrue PTO for your employees?
It can be challenging to figure out how to calculate and manage PTO accrual.
This issue can cause confusion in the workplace as employees may not know how much time they have left to take their time off from work.
In this article, you will learn how to calculate PTO as an employer and understand how accrued PTO hours can contribute to workforce burnout.
Table of Contents
What is PTO Accrual?
An employee has accrued paid time off (PTO) if they have earned the right to take time off work for ...
Vacation
Sick leave; and
Personal days
... but have not yet taken the days off of work.
PTO accrual is an issue that employers face in two specific instances with employees:
An employee might be able to choose whether to roll the time over to the following year, cash it out, or use a combination of the two options when PTO for the year runs out; or
When an employee is no longer employed at the company, the employer may need to pay out accrued time off and include it in their final salary.
By establishing an accrual policy, employees and employers will know:
Why it's important to accurately track hours worked and earned PTO; and
What happens with accrued time off at the end of the year or when you may no longer work at the company
Every company is different when it comes to PTO policies.
Therefore, employees and employers should take the time to understand the details of their company's PTO accrual policy.
Does your business allow employees to "cash-out" their accrued PTO at the end of the year?
If so, check out how Sorbet can simplify the way your company manages accrued PTO for your organization by:
Encouraging your employees to take time off; and
Offering a year-end cash advance for PTO accrual
How Does PTO Accrue According to Different Company Policies?
There are a few different ways that a company can decide to allow PTO to accrue, such as:
How many hours (or any other set amount of time) an employee works each week
A set amount of time that is given to all employees; or
How long an employee has been with the company
Let's look at some examples of how PTO accrual works for different company policies.
Hourly PTO Accrual
Hourly-paid employees typically accrue time off at a set rate per hour worked.
Most companies have a policy that states employees must use their hourly-paid time off accrual within 12 months.
How Hourly PTO accrual Is Calculated?
As an example, let’s walk through how a part-time employee named John can calculate his hourly accrual of PTO.
1. Find out how many annual PTO hours a full-time employee (working 40 hours a week) is eligible for.
For our example, let's use 80 PTO hours.
2. Determine how many hours a full-time employee can work each year if he works full-time for the year.
50 weeks x 40 hours per week = 2000 hours per year
3. Divide the total number of annual PTO hours (80 hours) by the total amount of hours that a full-time employee can work in a year (2000 hours). The answer will be the hourly accrual rate.
80 PTO hours / 2000 hours of work per year = 0.16 hours of paid time off
4. Multiply the accrual multiplier (0.16 hours) by the total time John, an hourly employee, has worked.
If John worked 6.25 hours, we would do the following calculation:
0.16 hours x 6.25 hours = 1 hour
For every 6.25 hours that John works, he will accrue 1 hour of PTO.
Daily PTO Accrual
Daily PTO accrual allows employers to track the amount of PTO employees have earned on each full working day.
This system is beneficial for both employers and employees because it allows employees to know precisely how much PTO they have earned each day.
It can also help individuals and teams plan for future paid time off.
How Daily PTO accrual Is Calculated?
1. Find out how many annual PTO hours a full-time employee (working 40 hours a week) is eligible for.
For this example, let's use 80 PTO hours again.
2. Determine how many days a full-time employee can work each year if he works full-time for the year.
50 weeks x 5 days per week = 250 days per year
3. Divide the annual PTO hours that a full-time employee can accrue (80 days) by the total number of days that a full-time employee can work in a year (250 hours). The answer will be the daily accrual rate.
80 PTO hours / 250 days of work per year = 0.32 hours of paid time off
So, for every full shift that John works, he can earn 0.32 hours of PTO.
Weekly PTO Accrual
Most employers offer their employees the chance to accrue PTO hours every week.
Both part-time and full-time employees can earn a certain number of hours of PTO for every week that they work.
Typically, you base the number of PTO hours earned on the number of hours worked in the week.
How Weekly PTO accrual Is Calculated?
1. Find out how many annual PTO hours a full-time employee (working 40 hours a week) is eligible for.
For this example, let's use 80 PTO hours again.
2. Divide the annual PTO hours that a full-time employee can accrue (80 days) by the total amount of weeks that a full-time employee can work in a year (50 weeks). The answer will be the weekly accrual rate.
80 PTO hours / 50 weeks of work per year = 1.6 hours of paid time off
So, for every week that John works, he can accrue 1.6 hours of PTO.
Bi-Weekly PTO Accrual
Under the bi-weekly PTO accrual system, an employee earns a certain number of hours of PTO each bi-weekly pay period.
The number of hours earned depends on the employee's length of service and job classification: non-exempt or exempt employee.
Accrued hours are on a prorated basis, so an employee who works fewer than full-time hours in a week will still earn PTO.
How Bi-Weekly PTO accrual Is Calculated?
1. Find out how many annual PTO hours a full-time employee (working 40 hours a week) is eligible for.
For this example, let's use 80 PTO hours again.
2. Determine how many two-week periods pay-periods a full-time employee can work annually if he works full-time for the year.
50 weeks / 2 weeks = 25 two-week periods
3. Divide the annual PTO hours that a full-time employee can accrue (80 days) by the total amount of two-week pay periods that a full-time employee can work in a year (25 weeks). The answer will be the bi-weekly accrual rate.
80 PTO hours / 25 weeks of work per year = 3.2 hours of PTO per 2-week pay period
So, for every pay period that John works, he can earn 3.2 hours of PTO.
Monthly PTO Accrual
Monthly PTO accrual is a way for employees to earn a set number of hours each month.
This system can be helpful for employees who need to take time off for medical reasons or to care for a family member, as they can spread out their PTO hours over the year.
It can also help employers manage staffing needs by ensuring that employees have access to PTO hours when they need them.
How Monthly PTO accrual Is Calculated?
1. Find out how many annual PTO hours a full-time employee (working 40 hours a week) is eligible for.
For this example, let's use 80 PTO hours again.
2. Determine how many months a full-time employee can work each year if he works full-time for the year.
This would be 11.5 months per year.
3. Divide the total number of annual PTO hours (80 hours) by the total amount of months that a full-time employee can work in a year (11.5 months). The answer will be the monthly accrual rate.
80 PTO hours / 11.5 months per year = 6.96 hours of paid time off
For every month that John works, he will accrue 6.96 hours of PTO.
Yearly PTO Bank
Usually, employees earn a certain number of hours or days per year with a yearly PTO accrual bank.
Employees can usually take their PTO at any time of the year and use it as they wish.
When someone takes time off, you subtract that time from their total PTO days.
How Yearly PTO accrual Is Calculated?
Here is an example of this simple calculation:
John begins the year with 40 hours of PTO.
In February, he puts in a PTO request (and you approve it) one day (or 8 hours) off.
After leaving work that day, he has 32 hours of PTO
40 hours PTO – 8 hours off = 32 hours of PTO
How Sorbet Provides a Win-Win PTO Accrual Solution for Both Employer and Employee
Many employers, like you, may struggle with understanding the liability of PTO accrual and how to incentivize employees to take it.
But what if you could encourage employees to take time off — not only to ensure a happier, healthier workforce but to potentially save thousands and avoid a substantial PTO liability?
Sorbet can help employers, like you, manage PTO liability more effectively as well as raise greater awareness of the risk of burnout in employees.
You may be wondering, how?
At Sorbet, we take pride in being able to help employees to:
Stay healthy by normalizing PTO
Take PTO and return to work refreshed
Opt to cash advance unused PTO before year-end; and
Feel valued in the workplace
Which employees are eligible:
Individuals 18+
Residents of United States cities where Sorbet is offered*
W-2-paying employees with a salary over $30,000
Individuals with accrued PTO days and a company policy that grants PTO carry-over and payout
*Current cities: Colorado, Florida, Illinois, Massachusetts, New York, New Jersey, Texas and Virginia
Our website even has a helpful accrual calculator that allows you to:
See how much accrual your company holds
Better understand PTO liability costs; or
Foresee burnout in employees, particular teams, etc.
Understanding how to encourage employees to take PTO can literally be one of the most important ways to grow your business and bottom line.
You and your employees deserve it because “it’s an accrual world”, and exploring the dynamics of PTO vs. inflation can provide valuable insights into creating effective PTO policies for the current landscape that benefit both your workforce and your organization.
Learn more about Sorbet and how we can be your company's PTO solution.