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PTO accrual: How to calculate accrued time off

By Kai Des Etages
Published on August 4, 2025

What is PTO accrual? Accrued time off is paid time off that employees earn gradually as they work more hours. This is different from lump sum PTO, which gives employees their full allotment of time off upfront at the start of the year or employment period.


For many workers, paid time off (PTO) is the most important benefit to consider when deciding where to work. Businesses need to implement policies that help them stay competitive, but that’s just one part of a larger conversation around PTO. Here’s what you need to know about accrued time off—the most common method for earning PTO.

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How does accrued paid time off work?

Accrued time off is PTO that workers earn over time. It’s different from lump-sum PTO, for instance, wherein a worker receives all their PTO at once. With accrued time off, workers earn PTO hours each week, pay period, or month.

Bar chart showing increase in PTO accrual with years of service.

Generally, companies cap the number of PTO hours a worker can accrue in a year. A year may start with the company’s fiscal year, the calendar year, or an employee’s hire date.

Companies often reward loyalty by increasing the number of PTO hours an employee can accrue in a year. They might also allow senior employees to roll over more PTO hours into the next year. Here’s an example from the Society for Human Resource Management:

  • An employee with two years or fewer under their belt can accrue up to 10 days of PTO, or 3.07 hours per pay period.
  • An employee who’s been with the company for over 10 years can accrue 25 days of PTO, earning 7.69 hours per pay period.

How to calculate accrued time off

Calculating accrued time off can be a challenge. That’s why most businesses use a PTO accrual calculator, typically embedded into their payroll or time tracking software. QuickBooks Time, for instance, makes it easy for managers to track employee PTO. They can even configure the app to allow employees to request or approve their time off.

An infographic listing steps to calculate accrued paid time off

But say an employee only wants to know how many hours of PTO they’ll accrue in a month. Here’s how to figure out the amount of PTO the employee is owed:

1. Find the accrual rate.

  • Example: The employee earns 2 PTO hours per week.

2. Calculate the number of pay periods

  • 3 months = 12 weeks

3. Multiply by the number of weeks they plan to work.

  • Example: If they’re working 12 weeks, multiply:
  • 2 hours/week × 12 weeks = 24 hours of PTO

4. Convert PTO hours to workdays.

  • Most employees work 8-hour days, so:
  • 24 PTO hours ÷ 8 = 3 full workdays off

Need an easier way to track it all? Timesheet templates can help you keep tabs on employee hours and PTO. Check out these free monthly timesheet templates to get started.

Pros and cons of offering accrued PTO

Accrued PTO has both advantages and drawbacks for employers and employees. Here’s a quick look:

Are accrued time off and outstanding time off the same?

Accrued time off and outstanding time off are separate concepts, though they overlap. To recap, accrued time off is PTO that someone earns over time. 

For instance, each week, your employee might earn two hours of PTO. In a month, your employee would have eight hours of PTO. For most people, that’s enough PTO to take a day off.

Outstanding time off is time off that a worker has requested but their manager hasn’t approved. It can refer to time off that a worker has taken or will take. Someone might have several hours of outstanding PTO if their manager hasn’t approved their PTO requests.

But accrued time off and outstanding time off often intersect. That’s because the same person who is accruing time off may also have outstanding time off. Remember those eight hours of accrued time off? Say your employee submits a request to take a day off work, but the manager is out of the office. Until the manager approves that time, the employee has both accrued time off and outstanding time off.

What’s the difference between lump-sum and accrued PTO?

Lump-sum PTO, also known as front-loaded PTO, is the most common alternative to accrued time off. Both options give employees paid time off, but the structure is different. Here's how they compare:

So, in practice, an employee with lump-sum PTO would receive 80 hours of PTO (based on their employer’s plan) at the beginning of the year. They’d have the whole year to use it as they wish. An employee with accrued time off might earn 0.65 hours of PTO each week. By the end of 12 months, they’d have 80 hours of PTO—enough for 10 workdays off.

Like accrued PTO, the amount of lump-sum PTO an employee earns each year may depend on how long they’ve been with the company. Tenured employees might receive double the number of PTO days as a newly hired colleague.

6 examples of how to accrue time off

Federal labor laws don’t require employers to give employees paid time off. That means there also aren’t any parameters around how much time off employees should accrue in a year. These are details business owners can decide for themselves. 

Business owners looking to set up a new PTO accrual policy might choose to:

  1. Accrue PTO hours each week
  2. Accrue PTO hours each pay period
  3. Accrue PTO hours each month
  4. Reset PTO accrual by the calendar year
  5. Reset PTO accrual by fiscal year, or
  6. Reset PTO accrual by each employee’s work anniversary

The latter three examples assume that the business puts a cap on how much PTO an employee can accrue in a year. Depending on the type of PTO policy, there might be a date that an employee can once again start accruing PTO and taking time off. That reset date varies from business to business, as some reset on January 1, while others go by fiscal year or work anniversary.

Factors that can affect PTO accrual rates

The rate at which an employee accrues PTO hours may be affected by several factors, like how many hours they work per period and how long they've worked for a business. 

Part-time employee versus full-time employee

The IRS defines a full-time employee as someone who works for a company, on average, at least 30 hours per week each month. A part-time employee is generally an employee who works less than that. Since part-time employees generally put in fewer hours than full-time staff, they tend to accumulate paid time off (PTO) at a slower pace. 

Access to paid vacation varies by employer size—91% of workers at large private companies (500 or more employees) receive it, compared to 70% at the smallest private businesses (with fewer than 50 employees). In the public sector, 63% of workers in small state and local government offices have paid vacation benefits, according to the US Bureau of Labor Statistics.

A similar survey showed that 88% of full-time employees had PTO, while only 38% of part-time workers had PTO. This means full-time workers were more than twice as likely as part-time workers to receive PTO from their employers. 

New employee probationary period

Another aspect that might impact an employee’s PTO is the amount of time they have spent in a job. For example, some businesses do not let employees start using their benefits until they have been working in the role for a certain period of time. 

So, if an employee has been at a company for less than three months, for example, they may not have access to their PTO days yet.

​

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Let new hires know when they’ll begin accruing and when they can start using PTO. This helps set expectations and reduces confusion during the first few months on the job.

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Employee's tenure or length of service

Similarly, if an employee has been at a company for more than a year, they may be eligible for more time off. Private industry workers had, on average, 11 days of PTO after their first year in a job, the BLS reported in 2022. That number increased to 15 days after five years, and 18 days after 10 years.

Can you roll over accrued PTO?

Whether an employee can use rollover PTO hours depends on their employer’s policy and state laws. Some employers might allow workers to roll over a certain number of hours from a previous set time period, while others might have a "use-it-or-lose-it" policy. 

A "use-it-or-lose-it" policy means that if you don't use your PTO during a set time period—often by the end of the calendar year—then you lose the unused accrued PTO hours.


note icon

If your business follows a "use-it-or-lose-it" rule, remind employees to use their time off before they lose it. Setting automated reminders can help reduce last-minute vacation requests and avoid employee frustration.


The number of hours an employee can accrue per set time period is also sometimes capped, depending on the employee’s contract or the organization’s policy. 

Here are two common PTO accrual caps that a business might use to determine when, or if, an employee has accrued their maximum PTO hours.

  • Annual: Employees are given a limit on how many PTO hours they can earn each year, so they accrue a small amount per week or pay period.
  • Unlimited PTO accrual: Employees can take as many hours of paid time off as they need, within reason. 

Additionally, a PTO balance cap occurs when an employee accrues the maximum number of PTO hours available to them for a set time period and is no longer able to accrue any additional PTO hours. A business might also limit how many days an employee can roll over.

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Do employers have to pay out accrued time off?

Currently, no federal or state laws mandate that employers give employees vacation pay. However, should an employer provide PTO, some states require them to pay out any unused PTO when an employee leaves the company. If a company contract or policy promises to pay out PTO, the employer must abide.

Arkansas, California, Colorado, and Illinois require businesses to pay out any earned PTO. Review your state’s labor laws for updates on similar PTO requirements. 

Some states also allow companies to offer a cash-out option, which allows employees to receive a lump sum of money instead of vacation days.

Make PTO accrual work for your business

Accrued PTO is one of the most common and flexible ways to offer paid time off. Whether you're rewarding long-term employees or setting fair accrual policies for new hires, a well-structured PTO plan can help you attract and retain talent—while staying compliant with state laws.

To keep things simple, consider automating your accrual tracking and payouts. With payroll software like QuickBooks Payroll, you can manage time off policies, track employee balances, and automatically sync everything with payroll. It’s one less thing to worry about, so you can focus on running your business.


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