How To Calculate PTO: Accurate Rates and Managing PTO

By Indeed Editorial Team

Updated June 22, 2022 | Published April 17, 2020

Updated June 22, 2022

Published April 17, 2020

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

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When an employer offers you a full-time job, they often include a benefits package. This package typically includes health care coverage, plus dental and vision, retirement plans and PTO. PTO, or paid time off, is a valuable benefit for employers to offer their team as it gives employees the chance to decompress, stay at home when sick or take care of errands or any other reason, such as an appointment, while still getting paid.

In this article, we explain PTO, the common types of PTO policies, typical accrual rates and how to calculate PTO, as well as tips for managing your PTO.

What is PTO?

PTO is short for paid time off and refers to an employee benefit where employers pay employees while they are away from work. PTO typically includes paid vacation, holidays, sick days and personal time.

Companies may choose to bundle these paid-time-off types into one PTO package, allowing employees to use their accrued paid time off as they wish. Some employers prefer to keep these PTO types separate, so employees use their PTO for their specific needs.

Paid time off is usually a part of your employee benefits package. When starting a new job, ask your employer how you earn PTO. Every company has a different PTO policy, so it’s important to understand how yours will work. For example, some employers give employees with a long tenure more paid days off each year. Here are some common types of PTO employers may offer their employees:

  • Set amount of days: Employers may offer employees a set number of PTO that they can use anytime throughout the year. Most companies have a 90-day probationary period before employees can use any of their benefits. Then, after this period, an employee could technically use all of their PTO for the year whenever they would like.

  • Accrued PTO: With this kind of PTO, employees earn a certain amount of PTO each pay period. The employer calculates how many days off are equivalent to your pay periods, and that is the maximum PTO you can accrue throughout the year. This policy encourages employees to stagger their paid time off instead of using it all at once.

  • Rollover allowances: If you have leftover PTO, a rollover policy is beneficial because you can use this extra PTO in the next year. For example, if you have 12 days of PTO a year and only used 10 this year, your leftover two days would rollover into the next year. Then, on top of your 12 days of PTO for the new year, you would have two additional days. Companies without a rollover policy tend to follow a "use it or lose it" policy to encourage employees to use all their PTO within a year.

Related: What Happens to Your Unused PTO When You Leave a Company?

PTO accrual rates

PTO accrual rates are how frequently employees can earn their paid time off. This only applies to employers who use an accrued PTO policy for their employees. When an employer sets an accrual rate, they plan ahead of time how much PTO employees will earn in a year. This policy is beneficial to employers because it encourages employees to take shorter stretches of PTO throughout the year. This is useful because companies don't need to plan around key employees being gone for long amounts of time, yet employees still get to enjoy time off. These are the most common PTO accrual rates:

  • Hours worked

  • Daily

  • Bimonthly

  • Every two weeks

  • Once a month

  • Yearly

Related: Employee Benefits: Examples of the Most Common Employee Perks

How to calculate PTO

How you calculate PTO depends on the way your employer awards that time. If they award time off in a lump sum each year, you will simply subtract hours from the total amount awarded as the year progresses. Oftentimes, though, employers will award a certain number of hours in each pay period. In this instance, you can use these steps to calculate your accrued PTO:

1. Determine the number of hours you accrue annually

First, determine the number of hours that you accumulate during the course of the year. If your employer gives you 15 days of PTO during the year, for example, you’ll multiply 15—the number of days you have off paid—by eight, the number of hours in a day. This will allow you to determine the total number of hours you accumulate during the course of the year.

2. Divide your annual hours by 12 or 24

Next, you need to calculate the number of hours you accumulate during each pay period. If you’re paid monthly, you will divide the total number of hours you accrue annually by the months in the year: 12. If you are paid twice per month, you will divide the total number of hours by 24.

For example, if you receive 15 days off per year, you’ll accrue 120 hours of PTO during the course of a year:

15 (days) x 8 (hours worked in a day): 120 hours

If you’re paid twice per month, you will divide 120 by 24, which equals five, meaning you accumulate five hours of PTO in each pay period:

120 (hours) / 24 (pay periods) = 5 hours of PTO per pay period

Related: Base Salary and Your Benefits Package

3. Multiply pay period PTO by time worked

To calculate the amount of time you’ve accumulated, you need to multiply the amount of time that you accrue in each pay period and multiply that by the time you’ve worked.

Example: Let's say you have worked for three months without taking any PTO. During those three months, you have had six pay periods—two per month. If you know that you accumulate five hours of PTO time per pay period, you can easily calculate your PTO by multiplying five by six, which equals 30 hours of PTO. To determine how many days of PTO that is, you can divide that number by eight. For our example, that would mean dividing 30 by eight, which equals 3.75 days of PTO.

This example, of course, assumes that you did not have any PTO prior to that three-month period. If you do, you’ll need to add the additional time, minus any vacation hours you have already used.

Related: Paid Time Off: What Is It (And How It Differs From Vacation Time)

Tips to manage your PTO time

Here are some tips to help you better manage your PTO time:

  • Plan your PTO wisely: Plan in advance how you're going to use your PTO. If you enjoy travel, this may mean planning well in advance so you know you have enough days for your vacation. If you prefer to take days off throughout the year, determine how much time you have off per month so you can evenly distribute days.

  • Calendar vacation in advance: When you have your PTO time planned and approved, immediately put it on your calendar. This will ensure the time remains clear and that meetings you need to be at aren't accidentally scheduled during the time you plan to be aware.

  • Consider negotiating for more time: If you need more PTO time, consider negotiating to request time. This is a viable option if you have a record for punctuality and productivity. You should be prepared to make concessions in other areas, such as your annual pay increase.

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