PTO for Hourly Employees: What You Need to Know

Paid time off benefits both employers and employees in many ways, yet those in the lowest wage categories in the US have the least access to PTO. Some 38% of part-time employees, who tend to be paid hourly, don’t have any access to paid leave.

While paid leave isn’t mandated by federal law, some states require it for all employees, including those on an hourly schedule.

Whether you do business in one of these states or you simply want to experience the benefits of providing PTO for your hourly employees, it can be helpful to learn how PTO works and how to implement an effective policy for your workplace.

The Value of Offering PTO to Hourly Team Members

While paid time off is often a perk for your employees, it also offers many benefits to employers.

If you’re having issues with absenteeism among your hourly workforce, for instance, a PTO policy can help reduce unexcused or surprise absences. While employees will still get sick and have emergencies, PTO gives them the flexibility to schedule their non-emergency absences. This, in turn, makes your team better prepared for when an employee is out.

PTO can also increase employee satisfaction by improving work-life balance. Being able to schedule days off whenever needed gives employees more control over their lives, which may reduce feelings of burnout, increase feelings of wellbeing, and decrease turnover.

This increased autonomy also has the potential to lighten the administrative burden of HR professionals. You’ll no longer have to sift through a stack of time-off requests to determine whether an employee has a valid reason for their request..

Finally, offering PTO to employees can help your company gain a competitive advantage in a tight labor market. Because many hourly workers go without PTO, employers that grant it to part-time employees may be more attractive to candidates.

How Does PTO Accrual Work?

In many cases, including those where paid time off is required by law, employees earn PTO over time instead of having a set number of days become available to them all at once. This process is called PTO accrual.

How does PTO work with hourly employees? The simplest answer is that employers usually offer a set number of paid hours for a set timeframe. For example, an employee may be granted a half hour of PTO for every shift worked.

Employers can use many different accrual methods, including:

• Hours worked (often used with hourly employees)
• Yearly (usually provided up front)
• Monthly
• Bi-weekly/semi-monthly (also known as “per pay period”)
• Weekly
• Daily

Usually, employees can usually use their PTO hours as soon as HR credits them to their account. Once the employee requests time off, those hours are deducted from their total available PTO hours.

How to Calculate PTO for Hourly Employees

If you have an “upfront” policy where employees receive all their PTO at the beginning of a 12-month period, there’s no need to calculate PTO. However, HR professionals who use an accrual model need to understand how to calculate and credit PTO accurately.

How PTO is calculated for any given employee will depend on several factors, including the accrual period you choose and the total amount of PTO an employee can earn. Note that while accrual per hour worked is common among businesses with hourly employees, that doesn’t mean you can’t adopt another accrual system if you prefer.

Monthly Accrual

Use the following formula to calculate monthly PTO accrual:

(maximum annual PTO hours) / (maximum number of months per year an employee can work) = monthly PTO accrual rate

For example, if employees can earn up to 80 hours of PTO per year and work 12 months, you would perform the following calculation:

(80) / (12) = 6.67 PTO hours earned per month

Bi-Weekly/Semi-Monthly/Pay Period Accrual

Here’s the formula for calculating PTO accrued per pay period:

(maximum annual PTO hours) / (number of pay periods each year) = pay period PTO accrual rate

Note that there are 24 semi-monthly pay periods in a year and 26 bi-weekly pay periods.

For an employee maxing out at 80 hours of PTO per year accrued on a semi-monthly schedule, you’d calculate PTO as follows:

(80) / (24) = 3.33 PTO hours earned per pay period

For 80 hours of PTO per year accrued on a bi-weekly schedule, the calculation would look like this:

(80) / (26) = 3.08 PTO hours earned per pay period

Weekly Accrual

To calculate PTO accrued weekly, you’d use the following formula:

(maximum annual PTO hours) / (total number of weeks each year) = weekly PTO accrual rate

In this scenario, an employee with a cap of 80 PTO hours each year would calculate their accrual accordingly:

(80) / (52) = 1.54 PTO hours earned each week

If your employees don’t work 52 weeks per year, simply plug in the number of weeks they actually work.

Daily/Per-Shift Accrual

The formula for calculating a daily or per-shift PTO accrual rate looks like this:

(maximum annual PTO hours) / (total number of workdays per year) = daily PTO accrual rate

For instance, an employee who can earn 80 PTO hours per year at a company that’s open 260 days a year would calculate their accrual like so:

(80) / (260) = 0.31 PTO hours earned each day or shift worked

Hourly Accrual

To calculate PTO accrued hourly, you can use the following formula:

(maximum annual PTO hours) / (total number of hours worked each year) = hourly PTO accrual rate

For example, an employee who can earn 80 total PTO hours every year and works 1,500 hours per year would do the following to calculate their hourly accrual:

(80) / (1,500) = 0.053 PTO hours earned each hour worked

Tracking and Managing PTO for Hourly Workers

Tracking and managing PTO requires a high level of organization and consistency. As you create a system for doing so, keep the following best practices in mind:

• Have policies that explain accrual rules and the PTO request and approval process.
• Make sure managers effectively communicate PTO policies to employees.
• Use an electronic time tracking system to track the number of hours an employee has worked and how much PTO they’re owed.
• Train managers to plan ahead for critical coverage to ensure on-time project completion when employees have requested PTO.

Paid time off presents a plethora of benefits, but it must be implemented correctly. As you manage your PTO policies, it’s important to ensure that every employee understands how to use the system responsibly.

Creating a PTO Policy for Hourly Employees

Creating an effective PTO policy starts with understanding state laws. Some states require employers to adhere to a minimum accrual rate (how much PTO is earned in any given accrual period) for all employees. For example, California mandates that employers offer at least one hour of paid sick leave per 30 hours worked.

Next, determine how hourly employees will accrue time off. Will you calculate PTO according to hours worked? Will PTO hours roll over from one year to the next? Will tenured employees have a higher accrual rate? It’s important for employees to know how much time they’ll be getting and when it will become available to them.

Train managers to implement and effectively communicate procedures to employees. This should include training on any electronic systems you’re using to track and manage PTO requests and information on how to handle unexcused absences when employees take time off without having any PTO left.

Finally, build a positive culture around taking PTO, reminding employees that you care about them. When workers feel that leaders are interested in their wellbeing, it leads to increased engagement and productivity, which helps businesses achieve strategic goals.