Definition of 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 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:
- Position within the company
- Industry standards
This means there isn’t one given approach to how a company structures its leave policies.
How do employers generally calculate leave accruals?
There are both paid and unpaid leave amounts that workers can accrue:
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 of 16 days of leave times 8 working hours per day (16*8) = 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 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 a bit more complicated. It would look something like this for someone who is paid twice per month: (173.33 (a month’s-worth of hours at 8 hours each day) / 4,160 (two years’-worth of working hours)) x 86.67 (one semi-monthly pay period).
Why is leave accrual important to your 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.
PAID TIME OFF IS ESSENTIAL TO RUNNING A HEALTHY BUSINESS.
We all know that 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 (and contagious), paid time off is essential to running a healthy business.
This also means that employees need to be able to take advantage of that leave they’re accruing. Managers need to allow employees time off without repercussion or guilt.
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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.
That legislation was defeated. However, many companies started offering office workers minimal amounts of paid vacation time in the 1910s and 20s. 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 (European Union), there isn’t a federal law mandating that employers give employees a specific amount of paid time off.
There are some companies that front-load an employee’s paid time off. This means that when employees start employment with the company, they receive their entire year’s allotment of paid time off. This happens instead of earning it as their career continues over time.
This approach has pros and cons. Employers can develop policies to keep employees from taking all their paid time off and then leaving the company.
Additional relevant information that may help you
- Paid time off policy best practices
- 5 things small business owners need to know about paid time off policies
- What does paid time off cost the employer?
- How to automate time and attendance (including paid time off calculations)
- The PTO guide: everything you need to know about how to create a PTO policy for happy, engaged employees
- Time tracking tool
Why paid time off accrual is a significant 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. You also retain your valuable talent.