How do you calculate PTO accrual based on hours worked?
Divide the PTO hours a year by the hours worked a year. The result is the PTO earned for each hour worked.
PTO per hour worked = PTO hours a year ÷ hours worked a year
Example: 15 days of 8 hours is 120 hours. 120 ÷ 2,080 = 0.0577 hours per hour worked, or 1 hour of PTO for every 17.33 hours worked. An employee who works 30 hours earns 30 × 0.0577 = 1.73 hours.
For part-time staff, use their own hours a year, such as 1,040 for 20 hours a week.
How much PTO accrues per pay period?
Divide the PTO hours a year by the number of paychecks a year.
PTO per pay period = PTO hours a year ÷ pay periods a year
Example: 120 hours a year is 2.31 hours a week (52 paychecks), 4.62 hours every two weeks (26), 5 hours twice a month (24) or 10 hours a month (12).
Per pay period suits salaried staff with steady hours. Per hour worked suits hourly staff whose hours change.
How do you calculate accrued PTO liability?
Multiply each employee’s unused PTO hours by their current hourly rate, then add up the team. For salaried staff, the hourly rate is the yearly salary ÷ hours worked a year.
PTO liability = unused PTO hours × current hourly rate
Example: 64 unused hours at 28 dollars an hour is 1,792 dollars. Add that for each employee to get the year-end line for the bookkeeper.
On the accrual method, the IRS lets you deduct vacation pay in the year it is earned if you pay it that year, or within 2½ months after year end when it is vested. Paid later, it is deducted in the year paid. The Reports & answers page shows how we keep figures like this current from payroll.
How do PTO caps and carryover work?
A cap is the most PTO an employee can hold: accrual stops at the cap and restarts after PTO is used. A carryover limit is how many unused hours move into the new year, so it can keep a balance under the cap for good.
Pay periods to the cap = (cap − balance today) ÷ PTO per pay period
Example: with a 160-hour cap, a 100-hour balance and 4.62 hours a paycheck, (160 − 100) ÷ 4.62 = 13 pay periods, about six months on biweekly payroll.
- Federal law (the FLSA) does not require paid vacation. It is an agreement between employer and employee.
- California treats PTO as vacation: earned hours can’t be forfeited, a reasonable cap is allowed, and unused hours are paid at the final rate when someone leaves (Labor Code 227.3).
- State rules vary.
Is there a PTO accrual calculator Excel template?
Download the schedule from the tool: it opens in Excel or Google Sheets with each pay period, the hours accrued and the running balance. The liability report downloads the same way.
To build it yourself, put PTO hours a year in B1, hours worked a year in B2 and pay periods in B3.
- Rate per hour worked:
=B1/B2 - Rate per pay period:
=B1/B3 - Next balance in C10, with the cap in B4 and last period’s balance in C9:
=MIN(B4, C9+B1/B3), with B1, B3 and B4 locked (F4) before you fill down - Liability, with the balance in D2 and the hourly rate in E2:
=D2*E2
Questions
Do overtime hours earn PTO?
Your policy decides. If overtime is left out, enter regular hours only in hours worked a year and in hours this period.
Can I use it for paid sick leave?
Yes. Choose “1 hour off for every so many hours worked” and enter the rate your state or city sets.
What pay rate goes in the team list?
The current hourly rate, or the yearly salary. A rate over 400 is read as a salary and divided by the hours worked a year.
Where does my team list go?
It stays in your browser. The math runs on your computer, and closing the tab clears it.
Sources
- Vacation Leave, U.S. Department of Labor,
- Vacation: frequently asked questions (Labor Code 227.3), California Department of Industrial Relations, Labor Commissioner,
- Publication 538, Accounting Periods and Methods (Rev. January 2022): vacation pay, Internal Revenue Service,
