How Does PTO Accrue? Rules, Methods, and Best Practices

If you're an employer or manager scratching your head over terms like accrued PTO, lump sum, or accrual period, you're in the right place. This guide breaks down exactly how PTO accrues, why it matters, and what rules apply depending on where your team is based.

Why PTO accrual matters for employers

Understanding how PTO accrual works is key for staying compliant with federal or state laws and keeping your team happy. A clear PTO accrual policy helps avoid disputes over accrued paid time, reduces confusion around vacation pay, and ensures fairness for full time employees, part time employees, and everyone in between.

It also helps you manage PTO requests more efficiently, track PTO balance accurately, and avoid issues like negative PTO or unused PTO stacking up. Plus, a smart approach will boosts morale and shows your employees you value their vacation time just as much as their hours worked.

How does vacation accrual work in the UK?

By law, full time employees in the UK are entitled to 5.6 weeks of paid holidays per calendar year. That’s 28 vacation days, which can include paid sick leave and bank holidays, depending on the vacation accrual policy. This applies whether the employee works five days a week or fewer, but the number of days off is always pro-rated based on the number of hours they work.

Accrual methods for different worker types

Here’s where it gets interesting. While salaried employees on regular schedules usually start accruing PTO monthly, the rules change for part time workers, casual contracts, and zero-hour employees.

• Regular workers: PTO is typically accrued at a steady monthly rate; about 2.33 days per month to hit the 28-day target by the end of the year.

• Irregular or part-year workers: They accrue pto hours based on a percentage of hours worked. The magic number? 12.07% of total worked hours. So if someone works 80 hours, they’ve earned about 9.66 hours of PTO.

This method ensures even those working fewer hours or with unpredictable schedules build up time off fairly.

✅ Quick tip: Using PTO tracking software makes it easier to calculate PTO accruals across different worker types and contracts.

Recent changes in holiday pay regulations

As of 2025, new rules in the UK now formally bring back the 12.07% accrual method for part time employees and irregular hours workers. This affects how accrual based PTO policies are applied, especially when calculating accrued time off after a waiting period or during a probationary period. The reforms were designed to simplify calculations and ensure a consistent approach across businesses.

How does PTO accrue in the US?

There’s no one-size-fits-all rule in the US, which makes it even more important to get your PTO policy right.

Federal guidelines on PTO

The Fair Labor Standards Act (FLSA) doesn’t require employers to provide vacation time, paid sick leave, or any form of paid time at all. Instead, employers create their own accrual policy, often based on industry norms, state laws, or company culture.

Employers decide things like:

• When employees start accruing PTO

• The accrual frequency (weekly, monthly, per pay period)

• Whether there’s a waiting period before PTO accrual begins

• If there’s a cap on PTO balance or unused vacation time

Common accrual practices

Despite the freedom, many employers follow similar patterns to calculate PTO accruals. Here are a few of the most popular:

• Hourly accrual: Employees accrue PTO hours as they work. For example, earning 1 hour of PTO per 40 hours worked. That adds up to 80 hours of PTO per year for full time employees.

• Per pay period accrual: Employees earn a set number of PTO hours each pay period, like 4 hours every two weeks, adding up to two weeks of vacation time over a calendar year.

• Front loaded PTO: A lump sum PTO amount is given at the start of the year, such as 10 vacation days. This simplifies admin but can get tricky if an employee leaves before using all their PTO.

Employers need to think carefully about whether they want to allow negative balance PTO (where employees use time they haven’t earned yet), or if they'll go for a use-it-or-lose-it approach.

State-specific PTO laws

Some states affect PTO accrual rates directly by mandating rules around unused PTO, payout upon termination, or vacation accrual. Here are a few examples:

• California: Does not allow use-it-or-lose-it policies. Accrued PTO must be paid out when an employee leaves.

• Massachusetts: Requires earned vacation pay to be treated like wages.

• Arizona & Washington: Require certain sick leave benefits for all employees.

Understanding state’s labour laws is crucial when setting your accrual policy, especially if you operate in multiple states.

What are the different PTO accrual methods?

Not all businesses use the same approach when it comes to building up vacation time. Whether you're managing hourly accrual, lump sum drops, or tracking monthly accrual, how employees accrue PTO hours can look very different.

Hourly accrual

This method is as straightforward as it sounds: employees earn PTO based on the number of hours they work. It’s especially common for part time employees, hourly workers, or companies with flexible schedules.

A typical example?
For every 40 hours worked, an employee earns 1 hour of PTO. Over a year, this adds up to 80 hours of PTO; equivalent to two weeks of vacation days for a full time employee.

Why it works:

• Fair for part time workers and shift-based teams

• PTO grows in real-time, with each shift

• Easy to adjust if someone works fewer hours

But there’s a catch: a tracking software is a must if you want to avoid messy spreadsheets and miscounted PTO hours.

Monthly accrual

With monthly accrual, employees accrue vacation at a fixed rate each month. In the UK, this often means 2.33 days per month for full time employees, totalling the legal 28 days of accrued paid time over a calendar year.

This method is great if:

• Your workforce is mostly salaried employees

• You want consistent PTO accrual rates

• You need a simpler way to calculate PTO accruals

Monthly accrual helps avoid negative PTO balances and gives employees a predictable view of their of their current balance, which is perfect for leave management.

Lump-sum allocation

Also known as front loaded PTO, this method gives employees all their PTO in one go, usually at the start of the year or on the employee’s hire date.

For example, a company might drop 10 vacation days or 80 hours of PTO into an employee’s pto balance every January.

The pros:

• Super simple to administer

• Encourages early-year vacation requests

• Employees love seeing a full pto time bank

But here’s what to watch for:

• If an employee leaves mid-year, you may need to recover any unused PTO or adjust final pay

• It can lead to negative balances if your pto policy doesn’t set limits

• Doesn’t always reflect how many hours worked; less flexible for variable schedules

How is PTO calculated for different employment types?

Not all contracts are created equal, and neither are pto accrual rules. Whether someone’s working 9 to 5 or picking up shifts when they can, PTO accrual depends heavily on their employment type.

Full-time employees

For full time employees, accrual based PTO policies tend to follow a clear structure, based on time served and sometimes seniority.

• In the UK: Full-timers accrue time off at about 2.33 days per month, totalling 28 days per calendar year. Some employers may include paid sick leave or bank holidays in this figure.

• In the US: It depends on the employer, but a common approach is earning pto hours per pay period. For instance:

  • 4 hours every two weeks (biweekly) = 104 hours annually = approx. 13 vacation days

  • Some companies give lump sum PTO on the employee's hire date; like 80 hours of PTO up front

Employers may also offer more accrued paid time to senior employees or tenured employees, with a higher accrual rate after a few years of service.

Part-time and irregular workers

This is where things get a little more custom.

• UK: For part time workers and those on irregular hours, PTO is accrued pro-rata. The standard calculation is 12.07% of hours worked. So, if someone clocks 50 hours, they’ve earned about 6.04 hours of PTO.

• US: Employers might use an hourly accrual rate, like 1 hour per 30 hours worked, ensuring part-timers earn PTO fairly. The key is to apply the same logic consistently across all employees.

This method helps you calculate PTO accruals in a way that reflects reality, especially if staff work fewer hours or inconsistent schedules.

Zero-hour and casual contracts

For zero-hour and casual employees, accrual period and hours worked can vary wildly, so flexible calculations are essential.

• PTO accrues based on actual hours worked. 12.07% is commonly used in the UK.

• In the US, it’s up to the employer to decide how they’ll accrue PTO hours for these contracts, but it usually mimics part-time accrual policies.

What are best practices for managing PTO accrual?

If you're wondering how to avoid headaches, payroll disputes, or grumpy messages about missing pto hours, these best practices are your go-to playbook.

Clear policy communication

Start with transparency. Every employee should know:

• How and when they start accruing PTO

• The company’s accrual frequency (e.g., per pay period, monthly)

• Whether you allow lump sum PTO or hourly accrual

• Rules around unused PTO, carryover, waiting period, and negative balance

Spell this all out in your employee handbook. If your PTO accrual policy isn’t crystal clear, it’s not helping anyone.

Utilizing HR software

Manually tracking PTO balance is a recipe for errors. Instead, use dedicated PTO tracking software to:

• Automate pto accrual rates

• Handle different employment types and accrual periods

• Flag unused vacation time or negative PTO issues

• Make managing pto requests quicker and easier

Bonus: Many tools let employees see how much PTO they’ve earned in real time which leads to fewer questions for HR.

Regular policy reviews

Labour laws change. Fast. Whether it’s new UK vacation accrual rules or updates to state’s labour laws in the US, staying up to date is non-negotiable.

Schedule annual policy reviews to:

• Adjust accrual rates or carryover policies

• Reflect changes in state laws or new contract types

• Ensure senior employees and part time workers are treated fairly

• Audit negative balances and expired vacation pay

Keep things fresh, legal, and crystal clear.

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How Shiftbase makes PTO accrual easy

Managing PTO accrual doesn’t have to be a headache. With Shiftbase, you can automate the entire process; no spreadsheets, no manual tracking, and no confusion over accrual rates, unused PTO, or negative balances.

Whether you use hourly accrual, lump sum PTO, or monthly methods, Shiftbase gives you the flexibility to align your accrual policy with your actual business needs.

With tools for employee scheduling, time tracking, and absence management, Shiftbase brings everything together in one easy-to-use dashboard. It helps you track PTO hours in real-time, manage PTO requests, and stay compliant without lifting a finger.

✅ Want to see how simple it can be? Try Shiftbase free for 14 days and take the stress out of PTO management for good.