PTO Accrual: A Guide for Employers Who Want to Get It Right
Emman Velos
Last update on:
August 11, 2025 8:16 AM
Published on:
TL;DR
PTO accrual mistakes often lead to disputes and can leave you exposed to compliance issues. To avoid these headaches, you need a reliable, transparent system for tracking how PTO is accrued. This guide breaks down how to calculate PTO, the common mistakes that organizations make when building a policy, and how reliable tools like Timeero can simplify PTO tracking for your company.
Paid time off isn’t just a perk, it’s something most employees expect. In fact, a solid paid time off (PTO) policy can be the reason someone joins your team – or doesn't.
The concept is simple: employees earn time off as they work and are free to use it throughout the year if they need a break, get sick, or have family plans. But as any manager or payroll admin knows, managing PTO is rarely that straightforward.
Add in part-time schedules, changing roles, and field-based teams, and suddenly it’s not so easy to track who’s earned what or when.
Without a clear, well-tracked system, PTO turns into one of those things that quietly drains time, trust, and sometimes, compliance.
Avoid PTO disputes and compliance risks—track time the smart way.
PTO accrual, simply put, is how employees earn their time off. Some employees accrue PTO by the hour, others receive a set number of days at the start of the year.
For example, you might offer 1 hour of PTO for every 30 hours worked, or provide employees a fixed rate of 3.1 hours per pay period.
Regardless of your accrual method, the goal is to make sure your employees are earning time off as they work.
Common PTO accrual methods
PTO Accrual Method
Description
Best For
Lump Sum Accrual
Employees receive all PTO at once, typically at the start of the year or on their anniversary date.
Small teams, businesses seeking a hands-off approach, salaried staff with annual schedules, and states without accrual-based sick leave requirements.
Periodic Accrual
Employees earn PTO each payroll period, spreading out the accrual across the year.
Salaried or part-time workers, employers with automated payroll, and companies seeking tighter control over PTO availability.
Hourly Accrual
Employees earn PTO based on actual hours worked, as required by states with accrual mandates.
Hourly workers, contractors, employers in states with accrual mandates, and businesses with mobile or fluctuating schedules.
There’s no universal best option when it comes to PTO accrual. Each method comes with its own pros and cons, especially if you’ve got a mix of employee types or operate in states with strict PTO laws.
Here’s a breakdown of the three most common approaches in accruing PTO for employers:
Lump sum accrual
With the lump sum method, employees receive all of their PTO at one time, usually at the start of the year or on their anniversary date. This method is straightforward and easy to manage.
Best for:
Small teams with predictable workloads
Businesses that want a hands-off approach
Salaried staff with annual schedules
States that don’t require accrual-based sick leave
Periodic accrual
With the periodic accrual method, employees earn PTO each time you run payroll. Whether you pay weekly, biweekly, or monthly, this method spreads out time-off balances across the year instead of front-loading them.
This setup is beneficial for everyone involved. Employees know what to expect each pay period, and employers stress less by having a predictable accrual system.
Best for:
Salaried or part-time workers on regular schedules
Employers with automated payroll
Companies that want tighter control over when PTO becomes available
Hourly accrual
Hourly accrual requires precision. With this method, employees earn PTO based on the actual hours they work. It’s a fair system for teams with variable schedules, and in many states, hourly accrual is required for sick leave payroll compliance.
With accurate recordkeeping, the hourly accrual method gives the clearest picture of what’s been earned, especially for field-based or part-time roles.
Best for:
Hourly workers or contractors
Employers in states with accrual mandates
Businesses with mobile teams or fluctuating schedules
Companies that want PTO to track closely with labor output
How to calculate PTO accrual
Keeping track of how much time each employee has earned and their remaining balances looks a little different depending on the accrual method you’re using.
Let’s take a look at the accrual calculations for each method.
Lump sum PTO calculation
There’s no need to calculate anything over time if you have a lump sum PTO policy.
The accrual calculation for lump sum policies is simple: subtract time off from the beginning balance.
Total PTO Accrued - PTO Used = PTO Balance
Emma is a salaried employee. Her company gives her 120 hours of PTO on January 1st. In March, she takes 3 days off to visit family.
To calculate her remaining balance, we would use this formula:
120 (accrual) – 24 (8 hours per day off) = 96 (PTO balance)
Her remaining PTO balance is now 96 hours.
Periodic accrual PTO calculation
Now let’s take a look at the same scenario, but apply the periodic accrual method.
Emma earns 120 hours of PTO per year, but her company uses the periodic accrual method based on a biweekly pay schedule. This means PTO is accrued evenly over 26 pay periods.
Here’s how the numbers break down:
Annual PTO Hours ÷ Number of Pay Periods = PTO Earned Per Period
120 hours ÷ 26 pay periods = 4.62 hours earned per pay period
Emma earns 4.62 hours of PTO on a bi-weekly basis.
Three months have gone by and Emma has received 6 paychecks. We can use the same formula to calculate how much PTO she’s earned:
PTO Earned Per Period × Number of Pay Periods = PTO Hours Accrued
4.62 hours × 6 pay periods = 27.72 hours accrued
If Emma works 8 hours per day, that means she’s earned a little over 3 days of PTO.
Hourly accrual PTO calculation
Emma’s been working full-time for a while and she's ready to take a break. She moves to a 20-hour work week so she can get a bit more breathing room. Since her schedule isn’t as predictable as before, her employer now has her accruing PTO by the hour.
Now, every hour she works adds to her time-off balance. It’s a common setup for teams with part-time or variable hours and is required in many different states, especially where paid sick leave laws apply.
Here’s how the math works in Emma’s case.
First we need to calculate how many hours of PTO full-time staff accrue in a year:
160 hours per month × 12 months per year = 1920 hours
Since all full-time employees are eligible for 120 hours of PTO per year, we can calculate Emma’s accrued PTO hours using this formula:
Annual PTO Hours ÷ Number of Hours of Work = PTO Earned Per Hour
120 hours of PTO ÷ 1920 hours per year = 0.0625 hours of PTO earned per hour
If Emma has worked 300 hours so far, her accrued PTO hours would be:
PTO Earned Per Hour × Number of Hours of Work = PTO Hours Accrued
PTO policies can look great on paper and still cause problems. That’s usually what happens when your company policy doesn’t match how your team actually works.
Because let’s face it – no team is truly one-size-fits-all. Everyone has different roles, schedules, and may even work in different states.
PTO only works when your policy lines up with how your team actually runs.
Here’s what you need to consider:
Employment status
Full-time, part-time, seasonal, contract… each group earns time off differently. And trying to force them all into the same accrual model rarely works.
Tenure or seniority
A lot of companies increase PTO accrual rates at key milestones as a way of thanking employees for their loyalty.
Rewarding employees with increased PTO accruals is a great retention tool, but only if it happens according to schedule.
State laws, local ordinances, and union contracts
States like California, Colorado, and Washington have their own rules for sick leave accrual, rollover, and front-loading. In some places, the law says you must track PTO hourly. In others, you might have to show carryover limits or provide specific notices.
If your team is spread out across state lines or includes union workers under a collective bargaining agreement, you'll need a flexible PTO policy.
Payroll frequency and system compatibility
Your pay schedule shapes how PTO should accrue. If employees are paid biweekly, your system should track 26 accrual events a year. If you pay monthly, it should track 12.
Then there’s the tech side. If your payroll system doesn’t talk to your PTO tracker, or if you’re relying on a spreadsheet with five tabs and a dozen formulas, things will break. Maybe not today, but eventually.
That’s why more employers are turning to automated time tracking tools like Timeero that include a built-in PTO tracking system.
Common pitfalls
No matter how well intentioned and organized an employer might be, they may still struggle with managing PTO accrual.
But most of the time, accrual pitfalls aren't the result of an employer's actions. They are typically seen when teams have a poor PTO management system in place.
Take a look at the top 5 PTO accrual pitfalls below.
1. Not accounting for different employee types
Salaried, hourly, part-time, full-time — each role type earns PTO differently. But many companies apply the same accrual rate across the board out of convenience.
2. Failing to update your policy after legal or organizational changes
If your company grows, expands to new states, adopts a remote work model, or changes its payroll cycle, your accrual rules might need to change, too.
The same practices should apply if federal and state laws were to change. Accrual rate requirements, carryover rules, and usage limits evolve, especially in places like California or Colorado.
3. Overcomplicating calculations without the right tools
Spreadsheets might work for a team of five, but if you’re managing 20+ employees that are located in different states with unique roles, relying on manual formulas is a ticking time bomb.
4. Lack of transparency with employees
PTO shouldn’t be a mystery. Employees shouldn’t have to guess how much PTO they’ve earned. Without a transparent system, time-off balances start to feel arbitrary — and that erodes trust.
5. No audit trail
If a wage claim hits, the burden of proof falls on the employer. If you don’t have clean, timestamped records of PTO accrual and balances, courts are likely to assume you were in the wrong.
Best practices for employers
When it comes to PTO, misalignment between policy, payroll, and people ops creates inefficiencies that ripple through your entire organization.
Use these strategies to help keep everything running smoothly:
Align your accrual method with your team structure
Not every role fits the same accrual model. Forcing one can lead to confusion or unfair balances. Hourly, part-time, and seasonal employees are better served by hourly accrual, since it reflects time earned in real time.
Salaried staff with consistent hours are a natural fit for periodic accrual tied to your pay cycle. If simplicity is the goal, lump sum accrual can also work. Just make sure it still meets local payroll compliance rules.
Give employees visibility into their balances
No one wants to bug HR just to figure out how much time off they’ve earned.
A reliable Time Off Tracker gives your team a clearer view of where they stand. They can check their balance on their own, whether they’re in the field, at a desk, or between job sites.
Keep your policy in sync with the law
PTO rules aren’t just a company thing — there are legal rules that apply as well.
For example, California requires hourly accrual and enforces strict rollover rules. Colorado employees accrue one hour for every 30 hours worked. Other states have their own requirements for sick leave, caps, front-loading, and payouts.
We’ve seen employers hit with wage claims, audits, and even lawsuits that reach back years.
In matters of compliance, don’t wing it. Implement your policy early and revisit it often. Here’s how to start:
1. Map where your people are working, including remote and mobile staff.
2. Check state and city rules for accrual rates, carryover limits, and front-loading policies.
3. Adjust your policy settings to reflect the rules that apply to each employee group.
If your team spans multiple jurisdictions, you’ll want a system that can apply different rules by location and flag accrual errors before they cause problems.
Use a system that works with you
You can have the cleanest written paid time off policy, but if your system can’t track requests and approvals accurately, it doesn’t carry much weight.
Generic payroll tools and manual tracking methods won’t be sufficient for teams needing a tighter hold on PTO. If your setup can’t support different accrual methods, you’ll spend more time fixing errors than approving time off.
This is where tools like Timeero come in.
View employee Time Off requests within Timeero’s web dashboard.
With Timeero’s PTO tracking feature, you can:
Monitor accruals and balances in real time across teams and pay periods
Sync directly with payroll software for accurate compensation and payout
Automatically apply location-based rules to stay compliant
Communicate accrual balances with employees for proactive scheduling
Employees requesting PTO can view balances and accruals in one place.
Prevent PTO issues before they start
PTO problems don’t always show up right away. Sometimes it’s a missed hour here, a denied request there. But over time, those small inconsistencies stack up — and suddenly you’re fielding complaints or facing audit questions you weren’t ready for.
Timeero’s PTO tracking system can be customized to match how your team works, with the structure and visibility to back it up.
Q: Can employees use their PTO whenever they want?
A: Not exactly. Just because someone sees PTO building up on their pay stub doesn’t mean they’re automatically in the clear to use it. Most businesses have rules in place — some require advance notice, others block off peak seasons, and many won’t let new hires use PTO until they’ve been around a while.
Q: Why does your PTO policy need clear rules?
A: Here’s the problem with a vague policy – everyone interprets it differently. A solid PTO policy doesn’t just say how much time off someone gets. It should lay out how it accrues, when it’s available, who it applies to, and how it’s tracked. When that’s spelled out from the start, you avoid the back-and-forth and everyone’s on the same page.
Simplify PTO calculations and stay audit-ready—no guesswork required.
Emman is a passionate writer with more than 6 years of digital marketing experience under his belt. As a licensed chemical engineer with a passion for writing, he marries the technical with the creative to create engaging copy that converts. He is also a certified #girldad who spends most of his day playing with his three girls when he's not busy writing.
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