Giving your employees time off is a benefit that isn’t required by the FLSA. Since time off is nonobligatory, most employers believe that they are exempt from paying out employees when they leave. Although the federal government doesn’t regulate time off and payouts, state governments have different rules.
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There are several ways to calculate time off but only one of them is ideal for employees who work variable schedules. The by hours worked accrual rate ensures that employees only earn 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. This rate is good for part time workers, periodic workers, and it satisfies many state and local sick time requirements.
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Calculating PTO by hand is a not a simple task. 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 it to them in a lump sum. However, if you’re a little more math savvy, you can calculate PTO with other accrual rates that may be a better fit for your business. I’ll explain the different rates and the calculations.
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