How to Calculate PTO and Vacation Accrual

It is pretty much difficult to calculate the PTO by hand. There are a lot of rates to be chosen and are calculations are not always unlearned. That is why people who have small businesses use a yearly accrual rate. This is a very easy and simple method.

All have you to do is to simply decide how many days an employee gets in a year and then give it to them in a total without the deduction of any tax. However, if you are a shrewd person, there are other accrual rates that will help you find a better fit for your business. Just follow me and I am gonna tell you all the different rates and the calculations.

Typical Accrual Rates

Your employees will get a certain number of hours to use per year, no matter which accrual rate you choose. The accrual rate is different in the frequency depending on the way employees earn their time.

  • By hours worked
  • Daily
  • Twice a month
  • Every 2 weeks
  • Once a month
  • Yearly

PTO Calculations

you should be clear about one thing before you calculate the PTO, and that is you must decide how many hours you want your employee to accrue per year(Which is based on full-time schedule). We will find out the amount about the time employees should earn at each period of the pay.

Yearly

Employees that are connected for a long term to a company or an organization or employees who have already put in a year of tenure, it is better for them to use the yearly accrual rate. When an employee leaves, subtract it from the running total. At the start of the year on the anniversary of the employee, add their time to whatever is left over from the previous year.

Sometimes, the company doesn't want their employees to have to wait for the whole year to be able to take some vacation time, so they use any of the following rates instead:

By Hours Worked

This is a special accrual rate which does not give the guarantee of a certain number of hours to accrue per year. This is a great rate for employees who work part-time and who have variable schedules. It is also useful to fulfill sick time requirements.

This rate could be really helpful for you if you want the vacation time of your employee to reflect the actual time they have put in at the company. Employees who are part-time will get fewer hours than full-time employees and who work overtime would be able to earn more.

The calculation

Firstly, as I said above, you have to decide how many hours you would want your employee to get each year, it may be 80 hours or two weeks. Once you decide, then you have to determine 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(also any paid holidays).In this case, the employee would work 2000 hours per year.

To get our accrual results, we will divide 80( hours in two weeks of the work) by 2000( hours worked in the year) and we will get 0.04 for every hour, our employees work they will earn 0.04 hours of PTO.

Daily

This accrual rate is a good rate for the employees who are working part-time. These part-time employees must have to work a full 8 hours shift. That is why this may not be a great rate for employees who work part-time.

The calculation

To find the accrued time based on a daily rate, you have to divide the number of hours to the acre per year by the number working days in a year, so 5 days multiplied by 52 weeks.

let's say if an employee works for 40 hours a week and gets 80 hours of paid time off per year, we will divide 80 by the number of working days in the year. 80/260 which gives us 0.307. Now multiply this 0.307 by the number of total days in your pay period and you will get the PTO in each cycle.

Example

For example, if an employee worked 5 days in the pay period, we will multiply 5 x 0.307= 1.535. Thus, the employee will get 1.535 hours of paid time off in this pay period. If the employee works for the full year, it will add up to 80 hours. If the employee just works for 4 days a week, then he will get 1.228 hours each pay period.

Monthly, Bi-Monthly, or Every Two Weeks

These rates are very common and are quite easy to calculate too.

The calculation

We will divide the number of PTO hours that are granted per year by 24 for twice monthly or by 26 for every two weeks.

So, if the employees are given two weeks of vacations per year, then they will get 3.33 hours each bi-monthly paycheck.

This accrual is a little easy to handle than that of the daily or hourly rate because the employees see the same amount on each of their paychecks. It is not only easy but also less confusing to determine the current PTO amount of the employee if the records are missing.