Definition: Accrual (PTO accrual) is the method an employer uses to let employees earn paid time off over time, such as a set number of hours for every hour worked or every pay period, until a balance or cap is reached.
With EZTime time-off requests, employees ask for PTO from their phone and managers approve it in one place.
Paid time off can be provided in two broad ways. With front-loading, employees receive their full annual allowance on a set date, such as January 1 or a work anniversary. With accrual, employees build their balance a little at a time. Accrual is popular with hourly employers because it ties time off to time actually worked, scales naturally for part-time staff, and spreads the cost of leave across the year.
An accrual policy usually answers six questions: how much time is earned, what it is earned on (hours worked, pay periods, or months), when new hires start earning, when accrued time can be used, whether there is a cap on the balance, and what happens to unused time at year-end or separation.
The three most common methods are per hour worked, per pay period, and per month or year. The table below shows how each would produce roughly the same annual balance for a full-time employee.
| Method | Policy example (hypothetical) | Full-time result (2,080 hours/year) |
|---|---|---|
| Per hour worked | 1 hour of PTO for every 26 hours worked | 2,080 ÷ 26 = 80 hours |
| Per pay period | 3.08 hours per biweekly pay period | 3.08 × 26 = 80.08 hours |
| Per month | 6.67 hours per month | 6.67 × 12 = 80.04 hours |
Worked example (hypothetical): A part-time cashier works 24 hours a week under a policy of 1 hour of PTO for every 26 hours worked. Over 13 weeks she works 312 hours and accrues 312 ÷ 26 = 12 hours of PTO. If the policy caps balances at 40 hours and she already has 34 hours banked, she can only earn 6 more hours until she uses some of her balance. You can model scenarios like this with the PTO accrual calculator.
Per-hour accrual is the most precise for hourly teams because it automatically adjusts for overtime weeks, short weeks, and part-time schedules. Per-pay-period and monthly methods are simpler but can over-reward employees who work few hours, unless the policy prorates them.
Front-loading is simpler to explain and gives employees flexibility early in the year, but it creates a risk: an employee who uses the full allowance in February and resigns in March has received time off the employer never balanced against work. Accrual removes most of that risk because a balance can only reflect time already earned. The tradeoff is administrative. Accrual requires a system that recalculates balances every pay period, applies caps, and reflects timecard corrections. Some employers combine the two, front-loading a small amount for new hires and switching to accrual afterward.
Hourly businesses often have employees whose hours swing from 15 one week to 38 the next. A per-hour-worked rate handles that automatically: the employee earns more in busy weeks and less in slow ones, without any manual adjustment. If you accrue per pay period instead, decide whether part-time employees receive a prorated amount and document the formula. Whatever method you choose, apply it the same way to everyone in the same employee class, and make sure the hours driving accrual come from the same records that drive payroll. That keeps balances, pay stubs, and timesheets in agreement.
Federal wage law does not require PTO. The U.S. Department of Labor’s vacation leave page states that the Fair Labor Standards Act “does not require payment for time not worked, such as vacations” and that these benefits are “matters of agreement between an employer and an employee (or the employee’s representative).” The DOL’s holiday pay page says the same about holidays.
PTO also interacts with overtime. DOL Fact Sheet #23 lists pay for time not worked due to vacation, holidays, or illness among the payments excluded from the regular rate of pay. Paid hours off also are not hours worked, so a week with 8 hours of PTO and 36 hours on the clock does not produce overtime under the FLSA’s 40-hour rule.
While federal law is silent on most PTO, state and local laws often are not. Many jurisdictions require paid sick leave with specific accrual rates, carryover rules, and permitted uses, and some regulate whether accrued vacation must be paid out at separation. Confirm the rules where each employee works before setting accrual rates, caps, or forfeiture terms.
EZTime’s PTO/absence management connects accrual to real clock-in data, so balances grow from the hours employees actually work through the GPS mobile time clock with geofencing, NFC tags, tablet kiosk, or biometric clocks. Employees can see balances and request time off, managers approve requests next to the schedule built with AI shift scheduling and shift templates, and approved leave flows into payroll-ready Excel/PDF exports for any payroll software. Timecard corrections keep an audit trail so balances stay defensible. Explore the attendance clock and pricing, from $2/employee/month with a 14-day trial.
This is general information, not legal advice.
No. The DOL states that the FLSA does not require payment for time not worked, such as vacations. Many state and local laws do require paid sick leave, so check the rules where employees work.
Under the FLSA, overtime is based on hours actually worked over 40 in a workweek, and DOL lists vacation, holiday, and illness pay among payments excluded from the regular rate. Some employers choose to count PTO voluntarily.
A cap is the maximum PTO balance an employee can hold. Once reached, the employee stops earning more until they use some time. Caps limit the employer’s liability while still letting employees save time.
Divide the annual PTO you want to offer by the hours a full-time employee works in a year. For 80 hours of PTO and 2,080 hours worked, that is about 0.0385 hours per hour worked, or 1 hour for every 26 hours.