Step-by-step formulas for calculating paid time off: per hour worked, per pay period and annual lump sum, plus part-time employees, caps, carryover, tenure tiers and payout, with worked examples.
| Method | How it works | Best for |
|---|---|---|
| Per hour worked | Employees earn a fraction of an hour for each hour worked | Hourly and part-time staff with variable hours |
| Per pay period | A fixed amount is added each pay period | Salaried and full-time staff with steady hours |
| Lump sum (front-loaded) | The full annual amount is granted at the start of the year | Simple administration; watch state rules on forfeiture |
Some employers combine methods, for example per-hour accrual for part-time staff and per-period accrual for full-time staff. Read PTO vs vacation for how PTO banks differ from separate vacation and sick time.
PTO per hour worked = annual PTO hours ÷ expected annual hours worked
A full-time schedule of 40 hours a week for 52 weeks is 2,080 hours. If the policy gives 80 hours of PTO a year, the rate is 80 ÷ 2,080 = 0.0385 hours per hour worked. An employee who works 35 hours in a week earns 35 × 0.0385 = about 1.35 hours of PTO that week.
| Annual PTO | Rate per hour worked |
|---|---|
| 40 hours (1 week) | 0.0192 |
| 80 hours (2 weeks) | 0.0385 |
| 120 hours (3 weeks) | 0.0577 |
| 160 hours (4 weeks) | 0.0769 |
PTO per pay period = annual PTO hours ÷ number of pay periods per year
| Pay frequency | Periods per year | PTO per period |
|---|---|---|
| Weekly | 52 | 1.54 hours |
| Biweekly | 26 | 3.08 hours |
| Semimonthly | 24 | 3.33 hours |
| Monthly | 12 | 6.67 hours |
With front-loading, the employee receives the whole annual amount on a set date, such as January 1 or the hire anniversary. New hires partway through the year usually receive a prorated amount: annual PTO × months remaining ÷ 12. For example, an employee who starts with 9 months left in the year under an 80-hour policy receives 80 × 9 ÷ 12 = 60 hours.
Per-hour accrual handles part-time employees automatically, since they earn PTO only for hours worked. If you use a per-period method, prorate by scheduled hours: full-time PTO × (part-time weekly hours ÷ full-time weekly hours). A 20-hour employee under an 80-hour full-time policy would earn 80 × 20 ÷ 40 = 40 hours a year.
| Years of service | Annual PTO | Rate per hour (2,080 hours) |
|---|---|---|
| 0–2 years | 80 hours | 0.0385 |
| 3–5 years | 120 hours | 0.0577 |
| 6+ years | 160 hours | 0.0769 |
When an employee moves to a new tier, apply the new rate from the anniversary date forward. This is an example only; choose tiers that fit your budget and market.
Whether unused PTO must be paid out when an employee leaves depends on state law and your written policy. Some states require payout of earned vacation; others allow the policy to decide. To calculate a payout: unused PTO hours × current hourly rate. For salaried employees, convert salary to an hourly rate first. See PTO payout and the PTO payout calculator.
Many states and cities require paid sick leave, often accrued per hour worked, with their own minimum rates, caps, carryover and allowed uses. A general PTO policy can sometimes satisfy these laws if it meets every requirement, but not always. Check the rules where each employee works. The sick leave accrual calculator can help.
A retail employer gives full-time and part-time associates 80 hours of PTO a year, accrued per hour worked, with a 120-hour cap. Associate A works 1,040 hours in a year and earns 1,040 × 0.0385 = 40 hours. Associate B works 2,200 hours, including overtime; if the policy counts all hours worked, B earns 2,200 × 0.0385 = about 84.7 hours. Some employers exclude overtime hours from accrual; whichever choice you make, state it in the policy. Associate C already has 118 hours banked, so C stops accruing after earning 2 more hours until some time is used.
Have employees sign an acknowledgment, and apply the policy the same way to everyone.
Manual tracking leads to disputes. Keep accrual rules in one system tied to actual hours worked, show employees their balances and approve requests in the same place. See how to track employee PTO and try the PTO accrual calculator.
EZTime handles time off requests and balances alongside the time clock and scheduling, so approved time off shows on the schedule and hours worked are recorded accurately for payroll. Employees see their requests in the mobile app, and managers approve them in one place.
Divide annual PTO hours by expected annual hours worked. For 80 hours a year and 2,080 hours, the rate is 0.0385 hours per hour worked.
Divide annual PTO hours by pay periods per year. For 80 hours biweekly, that is about 3.08 hours per period.
Use per-hour accrual, or prorate the full-time amount by the ratio of part-time to full-time hours.
It depends on your policy, unless a law such as a paid sick leave rule requires accrual on all hours worked. State the rule clearly.
It depends on state law and your written policy. Some states require payout of earned vacation.
EZTime ties time off requests to the time clock and schedule, so balances and payroll stay accurate.