PTO Accruals: How They Work and How to Calculate Them

Not every paid time-off (PTO) policy can be as simple as “Work X hours and receive Y PTO.”

More physically strenuous work could justify more downtime. On the other hand, employees for a business with exceptionally flexible scheduling may not need excessive PTO. Other companies might not have traditional PTO accruals, but instead award an identical annual allowance to every worker at the start of the year.

With so many variables to consider, what’s best for your company isn’t always obvious. While we can’t design a policy for you, we can help you understand the options you have to create the best policy for your business. Let’s get started.

What is PTO accrual?

PTO accrual is the policy that determines how and when employees earn paid time off for the hours they work. PTO may cover vacation time, sick time, bereavement and personal days. It can also be:

• awarded in a lump sum
• earned per hour worked or each pay period
• given periodically

Accrual policies may be written as an equation, but how PTO accrues should always be clear and understandable to your employees.

Can employees use PTO anytime?

Having PTO doesn’t entitle an employee to use it at any time. Employers may have blackout dates where employees are not allowed to request time off based on business needs or levels of coverage.

Additionally, employers may impose restrictions on how long an employee must be with the organization before their time off accrues or can be used. All PTO requests should be reviewed with consideration given to business needs and other approved accruals, and employees who request time off should be in good standing.

There are also state and local laws limiting how paid time off or sick leave can be restricted. These rules vary by jurisdiction and can change over time, so it’s important to verify the regulations currently enforced in your area.

How does PTO accrual work?

PTO accruals don’t have a one-size-fits-all approach, especially in an age where hybrid and remote-work situations may factor into time-off policies. Consider these accrual types and options as you evaluate your policy.

Accrual rates

Accrual rates refer to the amount of PTO given for a certain milestone. It could be “one day off per two weeks worked” or “one hour earned for every 25 hours worked” — the exact accrual rate is up to your organization. In other words, it’s generally expressed as a ratio of hours worked. Tactically, it’s easiest for employers to determine the total number of PTO hours appropriate for employees each year. Once this is decided, work backwards to break out accrual rates by hours worked or pay period.

Certain organizations may calculate PTO accrual differently, and the rate may vary based on an employee’s:

• tenure
• title
• employment status (e.g., full-time, part-time or seasonal)

For example, imagine a company has an annual PTO accrual rate of 15 days for full-time employees. On average, they work 40 hours per week. How would you calculate PTO accrual for these employees?

• Weekly accrual rate: 15 days per year/52 workweeks per year = .2885 days of PTO earned per week
• Daily accrual rate: 0.2885 days earned per week ÷ 5 workdays per week = 0.0577 hours of PTO earned per day

In this example, the employee would accrue approximately 0.29 PTO days each week (roughly a full PTO day every 3.5 weeks). This would be added to their PTO balance on a set schedule.

Accrual period

An accrual period refers to a segment of time that an accrual rate applies to. Salaried employees — those without formally tracked hours — often rely on periods over specific rates.

An accrual period may be one week, one pay period, one month, one quarter or even one year. Regardless, this approach lets employees earn PTO based on the accrual period and awards it after that period has been worked.

Hours worked

Basing PTO accrual on hours worked allows employers to pace out employees’ accrued time. This method can easily scale according to tenure, too. In other words, if an employee has just started, they can’t immediately request PTO outside a prehire arrangement.

Even if a company administers PTO per hours worked, these policies may apply to salaried workers. In this case, the policy should be written to explicitly describe that employees who work 40 hours per week accrue PTO based on that fixed unit of measurement. Having clearly outlined policies is always a good practice, especially when it comes to clarifying your organization’s standards and practices surrounding PTO accruals.

PTO accrual on FMLA

The Family and Medical Leave Act (FMLA) does not require employers to provide PTO during the leave period. FMLA mandates job-protected, unpaid leave for eligible employees with family or medical reasons.

However, employers may have their own policies regarding the use of PTO and how PTO accrues during FMLA leave. Some employers may require employees to use PTO concurrently with unpaid FMLA leave. Employers should have clearly defined policies on how accruals can be used if they don’t offer paid leave or other wage replacement benefits like short-term disability.

Likewise, employees should review their employer’s PTO and FMLA policies and procedures since they typically vary among companies.

PTO accrual on sick leave

State or local laws on PTO and company policy often dictate how PTO accrues during sick leave.

Employers that allow PTO to accrue during sick leave should address this in their company’s broader PTO strategy. If they do allow for this kind of accrual, it means employees continue to earn PTO while taking sick leave.

If the company has a separate sick leave policy distinct from general PTO, it could alter the rules for accrual. Additionally, state and local laws may influence the accrual of sick leave and PTO, as some jurisdictions have specific regulations over paid sick leave. Because these rules can change, it’s recommended that your HR or legal teams stay on top of legislative actions in cities or states that might impact your policies.

When in doubt, employees should consult HR for clarification. An easy-to-use tool for sorting and responding to your workforce’s questions simplifies this process.

PTO accrual on disability leave

Like sick time, state or local laws and employer policy determine PTO accrual during disability leave. Depending on the circumstances, disability leave can fall under different categories, such as short-term disability or long-term disability.

Disability leave might be paid under an insurance policy or by the employee’s worked-in state. Each employer may have specific rules and policies governing PTO accrual during disability leave, and these details should be clearly outlined in a company’s policies or employee handbook.

Consider these common PTO accrual scenarios:

1. Employer policies: Some employers allow PTO to accrue during disability leave, treating it like other leave types. A business could also separate this leave from PTO, suspending PTO accrual during a period of disability.
2. Applicable laws and regulations: Depending on the jurisdiction, legal requirements may determine PTO accrual during disability leave. Some states — like California and Washington — have specific regulations addressing the interaction between disability leave and PTO.

It’s crucial for employees to review their company policies, benefits documents and relevant insurance guidance to understand how PTO accrual is handled during disability leave.

How do you calculate PTO accrual?

You may know how many organizations calculate PTO, but that doesn’t mean the most common method is inherently better. Keep these options in mind to help identify which PTO accrual is ideal for your employees.

Per-hours-worked accrual

Employers with teams of hourly or salaried positions can compensate PTO based on hours worked. For salaried employees, PTO can be calculated based on a standard 40-hour workweek. For example, if an organization offers 20 days of PTO each year, an employee would earn approximately 0.077 hours of PTO for every hour worked.

Providing PTO based on hours worked doesn’t always mean PTO accrues automatically, however. If your company relies on a fixed formula, consider investing in time and attendance tools to automate these calculations.

Per-pay-period accrual

Accruing PTO by pay period can make it easier for employees to predict their accrual and plan accordingly. For example, a biweekly pay schedule creates 26 pay periods in one year. If employees get 20 days off annually, then they can readily see that their PTO accrues at a rate of less than one day per pay period, or approximately 6.15 hours for each pay period worked.

Front-loaded PTO

Front-loaded PTO is when employees are awarded all their PTO in one lump sum that refills at designated intervals, usually at the start of the year.

For example, employees working for a company offering front-loaded PTO would receive the full offering of paid time off on January 1. Some companies may prorate their PTO offering, ensuring fairness for new hires or employees who exit the company in the middle of the year. If an employee working in a company with a prorated, front-loaded PTO policy began working on July 1, that employee would only receive 50% of the annual PTO allotment.

Front-loaded PTO allows employees to proactively plan out their time off for the year, but can also lead to abuse and excessive use after the award.

Full-time vs. part-time PTO accrual

Depending on company policy, part-time employees can earn PTO, too.

It could be as simple as allowing them to generate PTO on the same per-hour basis as full-time staff. However, certain employers may set caps on the maximum amount of PTO that part-time employees can accrue or require them to use accrued PTO before accumulating more.

For example, if a part-time employee were working for an organization that offered 20 days of PTO per year, they wouldn’t receive the full 20 days because that figure is based on a 40-hour work week. Instead of accruing PTO at the same rate as a full-time employee (6.15 hours per pay period), this employee would accrue PTO at a reduced rate. If they worked 20 hours per week, half the hours of a full-time employee, they would accrue PTO at an equally reduced rate, or 3.075 hours per pay period.

Some state and local jurisdictions may have their own rules governing PTO, including requirements for part-time employees. For example, California has introduced laws that mandate a minimum amount of paid sick leave for all employees, regardless of their status.

Tiered PTO accrual

Not all PTO must be awarded the same for every employee. In a tenure-based structure, for example, an organization differentiates PTO based on years of service. They may have a baseline PTO accrual with additional hours added when employees hit designated employment anniversaries. This could be an effective way to reward loyalty and boost retention.

Let’s see how these tiers might look.

• Tier 1 employee (new hire)
  • 80 hours of PTO annually, accrued at a rate of 0.0385 per hour (80 ÷ 2,080 = 0.0385)
• Tier 2 employee (two to four years tenure)
  • 120 hours of PTO annually, accrued at a rate of 0.0577 per hour (120 ÷ 2,080 = 0.0577)
• Tier 3 employee (five years tenure or more)
  • 160 hours of PTO annually, accrued at a rate of 0.0769 per hour (160 ÷ 2080 = 0.0769)

Bonus PTO

In addition to time-based PTO accruals, employers may use PTO to incentivize performance. For instance, an organization might give its sales team the last Friday of a quarter off if they surpass $1 million in monthly sales. This approach can help boost productivity.

Let’s see how this would work in practice. For many organizations offering bonus PTO, the bonus is a percentage based on the employee’s current rate of PTO accrual. If an employee accrues 20 days of PTO in a year, and the bonus is an additional 5% of PTO, they will be awarded one additional PTO day (5% of 20 = 1).

PTO accrual laws and compliance

State and local PTO accrual requirements

The state and local regulations regarding how PTO leave is accrued, defined or applied can change at any time. These updated regulations won’t necessarily change PTO accruals at an affected company, but they do impact employer obligations in certain jurisdictions.

PTO accrual updates employers should know for 2026

Some of the more notable changes to PTO accrual regulations in 2026 include Colorado’s requirement of up to 12 weeks of parental leave and Nebraska’s upcoming mandate, beginning Oct. 1, 2026, requiring sick leave accrual at the rate of one hour per 30 hours worked.

It’s important that you consult your legal and HR teams to make sure that your HR systems accurately reflect the most current state of PTO accrual regulations in the jurisdictions in which you do business.

For a more comprehensive overview, view our blog post examining PTO laws by state.

5 important PTO accrual considerations

Whether you’re developing your first handbook or tweaking one you already have, think about the following factors before you implement a PTO accrual policy.

1. PTO payouts

Employees with a positive PTO balance when they resign may receive a payout, given PTO is a form of compensation. Put simply, they would receive pay for the accrued but unused hours at the time of separation.

If your company doesn’t pay out PTO, it’s not a bad idea to explain why so workers understand the rationale. Some states require payout of unused PTO.

2. Protected leave

Protected leave refers to time off protected by federal or state laws. During protected leave, employees may take time off for reasons specified within the legislation without fear of termination or retaliation. Protected leave may also require businesses to extend health care coverage and other benefits during that period.

Even so, employees may still have the right to use their PTO during specific protected leaves. This provision can be relevant with the following examples:

• FMLA: Under FMLA, eligible employees are entitled to up to 12 weeks of unpaid leave for qualifying reasons. Employers may allow or require employees to use PTO concurrently during FMLA leave.
• Pregnancy disability leave: Some states provide protected leave for pregnancy or related conditions. During this leave, employees may be allowed to use PTO and keep receiving pay during their absence.
• Military leave: The Uniformed Services Employment and Reemployment Rights Act (USERRA) provides job protection for employees who need to take leave due to military service. Employers may allow the use of accrued PTO during this period; however, they cannot require the use of PTO for USERRA leave.

Both employers and employees need to be aware of all relevant laws related to protected leave. Employers should clearly communicate their policies regarding the use of accrued PTO during protected leaves to ensure compliance with relevant regulations and provide employees with clarity.

3. Probationary period

Some organizations may choose to enforce a probationary or a “waiting period” for PTO. This means new hires must wait for a preset duration — like 90 days — for PTO accruals to be available for use. This protects companies against new hires joining the team and immediately taking time off before they’ve proven they can handle the responsibilities of their job.

It helps to ensure that employees are designating the necessary time for training when joining a new company.

4. Accrual rollover

Employees who accrue time off may be tempted to save up their time to take it all at once. Depending on your industry, this practice could disrupt business due to a lack of coverage. Employers who want to encourage their workers to take PTO in more regular intervals may choose to cap accrual amounts and limit rollover.

This means that at a predetermined interval, employees may lose the PTO they didn’t take within a certain period. One common rollover policy is to have a certain amount of time off expire at the end of each calendar year. For example, employees may accrue 20 days of PTO per year, but they can only roll over five days into the next.

This type of policy encourages employees to take the time off they have earned and prevents anyone from accruing a disruptive amount of PTO. This has the added benefit of preventing companies from paying hefty payouts if employees leave with a lot of unused PTO.

5. Negative balances

Employers need to set parameters around employees asking to take more time off than they have accrued. In such instances, you may construct a policy that allows employees to have negative PTO — such as for emergencies — that they must “earn back” before requesting time off again.

These policies should include guidance or caveats. For instance, you may choose to allow a negative balance only if the time is being used for:

• bereavement
• illness
• family emergencies
• other unexpected life events

You could also adjust the nature of this policy based on tenure, similar to tiered PTO accruals. Regardless, your policy should be explicit and consistent to avoid claims of favoritism or discrimination.

Ultimately, PTO accruals aren’t just a box to check, but a strategic tool that supports employee well-being and contributes to the overall success of a dynamic and thriving workplace.

How does Paycom simplify time-off requests?

A PTO accrual policy is only effective if employees actually use it. But for many organizations, time off is a hassle to manage or is not managed at all. For supervisors, these requests can force them to manually approve or deny a request, then calculate the new balance — all while still making sure they have coverage for upcoming shifts.

And if it takes days or weeks to respond, employees may have to:

• cancel plans because of late approvals
• blame their leaders for unclear scheduling policies
• miss a slim window to book an affordable flight or cruise
• abandon the trust their employer painstakingly built with them

But just because reviewing time-off requests involves choice doesn’t mean those choices can’t be automated.

GONE® is a revolutionary enhancement to Paycom’s Time-Off Requests tool. It lets you set a variety of time-off decision-making criteria for timely resolutions that abide by company policies and meet departmental needs. That means no more mediating time-off disputes or keeping employees in the dark.

Once GONE is set up, Paycom takes care of the rest, with automated decisions flowing seamlessly and accurately into payroll.

FAQ

Is PTO accrual required by law?

PTO accrual is not required by federal law, but it is mandated in many states.

Can employers cap PTO accrual?

Yes. Some employers have maximum limits for accrued PTO.

Can PTO accrual be changed midyear?

Yes. An employer has the right to change its PTO accrual policy at any time, but it is still subject to the laws and regulations of its jurisdiction.

How often should PTO accrue?

PTO can accrue hourly, per pay period or according to any other system set forth by the employer, providing it complies with applicable regulations.

Can employees lose accrued PTO?

It is possible for employees to lose accrued PTO, depending on the state and the policies of the organization in which they work. Some companies have use-it-or-lose-it policies, meaning employees can lose accrued PTO if they don’t take advantage of these hours.

How does PTO accrual affect payroll?

Because PTO sometimes acts as earned and taxable compensation, it must be accrued, tracked and paid out like any other form of compensation.

Can PTO accrual differ by employee role?

Yes, as long as the PTO policy in question conforms to the applicable state and federal regulations.

How do PTO accrual policies impact compliance audits?

Because many states mandate specific practices surrounding PTO accrual, auditing these policies to ensure compliance with applicable legislation should be a priority for any organization.

What happens to unused PTO when an employee resigns?

That depends on the organization’s policies and the applicable laws for that location. The employee may lose some or all of their PTO, or the employer may be required to pay a specific dollar amount to the resigning employee for their unused accrued PTO.

How does PTO accrual work for exempt vs. nonexempt employees?

The specific policies governing PTO accrual depend on the policies of the employer and the jurisdictions in which the employer operates. In many instances, the PTO accrual process for exempt employees will not be the same as that for nonexempt employees.

If an employee has a negative PTO balance at termination, can the employer deduct that amount from their final paycheck?

It’s possible, depending on the organization’s policies and the applicable laws for that location.

How can Paycom help employers calculate accruals correctly?

Paycom helps employers accurately calculate accruals with time-tracking and payroll tools operating within a single software. When all data pertaining to an employee’s compensation, scheduling, attendance, leave and payroll is housed in a single software, information moves seamlessly between tools. This ensures that PTO accruals are tracked easily and accurately for the entire workforce.