There are several ways to calculate accruals for employees. Probably the most common is to give employees the whole lump sum at the beginning of the year or anniversary date, but other accrual rates are common for certain scenarios.
If you don’t want to hand out a year’s worth of time off at once, employees can earn time off on a monthly or biweekly basis instead. This is good for temporary workers or if you have a high turnover rate.
If your employees work irregular schedules, if their work is periodic, or if they work more than 40 hours per week, they can earn their time off by the number of hours they actually work. This might amount to earning less than or more than the other rates would provide.
Accruals By Hours Worked
The hours worked accrual rate is particularly great for employees who work a variable number of hours per year or take periods of unpaid leave. By using this rate, you can have the accrued vacation hours reflect that time spent away from work. Likewise, if your employee puts in extra hours, you might want him to be able to earn extra vacation time.
Calculating accruals by hours worked offers this flexibility. But calculating it isn’t as easy as just throwing it all into the bank at the beginning of the year. Here’s how to do it:
First, decide on approximately how many hours you want your employee to accrue per year – maybe it’s 40, 80, or some other number. Then you can figure out the fraction of an hour that they should earn for each hour they work.
Let’s say the employee should get 2 weeks, or 80 hours per year. There are 52 weeks in a year but he won’t be working 2 of them so we’ll multiply 40 hours times 50 weeks to get 2000 hours. 2000 hours is how many hours the employee would work if he worked full time and took 2 weeks off (this does not include paid holidays. You might want to subtract those out too).
Divide 80 by 2000 (vacation hours per year/hours worked per year) to obtain .04. So for every hour our employee works he should earn .04 hours of vacation. (If the employee actually worked full time, he would earn 80 hours of time off. Since the accrual rate by hours worked is usually used for employees who don’t work full time, the employee may never actually accrue that much time off.)
Once we’ve set this number in the system, our employee will earn appropriate vacation hours regardless of whether he works 50 hours a week or 30.
To see this in action, let’s say our employee averages 50 hours a week for the whole year and took 2 weeks off. So, 50 hours times 50 weeks gives us 2500. 2500 multiplied by .04 gives the employee 100 hours of vacation. That’s an extra couple of days he’s earned.
Conversely, if the employee only averaged 30 hours per week for the year, he would only get 60 – not quite a full two weeks.
To set this up in Timesheets.com, you’ll visit the Settings page for the employee and then click the Options tab. At the bottom of this page you will find the accruals settings where you can enter your prefigured values.
If you don’t already have an account with Timesheets.com, give us a call so that we can help you set one up. Tracking accruals with Timesheets.com is painless and you won’t have to remember a single calculation because they are all done for you!