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Setting Up Company Time Off Accrual Rules

Background

You can create rules to automatically accrue time off for employees, such as 1 paid leave hour for every 40 hours worked.  Once you set up your company-level PTO accumulation rules, you can assign these rules to employees. Employees will begin to accrue time off as they are paid.

You can also manually give employees a lump sum of time off hours.  See Editing an Employee’s Time-Off Balance. 

Based on your city or state, you may be legally required to give your employees paid leave.  Check out our resource for paid leave laws in your area. You are responsible for setting up any required paid leave accrual rules.  

How to set up company-level time off accrual rules

Before you begin:

  1. Set an Hour Type to track time off:  You will need to select at least one Hour Type to track time off.  This is the hour type that employees will earn and track their paid leave, such as “Vacation” or “Sick.” 
    • Go to Settings > Payroll Settings > Hours and Money Types. Click the hour type you want (for example, “Sick” and select the option to “Track Time Off.”For more details, see Setting Up Time-Off Hours. 
  2. Determine the formula:  Before you enter a new accrual rule, determine the following variables:
    1. What hours are used to accrue?  If you want paid leave hours to accrue based on all hours worked/paid, including the original paid leave hour type, or only worked hours, or some combination.  For example, some policies only allow for accruing vacation on hours that were actually worked, not including vacation, holidays, sick, etc. Other policies may allow for accruing 1 vacation hour for every 40 hours, including any non-worked hours that are paid.  
    2. Do you want to set an accrual limit?  You can set an annual limit of hours that will accrue.  Once the limit is reached, no more hours will accrue for that calendar year. If the employee has taken these hours, this will not affect the limit.
    3. Do you want hours to carry over into the next calendar year? If you allow available hours to carry over into next year, you can choose a limit to carrying over and when these carried over hours expire.

Once you have set up at least one Hour Type to track time off, and you know your formula, go to Settings > Payroll Settings > Time Off Accruals.  This page will show a list of your company-level accrual rules.

  1. Click “Add New Rule.”
  2. Title: Enter a unique title for this accrual rule, up to 50 characters.
  3. Create Formula: Enter the formula for how many paid leave hours will be earned for every hour paid or worked.
  4. Maximum Earning Limit: If there is a “cap” or limit on the amount of hours this rule should accrue per calendar year, choose “Set Limit” and enter the maximum number of hours the employee can earn for the calendar year.  Time off hours will stop accruing for the year once the limit is reached.
  5. Carryover Rules:  This will depend on whether your policy expires available time at the end of the calendar year, or allows hours to be “carried over” to the following year.
    • If your policy does not allow for hours to be carried over at the end of the year, choose “No Carryover.”  All available hours will expire after December 31 of that year. On January 1 of the following year, the system will automatically deduct any remaining hours. In the Manage Time Off activity, you will see “End of Year Reconciliation” for the action description for each employee’s detail.
    • If your policy allows for carrying over unused time off into the next calendar year, choose “Allow Carryover.” NOTE: Hours that are carried over into the following year do not count toward accrual limits for the new year. New hours will continue to accrue regardless of carried over hours. For example, if you allow 40 hours to be carried over into next year, and you also have a rule to accrue 80 hours for the next year, an employee could have up to 120 hours next year.
    • Limit Carryover Hours: If there is a limit to the number of hours employees can carry over into the new year, check “Limit Carryover Hours” and enter the maximum number of hours to be carried over.  If you keep this box unchecked, an unlimited amount of hours will be carried over into the next calendar year.
    • Carryover Expiration:  If the carried over hours should expire on a certain month and day of the following year, enter the month and day.
    • On January 1 of the following year, the system will automatically bring the hours balance for each employee to zero, and then determine how many hours are to be carried over into the next year. On each employee’s Manage Time Off activity, you will see “End of Year Reconciliation” to reduce the balance to zero, and another entry for “Carryover” which will add the carried over hours to the available balance.
  6. Assign Active Employees:  You may choose to assign this rule immediately to any or all active employees.  You can also leave this blank and assign the rule to employees later.
  7. Click Save.

Example 1:

You want employees to accrue 1 hour of vacation for every 40 hours worked, but not accrue on unworked hours, such as vacation, sick, or holiday hours. Your formula would look like this:

Employees earn 1 Vacation hour for every 40 Regular, Overtime, and Doubletime hour(s) worked/paid.

Example 2: 

You want employees to accrue 1 hour of vacation for every 40 hours worked or paid, regardless of whether those hours are actually worked.  This would include regular hours, plus vacation, holidays, etc. This is the more generous policy of the two examples. Your formula would look like this:

Employees earn 1 Vacation hour for every 40 [Check all] hour(s) worked/paid.

Assigning Accrual Rules to Employees

Once you have entered your formula, you can immediately assign this rule to active employees.   Active employees will appear in the dropdown list.  Select each employee to assign this rule, then click Save.  You can also assign accrual rules direct on an employee’s record.  See Managing Employee Accrual Rules.

Note: the accrual rules will not be retroactive. To add hours that employees have already acquired, go to Payroll > Manage time off. Select the employee and name and click “Manage {hour type name you are adding to}. Enter the amount of hours the employee will have as a starting point. Click Save.

Editing Company Accrual Rules

If the accrual rule has been assigned to an employee and used for calculating time off in a payroll, you will not be able to edit the rule title or formula.  You may inactivate the rule, or change the employees who are assigned to the rule. If you need to change the formula, you can inactivate the rule and add a new rule.

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