How to Calculate Annual
Leave Accrual for Your Staff
Even though employers in the US are not federally mandated to provide paid leave time to their staff, the 2018 report from the Bureau of Labor Statistics reveals that the vast majority of American businesses still chooses to offer this benefit to their workers.
If your employees already are among those who receive paid vacation time, or if you’re currently considering offering PTO to your staff, having a PTO policy in place that covers everything from eligibility to annual leave accrual is not just a matter of convenience, but a necessity for any serious forward-thinking business.
Leave accrual is an especially tricky topic. Legislation can vary quite dramatically from one state to another. Coupled with a number of other factors and variables you need to keep in mind when calculating your employees’ PTO, the whole thing gets even more difficult to wrap your head around.
That’s why we decided to dedicate this entire post to the subject of leave time accruals, where we’ll go over some of the more common practices and suggest a few tips on how you can make your life a bit easier.
Leave Accrual: A Quick Introduction
Accrual relates to the number of days or hours of paid leave time that an employee earns while working at a company.
Since there’s no federal law to regulate PTO, companies are free to pick from a number of different rates, as well as decide on the total number of days or hours of paid leave time their employees are entitled to.
For that same reason, the decision of which employees get to receive the benefit of annual leave accrual is also up to the employer. In most cases, it’s only reserved for full-time employees, while part-timers and contractors receive limited or no such benefit at all.
It’s also pretty common to establish a waiting period for new employees where they can only start accruing PTO after a certain period of time, or offer more accrued vacation time to senior staff or employees with more tenure at the company.
Leave Accrual: Rates & Calculation
Leave time accrual is commonly calculated with the help of one of the typical accrual rates, which differ in how often and how much paid vacation time employees earn throughout the year.
Yearly accrual. A yearly accrual rate is probably the easiest in terms of calculations, and works great for long-term employees who have put in a year of tenure. With this rate employees receive their entire yearly PTO allowance at their anniversary date or at the start of the year, and when they take a leave you simply subtract from their current balance.
Whether or not to allow them to carry over any of their leftover balance is up to you, as long as it’s in line with your state labor laws.
Monthly and semi-monthly accruals. Rates where employees accrue paid leave time every month or every two weeks are some of the most commonly used, and are also not very difficult to calculate.
Simply divide the total number of annually accrued leave days or hours by 12 for monthly accruals, or by 24 if you want your employees to earn PTO twice a month and you’re pretty much good to go. Thanks to how simple these rates are, they’re pretty easy to manage, so even if the records somehow go missing, everyone’s balances shouldn’t be too hard to figure out.
Daily accrual. A daily rate is the one where employees accrue a certain amount of paid leave time for every day of work. It’s a great rate to use for part-time workers, but only those who work full day shifts.
To calculate an employee’s accrued time under this rate, simply divide the total number of awarded PTO days per year (let’s say 20) by the total number of work days in a year (5 days x 52 weeks = 260).
Hourly accrual. This rate is unique in the way that it does not guarantee a certain number of hours or days to accrue per year. Employees are only awarded leave time based on the number of hours they put in, which tends to work quite well for part-time workers with variable schedules. With this rate, your part-timers will get less paid vacation time, while full-time employees who work overtime can earn more.
The calculations are a bit more complex but still fairly straightforward. Take the number of hours your employees would get per year if they worked a full schedule, let’s say 160 hours (or 20 days), then divide it by the total number of hours worked in a year (52 weeks x 40 hours = 2080 hours), and you’ll get the number of hours of PTO they’ll accrue for every hour of work.
Calculating Accruals the Easy Way
The rates and their respective calculations we have reviewed above may not sound that bad on paper, but applying them in practice is a bit of a different story. When you have a team of dozens or even hundreds of employees, keeping track of everything in a single Excel spreadsheet can turn into an actual nightmare.
That’s why we suggest adopting a specialized leave management application like actiPLANS, which combines automated accrual calculation with a simple request and approval system. It also features a convenient calendar view where team members can see who’s in and out of office at any given time to avoid potential scheduling conflicts when planning their leaves.
The system is completely cloud based, and unlike an Excel spreadsheet, cannot be accidentally deleted or lost. Multiple people can access it simultaneously from anywhere at any time, as long as there’s an internet connection available. Try it out for free and start doing annual leave accrual the easy way.
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