How Do You Accrue PTO? Understanding PTO Accrual Rates and Policies

Your paid time off (PTO) accrual policy is more important than you might think. It's a recruitment tool, a retention strategy, a compliance requirement, and a financial liability that needs to be managed strategically. When candidates ask, "how do you accrue PTO?" your answer can give you an edge over the competition — or achieve the opposite effect. Here's how you can design a PTO accrual policy that helps you attract better candidates, keep employees engaged, prevent burnout, and maintain predictable costs.

While this article focuses specifically on how PTO accrues, it’s also important for employers to clearly define what types of time off their PTO policy covers, since different categories may carry different legal requirements.

What Is Accrued PTO?

Accrued PTO is time off that an employee earns incrementally based on how many hours they have worked. For example, if you hire a new employee on January 1st, they may not be entitled to PTO until they have worked for 90 days (a common introductory period). Once eligible, they accrue PTO at a steady rate for every hour worked. By their six-month anniversary, they may have accrued around 40 hours (one full work week) of paid time off they can use.

Unlike front-loaded PTO, where an employee receives a “lump sum” of PTO at the beginning of the period, accrued PTO adds up over time. This can help protect employers from losses if an employee leaves unexpectedly. For example, a front-loaded PTO policy might renew on January 1st, which means employees have immediate access to all their PTO for the year. In theory, an employee who leaves the company on February 1st may be entitled to a full PTO payout where required by law or if required by the employer’s policy. With accrued PTO, that same employee may be entitled only to the PTO they have earned.

PTO Accrued vs. PTO Available

You may sometimes hear the terms “accrued PTO” and “available PTO” used interchangeably, but they actually refer to different concepts. Accrued PTO is the total amount of paid time off an employee has earned, while available PTO is the amount of time they currently have available to use. Calculate available PTO by subtracting PTO used from total accrued PTO.

Formula:
Total Accrued PTO – PTO Used – Scheduled PTO = PTO Available (for internal tracking purposes)

Example:

• An employee has accrued 80 hours of PTO
• They have used 20 hours
• They have 10 hours scheduled
• Internal calculation: 80 – 20 – 10 = 60 hours currently available

Note: This example illustrates how employers may track PTO internally. Requirements for what must or must not appear on wage statements vary by jurisdiction.

How To Accrue PTO

There are two main ways an employee can accrue PTO: based on hours worked or on time passed. While employers may choose a method that aligns with their workforce and policies, in many jurisdictions the required accrual method is dictated by law. Accrual based on hours worked—common in state or local paid sick leave laws — is often mandated rather than optional. In contrast, time‑passed accrual tends to be more predictable and is frequently used when not otherwise restricted by local requirements.

• By Hours Worked: Employees accrue PTO based on how many hours they have worked. This creates an environment where the PTO an employee earns is equitable compared with other employees who may work more or fewer hours. For example, a part-time hourly worker earns less PTO in a pay period than a full-time hourly employee.
  • Example: An accrual rate of 0.0385 hours of PTO for every hour worked = approximately 2 weeks annually when working 40 hrs/week.
• By Time Passed: Employees can accrue PTO based on time intervals (weekly, biweekly, monthly, or annually) regardless of hours worked. This method provides predictable accrual amounts each period and is easier to administer than hours-worked accrual.
  • Example: 4 hours PTO earned every two weeks.

Your employee handbook should clearly state how the policy works for various roles. Accrued PTO may also be stated on an employee’s paystub so they can see their current balance for each pay period. Some jurisdictions have specific wage statement and notice requirements for employee time off that should be reviewed and incorporated into employer practices.

How To Calculate PTO Accrual

PTO accrual rates and policies vary by company, but they are usually calculated using the same formulas. Understanding how to calculate PTO accrual by time passed and per hour helps employers design equitable policies and keeps employees up to date on their available benefits.

Here’s how to do it:

• Convert annual PTO from days to hours. If an employee receives 15 days of PTO annually, for example, multiply 15 days × 8 hours per day = 120 hours per year. Use this number to calculate accrual rates for salaried and hourly employees.
• How to calculate PTO accrual by time passed. Most policies calculate PTO either bi-weekly or bi-monthly for employees, depending on how your pay structure works.
  • For Biweekly Accrual (26 Pay Periods): 120 hours ÷ 26 = 4.62 hours per pay period.
  • For Semi-Monthly (24 Pay Periods): 120 hours ÷ 24 = 5 hours per pay period.
  • For Weekly Accrual (52 Pay Periods): 120 hours ÷ 52 = 2.31 per pay period.
• How to calculate PTO accrual per hour based on hours worked. Determine how much PTO an employee earns per hour worked.
  • For Full-Time Hourly Employees: 120 annual hours ÷ 2,080 standard work hours per year = 0.0577 hours of PTO per hour worked.
  • For Part-Time Hourly Employees: Use the same accrual rate and multiply it by hours worked.

Most employers provide PTO balances on paystubs and through HR portals so employees can easily verify their available time off and plan accordingly.

What Impacts PTO Accrual Rates?

PTO accrual rates aren't one-size-fits-all. Employment status, company policy, tenure, and applicable laws may all impact how fast an employee earns PTO. This means employees at different organizations (or even within the same company) may accumulate PTO at different rates. Consider the following factors as you develop your policy.

Employment status is one of the primary factors that determines PTO accrual rates, and in many jurisdictions, applicable laws may also set minimum accrual requirements

• Full-time employees typically accrue PTO at a standard rate (for example, 120 hours annually for a total of 3 weeks of PTO).
• Part-time employees usually accrue PTO based on hours worked, and accrual rates may differ from full-time employees. For example, your part-time employee benefits policy may stipulate that someone working 20 hours per week will accrue PTO at 50% of the full-time rate.
• Temporary workers and contractors generally don't receive PTO benefits.
• Seasonal employees may have prorated accrual or no PTO depending on company policy and applicable law.

Company-specific policies establish the framework for how and when employees earn PTO:

• Restriction Periods: No PTO accrues during the restriction period (e.g., first 90 days).
• Introductory Periods: PTO accrues but isn't available for use until the introductory period ends; accrual may be retroactive to hire date.
• Balance Cap: Maximum PTO hours an employee can have in their balance at any given time (e.g., 240 hours max); accrual stops when this limit is reached.
• Accrual Cap: Maximum PTO that can be earned in a single benefit year.
• Carryover (or Rollover) Policies: Allow unused PTO to transfer to the next benefit year as the same leave type (e.g., vacation remains vacation), with potential limits on amounts.
• Use-It-or-Lose-It Policies: Don't allow any transfer to the next period where legally permitted.

Many organizations reward employee loyalty by increasing accrual rates based on tenure:

• Tiered PTO accrual rewards loyalty by increasing accrual rates at specific milestones. For example, an employee may accrue 2 weeks of PTO annually for years 1-3, 3 weeks for years 4-7, and 4 weeks after 8+ years.
• Tiered structures can increase retention, but they may also create higher long-term PTO liability.

Does PTO Accrue While on Leave?

Whether PTO accrues during leave depends on the type of leave, your company’s accrual rules, and applicable federal, state, or local laws. When employees use PTO, they are still considered active and on paid status, so PTO typically continues to accrue during that time.

However, during unpaid leaves or extended absences, PTO accrual generally pauses unless your company policy or local laws require otherwise.

PTO Accrual on Sick Leave

When employees take PTO when out sick, they may continue to accrue PTO at their normal rate since the employee is still employed, receiving compensation, and may be considered entitled to the same benefits as if they were working. However, if your organization has separate sick leave (distinct from general PTO), company policy and applicable laws will determine whether taking sick leave affects time off accruals.

For unpaid sick leave, accrual may pause. If the employee is taking a leave of absence, employers may extend PTO accrual for a limited amount of time (typically under 30 days). Others may suspend PTO accrual immediately once paid sick leave has been used up. Check laws in your state and localities to ensure policy compliance. Some jurisdictions require continued accrual during certain types of medical leave or mandate separate paid sick leave that operates independently from PTO. independently from PTO.

PTO Accrual on Disability Leave

According to the Equal Employment Opportunity Commission (EEOC), employers should permit the use of accrued paid leave before providing unpaid leave when providing leave as an accommodation due to a disability.

Most employers suspend PTO accrual during disability leave since the employee isn't actively working, even though they may continue health insurance and other benefits. If employees use accrued PTO to supplement disability payments (which cover only a percentage of salary), accrual usually continues during that paid portion.

As you create your policy, answer the following questions:

• When does disability leave officially begin?
• How do you treat other employees in a similar leave status?
• Do applicable laws require continuation of benefits during disability leave?

PTO Accrual on FMLA

Under the Family and Medical Leave Act (FMLA), employers must maintain an employee’s coverage under group health benefits during an employee's protected family leave. Federal law doesn’t require employers to continue PTO accrual during unpaid FMLA leave; however, your policy must treat employees on FMLA leave the same way it treats employees on comparable types of unpaid leave.

Employers may suspend PTO accrual during unpaid FMLA leave, resuming it when the employee returns to work.

Bonus PTO, Donated PTO, and Volunteer PTO Programs

Supplemental time-off programs serve different purposes beyond standard PTO accrual. Employers may use them to reward performance, to support community engagement, or to help employees during hardship. Understanding how these programs work helps employers design attractive benefits packages while managing the administrative and financial implications.

• Bonus PTO: Awarded as a reward or incentive for achieving specific milestones or performance goals, such as meeting quarterly sales targets, perfect attendance records, years-of-service anniversaries, or completing special projects.
• Volunteer Time Off (VTO): Allows employees to take paid time off specifically for volunteering with approved charitable organizations or community service activities. VTO is typically allocated as a separate annual amount rather than being deducted from regular PTO. Employers may require pre-approval or proof of volunteer activity.
• Donated PTO Programs: Allow employees to support colleagues facing serious hardships by sharing their accrued time off. These programs operate independently from standard accrual:
  • Leave Banks: Employees contribute hours to a centralized pool that eligible employees can access during emergencies.
  • Leave Sharing: Employees transfer hours directly to individuals facing hardship (may have tax implications).
  • PTO for Charity: Employees convert unused PTO to monetary donations the employer makes on their behalf.

Key Considerations for Designing Your PTO Accrual Policies

As you create your PTO accrual policies, evaluate each element carefully to ensure fairness, clarity, and alignment with organizational goals. Consider laws in your jurisdiction(s) and make sure policies don’t create excessive administrative burdens or compliance issues.

Your policy should define the following critical policy parameters:

• Qualifications: Define eligibility criteria clearly, such as employment status (full-time, part-time, temporary), minimum hours worked per week, and whether contractors or seasonal workers receive PTO. Consider whether to align qualifications with benefits eligibility or create separate tiers based on job level or department.
• Waiting Periods: Establish whether new hires begin accruing PTO immediately, after a introductoryperiod (typically 30-90 days), or on their first anniversary, and decide whether accrual is retroactive to the hire date. Balance the competitive advantage of immediate accrual against the risk of turnover before employees become fully productive.
• Usage Rules: Specify minimum advance notice requirements for PTO requests (such as 2 weeks for vacations) and any blackout periods during peak business seasons. Clarify whether employees can use PTO in partial-day increments or must take full-day blocks. Establish approval processes and protocols for emergency absences.
• Tiers/Increases: Determine whether PTO accrual increases over time and establish service milestones that trigger those increases. Specify the new accrual amounts at each tier to reward loyalty and reduce turnover. Consider whether tenure-based increases apply to all employee classifications or only certain positions.
• Total PTO Allowed: Set annual PTO allotments in alignment with industry standards and competitive positioning. For example, a typical range might be 10-25 days for full-time employees. Review industry benchmarks and consider whether your total PTO should increase with seniority and tenure or remain consistent regardless of service length.
• Accrual Rate: Calculate the per-pay-period or per-hour-worked accrual rate that delivers your intended annual PTO amount. Verify that accrual calculations are accurate across different employee schedules (full-time, part-time, variable hours) to avoid over- or under-allocating PTO.
• Unused PTO: Decide whether unused PTO rolls over to the next year, expires annually ("use-it-or-lose-it" where legally permitted), or accrues indefinitely up to a maximum cap. If allowing rollover, specify how much.
• PTO Payout: Establish whether accrued, unused PTO is paid out at termination. Consider different circumstances: voluntary resignation, involuntary termination, or retirement. Check your state's laws, since some states legally require payout while others leave it to employer discretion.
• PTO Buyout: Some employers offer programs that allow employees to sell back accrued PTO hours for cash payment while still employed, providing flexibility for those who prefer compensation over time off.
• Negative Balances: Decide whether to prohibit negative PTO balances or allow limited advance usage with clear repayment terms. If permitting negative balances, document the maximum borrowing amount and establish payroll deduction procedures where state law allows.
• Compliance Requirements: Research federal laws (FMLA), state-specific mandates (paid sick leave, PTO payout requirements, accrual vs. lump-sum restrictions), and local requirements that may dictate minimum PTO standards or usage protections. Verify that policies don't violate wage and hour laws, and update handbooks regularly as employment laws evolve.