Calculating paid time off can seem daunting to a busy small business owner. There are many rates to choose from and the calculations aren’t always intuitive. For this reason, most small business owners just end up using a yearly accrual rate. This method is easy – you just have to decide how many days employees should get per year and give them in a lump sum.

There are other accrual rates which might be more useful for your company. If your are interested in using them, I am going to help you tackle the math.

## Typical Accrual Rates

There are a lot of rates to choose from. In the end, most of them dole out the same amount of hours per year, but at different rates. A yearly accrual rate is great for long-term employees or employees who have already put in a year of tenure. But many companies don’t want their employees to have to wait a full year to be able to take some vacation time. In this case, the employee should accrue paid time-off gradually, based on one of the following schedules. Accruing time by hours worked is a special accrual rate which does not guarantee a certain number of hours to accrue per year. This is a great rate for part time employees who work varying schedules, as I explain below.

- By hours worked
- Daily
- Twice a month
- Every 2 weeks
- First of the month
- Once a month
- Yearly

## Calculations

For any of these, you will first decide how many hours you want your employee to accrue per year (based on a full time schedule) – maybe it’s 40, 80, or some other number. In the sections below, we’ll figure out the fraction of an hour that employees should earn for each pay period.

### By Hours Worked

This accrual rate is great for employees who don’t work a set schedule – working variable schedules from year to year. If you want their vacation time to reflect the actual time they put in at the company, then this is the rate schedule for you. Part-time employees will get fewer hours than they would get if you gave them PTO yearly in a lump sum, and employees who work overtime would earn more.

Decide how many hours you would want your employee to get each year if he worked a regular full time schedule. For this example, we’ll say 80 hours, or two weeks. Next, figure out how many hours your employee would work in a year if they worked full time. This would be 40 hours times 52 weeks, minus the time off (and any paid holidays). In this example the employee would work 2000 hours per year.

To get our accrual multiplier, we’ll divide 80 (hours in two weeks of work) by 2000 (hours worked in the year) to obtain .04. So for every hour our employee works he should earn .04 hours of vacation.

If you are using our service to track accruals, you can set this number in the system. Then your employee will earn appropriate vacation hours automatically regardless of whether he works 50 hours a week or 30. For this accrual rate, it’s really nice to have a system do the work for you because this is a little more math-heavy than the other accrual rates.

### Daily or Monthly

To figure an employee’s accrued time based on a daily or monthly rate, you will divide the number of hours to accrue per year by the number of working days in a year, so 5 days x 52 weeks, for daily or simply by 12 for monthly.

A daily accrual rate might be good for a company with a high turn over rate. For an employee working 40 hours a week, getting 80 hours of paid time off per year, you will divide 80 by the number of working days in the year. 80/260 gives you .307. Multiply .307 by the number of total days in your pay period to the see PTO in each cycle.

**Example:** If the employee worked 5 days in the pay period, you would multiply 5 x .307 = 1.535. So this employee would get 1.535 hours of paid time off in this pay period. If he worked the full year, it would add up to 80 hours. If the employee just works 4 days a week then he would get 1.228 hours each pay period.

**The daily accrual rate works really well for part time employees who work full 8 hour shifts. This is not a great rate for employees who work part time shifts.**

### Twice a Month or Every Two Weeks

The calculations here are not much different from the above. Divide the number of PTO hours granted per year by 24 for twice monthly or by 26 for every two weeks.

So for an employee given two weeks of vacation per year, he will get 3.333 hours each bi-monthly paycheck.

This accrual rate will be a little easier to handle than the daily or hourly rate since you will be looking at basically the same amount on each pay check. It’s a little less confusing and easier to figure out an employee’s current PTO amount if records go missing.

## The Easy Way to Calculate It

Let Timesheets.com do these calculations for you! No matter which method you choose, the software will do the calculations each period and you won’t have to keep separate records or worry about making costly mistakes.

Where does the 3 week vacation piece come into the equation?

My total hours 290.75 divided by 25 week look back = 11.63 average hours worked per week.

To Calculate By Hours Worked:

If using 40/week as calculation:

40 x 52 = 2080

11.63 x 52 = 604.76

604.76 ÷ 2080 = 0.2975 % of full-time hours/week

So for every hour I work I should earn 0.2.975 hours of vacation. Is this correct?

If using 37.50/week as calculation:

37.50 x 52 = 1950

11.63 x 52 = 604.76

604.76 ÷ 1950 = 0.3101 % of full-time hours/week

So for every hour I work I should earn 0.3101 hours of vacation. Is this correct?

My vacation leave in the pay slip is 11.364.so how many day or week should i take for leave.

[…] date. But there are other ways to calculate accruals too. I’ve written a whole post about it here but today I am going to dedicate a whole post on the most complicated method: by hours […]

If I work12 hrs.and I have4week’s vacation time what would that total ? Also is it right that the company changes your vacation time to PTO I’m sure they’re ripping my off that’s just what they do !

Hello,

Looking for some assistance on explaining to our employees why we will be changing to PTO time off and that they will need to accrue time. I want to see this as a positive and not have them feel like some of these other comments “feeling ripped off” We need to protect our company as well. We have run into instances where and employee leaves right after their anniversary and received 2 weeks vacation that was not earned but they feel it was bc of years in. ahhh help me >

Hi Kelly,

Unless time off is a benefit of employment (given as soon as hired in some larger corporations), time off is an earned benefit. There are several ways in which you can “pay out” those earnings. You can either give employees their time off at the end of an employee’s first year – the employee has put in a year’s worth of work, they now receive their time off benefit for that previous year. In this case, if they left immediately after receiving their benefit, it would be okay because they put the year in to earn it. Or they can receive their time off earnings at each pay period – getting their time off for the work done in the previous pay period. Either way, employees have to put in the time to get their time off so I don’t think it really matters which accrual rate a company uses as far as fairness goes. I have some more pros and cons of the different rates in last week’s blog post that you might be interested in. https://www.timesheets.com/blog/2017/02/which-vacation-accrual-rate-to-use/

Let me know if I can help further!

Hi Peggy,

I have a question for you: what is the organization’s expense for an employee that earns $50,000/year + vacation allowance of 2% or $ 2,000/year?

Here are my thoughts: Y01 – Wages – 50,000 + Vacation Accrual $2,000. Expense = $52,000

Y02 – Wages 48,000 ( the employee took the vacation allowance) + Accrual $2,000. Expense 50,000.

Here is where I am confused: The time off taken by the employee is being paid out of the accrual account (reducing it) and the time worked out of the wages account.

The employee accrued another $ 2,000 this current year (accrual includes the time off work), so the liability account is back to its balance of 2,000. However the expense for the organization is lower than the previous year. is that right? I feel I am missing something … would love to hear your feedback.

Thanks,

Fernando

Hi Fernando,

I admit I’ve never seen a scenario like this before but here are my thoughts on what I see here. In the first year, your company paid $50k, not $52k because the employee didn’t actually take the time off in that first year – she only accrued it. The second year she was paid $50k again except that this time $48k came from the wages account and $2k from the accruals account. Each subsequent year it will be the same (unless she gets a raise).

Let me know if you think I’m missing something!

Hi I Got Question I Work 20 Hours A Week Some Times Its 16 My Pay Check Be Like 354.00 Every 2 Weeks My Job Say I Could Get A PTO But I Got To Wait 2 Weeks To Be In Da System I’m A Part Time Worker I Work 20 Hours Or 16 Hours A Week Pay Check Be 354.00$ Every 2 Weeks How Many Hours I Could Take PTO Vacation 1 Day Every Week Or Every 2 Weeks I Need Answers

Our company requires time off to be approved. In our case it is 1 mo ahead of time, *unless* they can make arrangements to get their shift covered ahead of time.

In your case, you can simply require advance notification, or offer to pay out PTO time. Our company switched from a paid holiday system, to PTO, and many employees similarly felt cheated as they lost 6 paid days

So I want to calculate the days vacation the have remaining.

Do I take the Vacation Owed $625.00 divide by their rate/hr $19 divide by their work hours 8hr shift equals 4.11. So about 4 days of vacation owed. Right?

Hi Tom. If you know you owe your employee $625 for vacation but aren’t sure how many hours that is, then, yes, divide that by the hourly rate to get 32.89 hours. That’s .89 more than 4 days.

Is there an easier method to this type of calculations?

You could use an automated accruals system…

Hi,,

Want to calculate hrs. if In Time is [10:00 PM] and Out time is [6:00 AM Next day]. I have tried =TIME(HOUR(), MINUTE(), SECOND()) – TIME(HOUR(), MINUTE(), SECOND()). but not works if the Duty hours going in two days. Please help if you can..?

Thanks,

Aryan

If my hire date was 12/15/2005 my pay rate is $21.50 what is my accrual rate.

You’ll have to ask your employer.

i have a question an employee from my company was hired on Nov 1, 2016, and left Feb10, 2017. His package includes 120 hours of vacation. How many hours he accrued until his last day.

based on the calculations he accrued 33.8hours is this wrong or right?

What accrual rate were you using for him? If it’s monthly, then your number looks right.

[…] drafts a time off policy, they have several choices to make: How much time off to give each year, which accrual rate to use, whether to implement a probationary period, and whether to use an accruals cap. When deciding on […]

if I have 4 weeks vacation, what is my accrual per month?

If I work 40+ hours a week and get paid weekly.

What are the calculation breakdown for weekly PTO?

Hello,

I accrue 1 and 1/3 days leave for every week i am on the job.

How can I calculate in excel without incurring rounding errors due to decimalised days (1.333 days per week on the job)

Hi Roy,

I don’t really know anything about accruals tracking in excel. Timesheets.com offers automated accruals tracking though!

Are vacation hours accrued during the year they will be paid or during the previous year? I have an employee who is leaving and she says her unused vacation pay was accrued the previous year and she should be paid for her full 4 weeks vacation rather than the one week she has accrued thus far this year.

Hi John,

Time off policies vary from company to company so it’s a good idea to clearly define your policy and share it with your employees. That said, if employees accrue time throughout the year, then they will never hit their max accrued until December. Clearing out their time at the end of the year would never give them a chance to use it. If you are in California (and several other states) and you did not specifically inform employees that you have a use it or lose it policy, then, yes, you do owe your employee for that time. Here is a little more information on that. https://www.timesheets.com/blog/2017/02/is-use-it-or-lose-it-a-good-time-off-policy/

Peggy,

Our vacation policy is:

The amount of paid vacation time employees receives each year increases with the length of their employment as shown in the following schedule.

After completion of 1 year of employment ………………. 5 days/year

After completion of 2 years of employment ……………… 10 days/year

After completion of 10 years of employment …………….. 15 days/year

The length of eligible service is calculated based on a “benefit year”. This is the 12-month period that begins when the employee is hired.

Once employees enter an eligible employment classification, they begin to earn paid vacation time according to the schedule.

If I read our policy right an employee is not eligible for vacation until they reach there anniversary date. Because we have a use it or loose it vacation policy this causes issues for employees hired late in the year. For example if someone was hired December 15th they would have only 2 weeks to use their vacation. The same problem exist for employees that increase vacation leave eligibility due to tenure.

I don’t like accruing vacation on each pay check for reason you have previously stated.

Any suggestions?

Hi Doug,

Does the policy require that employees lose it by December 31st or is it by the end of the anniversary date?

My situation is similar to Doug’s, except my employees get 1 week after 1 year; 2 weeks after 3 years and 3 weeks after 6 years of employment. They must use their vacation by December 31.

For someone starting in May 2016, I would have allotted them

3 days to use between 5/17 and 12/17

5 days from 1/18 and 12/18;

7 days from 1/19 and 12/19

10 days from 1/20 and 12/20 and 10 days from 1/21 and 12/21

13 days from 1/22 and 12/22

15 days from 1/23 and 12/23

Does this make the proper adjustment for the employee’s start date?

Hi Susan. This is a complicated scenario. Rather than having a use-it-or-lose-it policy that expires for all employees on the last day of the year, why not either have it expire on the employee’s anniversary date? Or, if you use our service, setup a policy that allows employees to keep their accrued time but never accrue more than their total allowed.

As for your calculations, it doesn’t look quite right to me. If the employee starts in May 2016, then in May 2017 they should be earning 2 weeks. So on your second line “5 days from 1/18 and 12/18” this is going into the second year and so they should have more than just 5 days.

Hi Peggy,

Say the employee turns in their two weeks notice on April 10. His/her last day is April 24.

The employer then tells the employee that he/she is getting no vacation time paid out for the month of April. Does this make sense or is it even legal??

I would talk to a lawyer about it. It’s a pretty specific question and probably depends on the employee handbook at the company. For example, if an employee accrues time monthly for the previous month then no time for April would have yet accrued. A lawyer would know this for sure.

I was hired back in Aug 2010. I earned my vacation on my anniversary month, which is 4 days/yr for the first 3 years and then 8 days/ year there after. The old manager quit and the new manager came aboard and wants to change our accrued hours from anniversary month to a calendar year. I got my 8 days vacation days up til August 2016. Then, my hours was cut in Jan 2017 and my vacation also got cut to only 3 days/year. My question is: I never got compensated for the accrued hours from August to dec 2016. When I asked my manager, she told me that since I earned my 8 days in 2016 already, it doesn’t matter anymore and I am maxed out, is that true?

I have 170.57 sick time and 151.82 annual time. How do I calculate how many days i actually have for sick leave or vaction time? how did you get that answer

Assuming that you mean you have 170.57 hours of sick time, then just divide that by 8 (hours in a day) to get 21.32 days.

Hello, is it common to not earn the time off if you use your PTO that week? Such as, if you use any of your time, you will not recieve the full 1.54hrs that you would have earned if you worked the full week.

Yes, if you are accruing time based on hours worked, then you would not accrue it while you’re not working, i.e. on vacation.

I accrue 3.07 hrs per week towards PTO, how many hours/weeks does that come out to? How did you get that number?

I believe you would do 3.07 X 52 weeks = 159.64 divided by 8 hours = 19.96 days. That would be for a full year. The 3.07 is earned per full 40 hour work week. That means if you take a day off in that time you will accrue less.

I am part time for 12 years and my company has been taking my accrual rate and multiplying it by my 25 hours per week. (My annual accrual hours for time off is 126). If I only happened to work 23 or 24 it would get multiplied by that. This year all of a sudden my numbers aren’t matching theirs and I found they are deducting all holidays and any paid time off (vacation/sick) and then multiplying the accrual rate. So If I took 3 vacation days they are multiplying the accrual rate x 10 instead of 25. Can they all of a sudden start doing this? Because now it seems I won’t accrue my 126 hours. (Before this accrual mess I would receive annually 4 weeks vacation and 5 sick days) I feel like I’m being jipped.

Hi Donald,

As I understand it, what they are doing seems fair. Time off hours are never used in accruals calculations. If they were doing this before, it was probably a mistake. What is the multiplier that they are using? As long as the multiplier is based on your yearly hours worked, minus the hours you take off, then all should be correct.

For all salary employees I calculate a daily rate = (salary/260 paid days)**includes paid stat days

I then calculate vacation earned by calculating the amount of time they have been with the company. So for example if they started on January 1 and left the company on June 30, we would pay them out approx. half of their vacation benefit. For an employee entitled to 4 weeks vacation, they would have earned approx. 9.89 days.

Payout = daily rate*days earned

What do you think of this? Just want to make sure I haven’t missed any considerations

do you know the law if the company gives you 4 weeks at the beginning of the year and you have until the end to use it. Am I entitled to what is not used?

You can find some information on that here: https://www.timesheets.com/blog/2017/02/is-use-it-or-lose-it-a-good-time-off-policy/

Im starting a new job and this is what she emailed me regarding the policy. Can someone help me out on how to calculate.

Our employees receive 5 sick days in January. New hires are prorated based on their hire date. I have provided a copy of our vacation policy below. Please let me know if you have any questions.

Years of Service Annual Accrual Per Pay Period

Up to 2 years 40 hours 1.54

Year 3 – 4 80 hours 3.07

Year 5 – 9 120 hours 4.62

Year 10+ 160 hours 6.15

Time off may be used only in one hour increments, unless otherwise required by law.

Eligible employees are allowed to carry 40 hours (5 days) of accrued time off into the next calendar year, unless applicable state law requires otherwise, in which case the Company will follow applicable state law.

I am trying to figure out what an emplpoyee accrues in vacation time if they accrue 20 days per calendar year at a rate of 1.66 days per month after hire. What does 1.66 days equal as far as hours if the employee is paid every 2 weeks and the time is reflected on each pay check and there are 26 paydays in a year. Please help.

Hi Aisha.

In order to get your multiplier of 1.66 you just divide 20 days by 12 months. 20/12 = 1.66

Do a similar operation to get the multiplier for a biweekly calculation. 20/26 = .769

So employees will get .769 hours of time off on each paycheck. By the end of the year, they will have their 20 days.

Good afternoon, I have a question on Salary employees. I have two guys who work 7.5 days or 8 days if 31 days in a month. They work only twice a month. I’m wondering can you divide their accrual rate in half for the both employee’s? One employee works 15 days out of the month and the other does same. After three years their rate is 1.75

Help! I was hired 9/21/2009 and my last day is august 17, 2017. How much vacation time and sick have i accrued ?

Every year i get 120 vacation and 40 sick.

i also have 66.5 unused vacation.

Hi I have 3 weeks of vacation ( 5 days) per year and I just started the job in April 1st 2017. By the end of December, how many vacation days should I be able to take? This company also does not allow us to use the days into next year. We have to use it in the current year or we lose it. please advise if I use any of my accumulated vaca days, do I lose anything for 2018?

You should talk with your human resources department or your boss about that. It can depend on factors specific to your company.

I work 85 hours every two weeks (10 work days). I’m confused with trying to find how much vacation time I should have each year? Can you help?

It depends on what your company offers. Company policies vary.

[…] can learn about how to calculate these accrual rates here. The best way to calculate accruals, though, is to let someone else do it for you! Online accruals […]

Hi, I’m trying to apply the monthly pro-rated formula to get my accrual rate so I can project how much I will earn by a certain date, but I’m not sure if I understand how it was worded.

“Daily or Monthly: To figure an employee’s accrued time based on a daily or monthly rate, you will divide the number of hours to accrue per year by the number of working days in a year, so 5 days x 52 weeks, for daily or simply by 12 for monthly.”

So from what I understood using a monthly rate, I tried 80hrs vacation per year divided by 12 = 6.67. I know I’m not earning 6 hours per hour worked..Is there another step?

I have an employee that was hired on 5/15/17. If he was hired 1/1/17, he would get 12 hours of personal time to use for the year. Since he was hired mid-year, I need to know how to prorate this amount. He is an hourly employee and works 40 hrs. per week and is paid weekly. How many hours of prorated personal time would he have to use before the year is over?

Hi Cheryl,

Which accrual rate do you use for him – monthly, yearly? Also, did you mean that he gets 12 hours of personal time to use in a year, or did you mean days? Feel free to give me more details but assuming you meant days and assuming it’s a once yearly accrual rate, then he’s getting one day per month to use. He didn’t work for you for the first 4 and a half months so subtract that out to get 7.5 days.

I would use the yearly accrual rate and I meant 12 Hours.

Ok, so 7.5 hours for the year then.

Hello Peggy,

We’re really struggling on how to apply vacation hours. We are a very small agricultural company (grape growers). We give 50 hours vacation per year for full time employees working 50 hours/week. Some of our employees only work for 9 or 10 months of the year but we have some that come back year after year. How would I create a calculation for them to earn their vacation hours based on hours worked?

Many thanks for your help!

Sharon

Hi Sharon,

To get your accrual multiplier, we’ll assume your employees work a regular full time schedule and get 50 hours vacation. The calculation would be 50/2030=.0246. If an employee worked 10 months with this multiplier, they would get about 50 hours off. Let me know if this helps. Using the hours worked rate usually won’t yield the exact number of hours off.

To check this, imagine your employee works for 9 months at 50 hours a week, with one week off. That will be

Hi Peggy,

I just approached my boss with your great accrual formula for seasonal employees but I am now thoroughly confused!

He wants them to start accruing after 1560 hours worked. They should accrue up 50 hours per year. I don’t know how to figure this out – I’d really appreciate your help.

I get the process of converting all employees at the same time from anniversary date to calendar date and awarding appropriate vacation time, but how do you prorate or transition a new employee into the system? If an employee starts on 9/27/17 and the PTO policy starts earning day 1 and is earned per hour worked, PTO awarded as follows: 0-1 year 32 hours .01626, 1 year 40 hours .02040, 2 years 48 hours .02459. This was calculated on 2080-112= 1968 hours worked. I need to transition the new employee in and have them on a 1/1/18 date. How do I prorate this?

I don’t see anything on my situation. In May 2017 I was told my hours were being cut and I would be part-time as of 8/1/17. My vacation hours for 2017 (10days) were earned in 2016.

In 2017 My vacation hours increased to 15 days @ 37.5 hours/week so these would be put toward 2018. If I calculate for 7 months (Jan 1-7.31) using the bi-monthly formula—- I get 4.69 hours earned per period. So for 7 months I have earned 65.66 hours PTO.

How do I calculate the part time hours from 8/1-12/31? I have worked 373 hours. I’m confused.

[…] drafts a time off policy, they have several choices to make: How much time off to give each year, which accrual rate to use, whether to implement a probationary period, and whether to use an accruals cap. When deciding on […]

I need to prorate an employee’s vacation time for unpaid leave of 7 weeks time off. Vacation time is 10 days / 80 hours annually. How would I calculate this? What would the correct amount of vacation time be with the adjustment with the 7 weeks of unpaid time off when vacation time is not accrued?