Whether or not you accrue PTO while on PTO depends entirely on how your company has set up its PTO system. Here’s a dirty little secret: most companies probably don’t even know the answer to this question when it comes to their own PTO policies.
Some payroll software doesn’t even give the option of paying PTO when you’re not at work. Unless someone has really dug under the hood of the software they’re using, no one will know what happens to PTO accrual when you’re on PTO.
The only way to find out if you’re accruing PTO while on PTO is to compare your PTO accruals to pay periods where you worked 100% of the time to periods where you took a bunch of time off. Then you’ll have your answer.
The Impact of Not Accruing PTO While You’re Out
You might think that PTO not accruing while employees are on PTO won’t make much of a difference.
So let’s break down the math.
Say you, an employee, receive three weeks of accrued PTO each year for a total of 120 hours (15 business days).
To find out how much you earn every day of the year, we divide 120 by 260, which is the number of work days in a single year.
120 hours / 260 work days = 0.462 hours earned each workday of the year
You decide to take your full 15-day vacation, reducing your total number of workdays to 245 because you don’t earn PTO while on PTO. We’ll take the 0.462 hours and multiply them by 245 days to find out how much PTO you actually end up with at the end of the year.
0.462 hours x 245 work days = 113.19 hours
Now we’ll subtract 113.19—your actual accrued PTO—from 120 to get 6.81 hours. That’s how many hours of PTO you lose if your PTO doesn’t accrue while you’re on paid vacation. Practically an entire workday!
If you do accrue PTO while on PTO, you wouldn’t subtract any days from the 260 work days, giving you your earned total of 120 hours.
The bottom line? If PTO isn’t accruing while you’re not working, you lose out on 1 PTO day per year. This goes up if your company has generous paid leave policies like 3 months of paid paternity leave, a summer break, or a 4-day work week.
For example, let’s say an employee takes March, April, and May off for paid paternity leave. This is equivalent to 66 work days. If your employee isn’t accruing PTO during this time, you’ll subtract 66 work days from the yearly total, 260, for a total of 194 work days.
When we plug that number into our formula, we get this:
0.462 hours x 194 work days = 89.63 hours
That’s a loss of 30.37 hours of PTO, or almost 4 full days of PTO.
As an Employer, Double Check Your Payroll Software
We (almost) learned this lesson the hard way. At Stone Press, we use Gusto as our payroll software. Initially, we thought PTO was accruing for our team during PTO and other time off.
But then we dug into the numbers and realized it wasn’t. We’re pretty confident that Gusto released the setting to configure this AFTER we set up our PTO policy. Instead of asking us whether or not we wanted PTO to accrue during PTO, Gusto automatically defaulted it to not accrue.
That meant that our team members were earning 1 day less per year than we thought.
Luckily, we caught this problem early and fixed it.
Moral of the story? If you’re not 100% confident in how your system works, you should go check it and make any necessary adjustments. Dig around in your payroll software’s settings to find out if PTO is accruing for each of your employees during their paid vacation time.
If you can’t figure it out that way, take a close look at the numbers. Do your employees seem to be accruing fewer hours of PTO than they should?
Do a little bit of math to find out. All it takes is a few easy steps:
- Find out how many hours of PTO an individual employee is owed as per your company’s PTO policy—for example, 140 hours for a five-year employee.
- Divide that number by the total number of work days every year to learn how many hours of PTO are earned each day: 140 hours / 260 work days = 0.54 PTO hours earned each workday of the year.
- Look at the number of days off your employee has taken and how many days that employee has worked so far in the year. To keep things simple, we’ll say the employee had 40 hours of PTO that rolled over from last year and that’s what they use for their 5-day vacation. This year, the employee has worked 130 days total including those 40 hours of PTO:
- If PTO accrued during those 5 days off, your employee will have earned 0.54 hours x 130 work days for a total of 70.2 hours of PTO so far.
- Now subtract 40 hours, or 5 work days, from the 130 work-day total: 0.54 hours x 125 work days for a total of 67.5 hours of PTO so far. This is how much your employee will have earned if PTO did not accrue during those 5 days off.
If PTO isn’t accruing during PTO, your employees may be getting less paid time off than what is specified in your PTO policy.
Finding out how much PTO your employees are actually getting vs. how much they’re owed can help you make deficits right and avoid any sticky legal situations.
Should You Accrue PTO While on PTO?
If you haven’t guessed our stance on this already, the answer is a resounding yes! Making sure your employees are fairly accruing PTO while on their well-earned breaks is important. You don’t want a situation where an employee finds out that their PTO isn’t accruing to the promised number of days each year.
Wondering how PTO accrual works when it comes to overtime? We’ve got an article that explains that, too. Learn all about PTO and overtime here.
