Feeling like calculating PTO is more of a brain teaser than a break from work? You’re not alone. Even the most experienced HR managers and team leads get confused from time to time.
After all, it’s pretty easy to get caught up in the tangled web of PTO accrual systems. While seemingly small and simple, missteps in these calculations can lead to disgruntled employees and compliance issues, creating unnecessary stress for everyone involved.
Luckily for you, we’ve come to save the day. Okay, maybe not save the day, but we are here to help you untangle the knots and calculate vacation time accurately so everybody gets their fair share of days off.
Follow along as we explain step-by-step how to calculate vacation time and PTO, ensuring you stay compliant, your team feels valued, and your business runs smoothly.
Top tip:
While you’re here…are you looking for an employee time tracking software to reduce the complexity of tracking work hours and managing vacation time? Sign up for a free Toggl Track account to skip the “how to’s” and get straight into more accurate time tracking.
Why is paid time off so important?
Paid time off, or if you aren’t too cringe to use business slang, PTO, is any worker’s golden ticket to guilt-free days away from the grind.
It is a benefit employees are offered where their employer pays them while they are off work. PTO generally covers vacations and public holidays and can be used for sick days and personal reasons.
In the grand hierarchy of workplace perks, PTO is pretty popular these days—with unlimited PTO becoming increasingly common among modern workforces.
A staggering 31% of employees consider mandatory PTO a top benefit companies can offer, meaning that, as a business, it’s more than just a cool perk; it’s a necessity that keeps morale high and burnout at bay.
Different companies offer different types of PTO (which we’ll explore below). Some offer these days as specific vacation, sick, personal, or parental leave days, each with its own quota. Others bundle them all together so you can dish them out as you please.
Top tip:
Regardless of how or what you offer, paid time off is essential if you want to attract (and retain) great talent these days. It’s also essential if you want any sort of long-term, sustainable productivity out of your workforce.
The five types of PTO
There are different reasons why an employee might want to use their paid time off. That’s why company PTO policies are often so flexible and allow employees to use their time off for many reasons (they should, at least).
In some companies, specific guidelines may apply to each type of PTO. Why? Well, they are somewhat different, as you’ll see below. 👇
- Vacation: This is the standard type of PTO. Employees use vacation days for vacations, such as regular work breaks, weddings, travel, etc. Vacation policies differ between companies depending on local laws. There could also be rules about how many vacation days can be taken consecutively.
- Sick time: This type of PTO is used when employees feel unwell so they can rest and recover. They are used for sick leave and mental health days.
- Personal days: Personal time off is used for unforeseen emergencies. Like when an employee finds a huge leak under their sink or when their child is home sick from school. When things go wrong outside an employee’s control, they can use a personal day off.
- Parental leave: Although companies in the US and many other countries aren’t legally required to provide parental leave, some offer it as a benefit. Maternity and paternity leave is used when an employee becomes a parent or has another child.
- Bereavement: When an employee loses a loved one, focusing on work duties is difficult. They may choose to take paid leave to attend the funeral, memorial, or just to grieve. Some company policies offer specific bereavement leave for close relatives only.
Top tip:
With Toggl Track, you can add vacations for your team by using our Time Off feature! This feature provides a clear overview of who’s available and who’s not on Time off view and Team timelines. You can also see a conflict warning when work is scheduled for someone who is unavailable.
How to calculate PTO accrual
Unless your business offers unlimited PTO, employees will accrue vacation days or hours. Different accrual methods affect the way PTO is calculated.
Which should you use, or if you are already using a specific method, how do you calculate accrual accurately? Here are the three most common methods of PTO accrual and how to calculate PTO in each method.
Yearly
Accruing PTO yearly as a lump amount is the easiest way to award vacation time. Usually, the allotted PTO is given at the beginning of the year or on their work anniversary.
Calculating PTO is easy in this method, too, as days of PTO are subtracted from the yearly total as they are taken. Unused vacation time is rolled over or lost at the end of the year, depending on the company policy.
Top tip:
The downside of this accrual method is that employees can overdraw from their vacation days.
Hourly
If you have part-time, hourly, or shift workers, hourly vacation accrual could be a good option. In this case, the PTO accrued depends on the number of hours worked.
For example, let’s say your employee works three five-hour days or 15 hours weekly. Here’s how you can calculate the accrual rate:
| Work hours per week | Work hours per day x Work days per week | 5 x 3 | 15 hours |
| Total work hours per year | Work hours per week x Weeks in a year | 15 x 52 | 780 hours |
| PTO as per company policy | 75 hours | ||
| Actual work hours per year | Total work hours per year – PTO hours | 780 – 75 | 705 |
| Accrual rate | PTO hours / Actual work hours per year | 75 / 705 | 0.1 |
Top tip:
Using this example, your employee would earn 0.1 hours (or 6 minutes) of leave for every worked hour. For example, if this employee works for 50 hours, his accrued PTO is 5 hours.
Daily
The daily PTO accrual rate is ideal for employees who work full work days. Here’s an example calculation of the daily accrual rate:
| Work days per week | 5 days | ||
| Total work hours per year | Work days per week x Weeks in a year | 5 x 52 | 260 days |
| PTO as per company policy | 15 days | ||
| Actual work days per year | Total work hours per year – PTO hours | 260 – 15 | 245 days |
| Accrual rate | PTO days / Actual work days per year | 15 / 245 | 0.06 |
Top tip:
In this example, the employee would earn 0.06 work days (or 28 minutes) of PTO leave for every day they work.
How to calculate PTO
Unless PTO is awarded yearly as a lump sum, you will likely need to calculate how much PTO you or an employee has. While many HR software does this for you, it’s not always accurate, especially if you have a unique PTO policy.
So, follow the steps below to calculate PTO.
- Figure out the number of hours accrued annually. Let’s say you’re given 25 days of paid time off every year and work eight hours daily. Multiply the PTO days by the hours in the workday to give you the number of PTO hours (25 x 8 = 200).
- Work out the number of hours accrued per pay period. Most employees are paid monthly, so we’ll divide the yearly PTO hours from the previous calculation by 12 (200 ÷ 12 = 16.67). If you’re paid twice per month, divide the hours by 24.
- Multiply monthly PTO by the amount of time worked. For example, you’ve worked at the company for nine months, meaning you have accrued 150.03 hours of PTO or 18.754 PTO days (16.67 x 9 = 150.03, 150.03 ÷ 8 = 18.754).
How to prorate paid vacation time
Let’s be honest: you’ll rarely hire an employee that starts on January 1st. So, if you’re working off an annual PTO accrual policy, you’ll need to work out the prorated PTO amount for the rest of the year. There are different formulas for calculating prorated vacation days for part-time and full-time employees.
Prorate PTO for full-time employees
First, you need to calculate the days the employee will work between their start date and December 31st.
For example, let’s take an employee who started on September 19th, 2024, at a company that gives 15 vacation days per year. There are 92 work days between this date and the end of the year, accounting for US public holidays.
To calculate the employee’s PTO for the rest of 2024, divide the workdays by the total number of days in the year, then multiply by the PTO amount.
92 ÷ 366 = 0.251
0.251 x 15 = 3.765
So, this employee should receive 3.765 days of vacation for the remainder of the year.
Prorate PTO for part-time employees
Calculating pro rata vacation time for part-time staff is slightly more complicated and is best done in hours instead of days.
First, you must establish the PTO amount according to the employee’s hours. Divide the part-time employee’s hours by 40, then multiply the result by the full-time employee’s PTO allowance in hours.
Suppose another employee joins the same company from the previous example on the same day but only works 10 hours per week. So, we divide 10 hours by 40 full-time hours, then multiply this rate by the amount of PTO hours for a full-time employee, which is 120 in our example (15 days x 8 hours):
10 ÷ 40 = 0.25
0.25 x 120 = 30
This means the part-time employee should get 30 PTO hours yearly.
Next, divide the vacation hours by the number of weeks in a year:
30 ÷ 52 = 0.577
The employee in our example will earn 0.577 vacation hours per week. They also start on August 19th, 2024, so there are 19.29 weeks until the end of the year. Multiply these two numbers to get the prorate PTO hours:
0.577 x 19.29 = 11.13
Therefore, our part-time employee should receive 11.13 PTO hours for the rest of 2024.
Free PTO calculator
Calculating PTO can get complicated, especially when you have multiple new starters to prorate. So, to make your human resources activities easier, we’ve created this handy PTO calculator Excel spreadsheet template to speed up your PTO calculations.
📌 Download the free PTO calculator here.
Now back to you
We’ve covered everything you need to know about PTO—what it is, the different types, how it accrues, and how to calculate it accurately.
While understanding PTO is important, tracking an employee’s work hours can be challenging. Manual methods often lead to errors, which complicates PTO calculations.
To ensure you’re tracking work hours accurately, we suggest using employee time tracking software. This software simplifies the process and ensures accurate and stress-free tracking.
Ready to make tracking effortless?
Sign up for a free Toggl Track account and track hours for up to five employees at no cost. Start now and streamline your PTO management!
Frequently Asked Questions (FAQs)
How many vacation days/hours are usually allowed per year?
The number will differ depending on the company, state laws, federal regulations, and location. The average number of paid vacation days for workers in the US is 11 days or 88 hours.
How much PTO do you accrue for 40 hours (one working week)?
The exact amount will vary depending on the PTO you receive for the year. To calculate weekly PTO accrual, use this formula:
Total yearly PTO allowance ÷ 52
How does PTO work for hourly employees?
Paid time off for hourly employees can be calculated using the hourly accrual rate detailed in this article. The total hours they’re offered as paid time off should be in line with the amount offered to full-time employees and can be calculated using the following formula:
Weekly hours worked ÷ weekly full-time hours = N
N x full-time PTO hours = hourly worker PTO allowance
What happens to unused PTO when you leave a job?
Depending on the company PTO policy, any unused accrued time is lost when you leave the company or you will receive vacation pay for the unused vacation days.
Elizabeth is an experienced entrepreneur, writer, and content marketer. She has nine years of experience helping grow businesses, including two of her own, and shares Toggl's mission of challenging traditional beliefs about what building a successful business looks like.
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