Enter accrual rate per pay period, starting balance, number of pay periods, and an optional cap to calculate projected PTO balance.
PTO accrual is the method by which employees earn paid time off incrementally over time rather than receiving it as an upfront annual grant. The most common accrual method for small businesses is per-pay-period accrual, where a set number of hours is added to the employee's balance at the end of each payroll cycle. This ties PTO directly to the payroll system, makes balances predictable, and avoids the situation where an employee takes their full annual PTO allotment in January and then resigns in February.
The accrual rate you set determines the total days off an employee earns in a year. An accrual rate of 3.33 hours per biweekly pay period (26 periods) produces approximately 86.6 hours, or about 10.8 days annually. Most competitive small business PTO policies provide between 10 and 15 days for new employees in their first year, scaling up with tenure. The cap prevents balances from accumulating indefinitely -- both to manage payroll liability and to encourage employees to actually use their time off.
Accrued but unused PTO is not just a benefit -- it is a real financial liability. In most states, employers are required to pay out accrued PTO balances at termination at the employee's regular rate of pay. For a 15-person team where each employee has an average of 60 hours accrued at an average wage of $25 per hour, the total liability is $22,500. Knowing your team's total accrued PTO balance at any point in the year -- not just at year end -- allows you to manage this liability accurately in your financial planning and avoid a surprise cash obligation when an employee leaves.
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