The HR Dictionary

Accruals (Leave)

Accruals are the number of leave hours that an employee accumulates in a period of time as determined by the company's HR policy. The employer is liable in this situation. Simply put, it is paid time off that you receive as compensation for working for your firm. Normally, paid leave must first be earned before being taken. While employers do permit unpaid leave in emergency situations, it needs to be allowed or it would be recorded as an unauthorized time off/leave.

Although there isn't a standard for leave accruals across firms, most companies typically have clear policies regarding it. Below is how it is usually structured.

  1. Yearly - One of the simplest methods for a business to accumulate leave accruals is on an annual basis. Each year, an employee obtains XX hours of paid time off and the employee's first-year anniversary is the date of accrual.
  2. Monthly - An employee is entitled to XX hours of leave for each month of work that is completed. This is then multiplied by 12. For instance, if you are granted one week of vacation time yearly (40 hours), you would have 3.333 hours of holiday entitlement available each month.
  3. The method of paying leave time based on the time an employee has actually worked is the most challenging, but it is also the most realistic. The employer must be aware of the number of hours an employee is anticipated to work each year in addition to the amount of vacation time he/she will accrue. For example, an employee works 40 hours each week for 52 weeks in a typical year. That translates to 2,080 hours. This must also be  subtracted by the time that will not be utilized to accrue time. So, 2,080 hours would be subtracted from 40 to get 2,040 for employees who need to earn 40 hours of leave. If the organization collects the six major holidays that occur throughout the year, there will be 48 additional hours to subtract (6 X 8 = 48), therefore 2,040 - 48 = 1,992 hours. Now divide 40 by 1,992 to get the amount of leave time accrued for each hour, which is.02008. Thus, an employee is entitled to.02008 of an hour of paid time off for each hour worked.

However, managing leave accruals manually with paper can be a nightmare. Thus, most organizations, small and large, use HR software that includes PTO management or leave management features along with the ability to manage accruals automatically so the hard work gets done automatically by the software. It saves time and avoids the possibility of error.