How to Calculate PTO Accrual Per Hour, Pay Period, Month & Year

Anyone working in HR or payroll knows PTO management can get complicated fast. Some employees earn paid time off (PTO) for every hour they work, others earn it each pay period or month, and some get their full balance all at once at the start of the year.

All of these approaches affect how quickly employees build up their PTO, how you prorate time for new hires or part-timers, and how you handle things like carryover at the end of the year.

This guide breaks down how to calculate PTO accrual per hour, pay period, month, and year using the most common methods. It walks through real examples and gives you easy-to-use formulas you can apply to your own policy.

What is PTO accrual?

PTO accrual refers to earning paid time off gradually over time rather than receiving the full amount at once. Under an accrual system, employees “bank” PTO based on:

• Hours worked
• Number of pay periods
• Employment status (full-time or part-time)
• Tenure
• Company PTO policy
• Sometimes local labor law requirements

Accrual-based PTO is popular because it’s fair, predictable, and easy to adapt to different work schedules.

Why companies use PTO accrual systems

• Prorates PTO fairly for employees who join mid-year
• Supports hourly or variable schedules more precisely
• Prevents employees from using all PTO before earning it
• Makes balances easier to track in payroll tools
• Provides transparency for employees and managers

Although accrual systems can look complicated at first, the math becomes straightforward once you understand how the annual PTO amount translates into hourly, per-pay-period, or monthly rates.

Key elements you need before calculating PTO

No matter which accrual method you use, you need to know the same foundational elements:

1. Annual PTO allowance (in hours)

Most companies specify PTO in days but calculate accrual in hours.

2. Work hours per year (for hourly accrual)

Most companies use: 2,080 hours per year (40 hours × 52 weeks)

If your full-time schedule is different (e.g., 37.5 hours/week), plug in your own number.

3. Number of pay periods per year (for per-pay-period accrual)

Method 1: How to calculate PTO accrual per hour

Hourly PTO accrual is the most precise system because employees earn PTO directly proportional to actual hours worked. It’s especially common for:

• Hourly employees
• Part-time schedules
• Shift-based, retail, or variable-hour environments
• Locations where hourly accrual is standard (e.g., some US states have PTO payout laws)

Step-by-step: Calculating hourly PTO accrual

Step 1: Convert annual PTO to hours

Example: 15 days × 8 hours = 120 PTO hours per year

Step 2: Use total annual work hours

Typically 2,080 hours.

Step 3: Apply the formula

Hourly Accrual Rate = Annual PTO Hours ÷ Total Work Hours

Example: 120 hours ÷ 2,080 hours = 0.0577 hours of PTO per hour worked

This means an employee earns 0.0577 PTO hours for every hour they work.

How to apply the hourly accrual rate

Use: PTO Earned = Hours Worked × Accrual Rate

If an employee works 40 hours:

40 × 0.0577 = 2.31 hours earned

If they work 32 hours:

32 × 0.0577 = 1.85 hours earned

This automatically prorates PTO for part-time employees.

Hourly accrual examples

Pros and cons of hourly accrual

Pros

• More precise
• Ideal for variable schedules
• Fully prorates new hires and part-timers
• Standard in some industries

Cons

• More complex manually
• Requires accurate hour tracking
• Harder to estimate future PTO balance

Method 2: How to calculate PTO accrual per pay period

Accrual per pay period is extremely common for salaried employees because it creates predictable, consistent accrual amounts.

Step-by-step: Calculating per-pay-period PTO accrual

Step 1: Know annual PTO in hours

Example: 15 days × 8 = 120 hours

Step 2: Know the number of pay periods

Example: Biweekly = 26 pay periods/year

Step 3: Apply the formula

Accrual Per Pay Period = Annual PTO Hours ÷ Pay Periods

Example for biweekly payroll: 120 hours ÷ 26 = 4.62 PTO hours per paycheck

Examples for different pay frequencies

Pros and cons of per-pay-period accrual

Pros

• Easy to explain to employees
• Predictable and consistent
• Works well for salaried roles
• Easy for payroll teams to automate

Cons

• Less precise for variable hours
• Part-timers may need separate calculations
• Not always aligned with local rules requiring hourly accrual

Method 3: How to calculate PTO accrual monthly

Some companies prefer monthly accrual for simplicity.

Formula: Monthly PTO Accrual = Annual PTO Hours ÷ 12

Example: 120 PTO hours ÷ 12 = 10 hours per month

This is simple but less precise, especially for hourly employees.

Method 4: Annual lump-sum grants

Some employers bypass accrual entirely by giving the full annual PTO balance upfront.

Pros

• Simplest to administer
• Employees instantly know their total PTO
• Easy for annual planning

Cons

• Harder to manage for new hires
• Employees may use more PTO early in the year than they’ve “earned”
• Can require clawbacks if employees depart mid-year

Even if you use lump-sum grants, it's still helpful to know the accrual math for prorating new employees.

How to choose the right PTO accrual method

Consider hourly accrual if:

• You employ hourly workers
• Schedules vary week to week
• Compliance requires granular accrual

Consider per-pay-period accrual if:

• You primarily employ salaried workers
• Workers have consistent schedules
• You want predictable accruals tied to payroll cycles

Consider monthly accrual if:

• You want a simple system
• Schedules are consistent
• You can tolerate less precision

Consider a lump-sum accrual if:

• You want maximum simplicity
• You don’t need prorated tracking except for new hires

Advanced PTO accrual considerations

Tenure-based accrual increases

Many organizations increase PTO after certain employment anniversaries.

Example:

• Year 0–2: 120 hours
• Year 3–5: 160 hours
• Year 6+: 200 hours

Each step simply requires recalculating the formula with the new annual PTO number.

Accrual caps

Employers often cap PTO balances at a certain number of hours. Common policies include:

• Hard caps (e.g., max 200 hours)
• Soft caps (stop accruing when reaching cap, resume after taking PTO)

Accrual caps impact how balances grow, but don’t change the accrual calculation itself.

Carryover rules

Depending on your policy and local law, employees may:

• Roll over a certain number of hours
• Lose unused PTO after a deadline (“use it or lose it”)
• Cash out unused PTO in some jurisdictions

Again, these rules affect balance but not the calculation formula.

Do employees accrue PTO on overtime?

Most employers allow accrual of overtime hours since they are “hours worked.” However, some restrict accrual to base hours only.

Your PTO policy should clearly specify this. Use Deel’s PTO policy template to draft your documentation if you don’t have a policy.

Do employees accrue PTO on unpaid leave?

Generally no. If an employee isn't working or being paid, PTO usually doesn't accrue unless required by law or contract.

Quick reference: All PTO accrual formulas

Simplify PTO management with Deel

Looking to reduce the admin work that comes with PTO management—without compromising accuracy or compliance?

Deel has everything you need in a single, easy-to-use platform.

With Deel HR, you can request, approve, and track your local or global team’s PTO in one place. With Deel Payroll, PTO payouts are centralized and simplified for every employee in any country.

With Deel’s Time Off Fairy, you get extra AI support to lessen the admin burden. The Time Off Fairy consolidates requests from any channel, flags conflicts, and updates Deel instantly. You can reclaim hours typically spent digging through spreadsheets and scrambling for backup plans.

Book a demo to speak with an expert about using Deel to streamline HR and payroll.