Leave Accrual

When you add the accrual method to your time off policies, you also maintain a way to manage that time off. Learn more about accruing PTO and leave. 

Accrued leave reflects how many hours of paid leave an employee earns according to the benefits and policies you, as their employer, define in your personnel policies. 

What is leave accrual? 

The ability to earn paid time off is one of the best benefits employers can use to entice new recruits and retain existing employees. Whether your company uses an all-inclusive paid time off (PTO) bank or has separate vacation and sick leave accrual policies, this is one benefit that motivates your employees to either stay with you or move to a different company. Many companies determine how much leave an employee can earn per pay period or month based on their overall leave policy. These leave accrual policies might be based on: 

• Tenure
• Position within the company
• Industry standards

How is leave accrual calculated? 

There are both paid and unpaid leave amounts that can be accrued. 

Paid 

When an employee is eligible for a total PTO bank of 16 days, is paid twice per month, and works 8 hours daily, their PTO accrual would be about 5.33 hours each pay period. This is a straightforward calculation: 16 days of leave times 8 working hours per day equals 128 eligible work hours per year, divided by 24 pay periods per year. As that time adds up and isn’t used, the employee’s leave bank accumulates to a usable level. 

Unpaid 

Some companies offer unpaid sabbaticals or additional unpaid leave outside the amounts required by various federal laws, such as the Family Medical and Leave Act (FMLA). The accrual practice would be similar to how paid leave builds. Once an employee has met the minimum amount of time to meet accrual eligibility, leave would accumulate each pay period. If the company offers senior members a 30-day unpaid sabbatical every other year, the accrual calculation would be more complex for someone paid twice per month: (173.33 hours, a month’s worth of hours at 8 hours per day, divided by 4,160, two years’ worth of working hours) multiplied by 86.67 (one semi-monthly pay period). 

Why is leave accrual important to your small business? 

A company that can clearly communicate its policies and how those policies benefit its employees is a company that will recruit and retain key talent. When we hire employees, we hire them to perform a specific job or function. Even so, it is critical to acknowledge that to avoid staff burnout and keep people from coming into the office when they are ill, paid time off is essential to running a healthy business. This also means that employees need to be able to take advantage of the leave they’re accruing — managers need to allow employees time off without repercussion or guilt. 

What is the history of paid leave? 

The push for formalized paid leave started in the United States in the early 1900s with legislation proposed by President Taft. He suggested employees receive 2–3 months of paid time off to ensure they were fresh and able to safely complete their duties. Although that legislation was defeated, many companies started offering office workers minimal amounts of paid vacation time in the 1910s and 1920s. In the 1930s, unions fought to get paid time off for laborers. There have since been additional attempts to legislate paid time off at the federal level. Still, unlike the EU, there isn’t a federal law mandating that employers give employees a specific amount of paid time off. Some companies front-load paid time off, meaning employees receive their entire year’s allotment at the start of employment rather than earning it over time. This approach has pros and cons, and policies can be developed to prevent employees from taking all their paid time off and then leaving the company. 

Summary 

Leave accrual reflects how your company defines the method used for determining how much paid time off an employee can earn and when they’re eligible for the benefit. Offering your employees paid time off gives you a tool that demonstrates that you value your employees and their well-being. When you add the accrual method to your time off policies, you also maintain a way to manage that time off and retain your valuable talent.