# Calculating Vacation Time Based on Hours Worked

There are a lot of ways to offer accruals to your employees. Probably the most common is to give them their whole lump sum at the beginning of the year or anniversary date. But there are other ways to calculate accruals too.

For employees who may not be long termers you can add time to their bank on a monthly or biweekly basis. Or, if you just like being super accurate, you can add time based on the actual number of hours they work.

### Accruals By Hours Worked

This accrual rate is particularly great for employees who work a variable number of hours per year. If the employee is entitled to 2 weeks vacation each year, but ends up taking several weeks off for medical leave or something else, you may want the accrued vacation hours to reflect that time spent away from work. Likewise, if your employee puts in extra hours, you might want him to be compensated for that extra time with a little extra vacation time.

Calculating accruals by hours worked offers this flexibility. But calculating it isn’t as easy as just throwing it all into the bank at the beginning of the year…

### The Calculation

First, decide on approximately how many hours you want your employee to accrue per year – maybe it’s 40, 80, or some other number. Then we’ll figure out the fraction of an hour that they should earn for each hour they work.

As an example, we’ll say our employee gets about 2 weeks, or 80 hours per year. There are 52 weeks in a year (or you may use 50 weeks if you don’t want to include the 2 weeks of vacation in your standard work year) so a standard work year contains 2080 hours (based on 40 hours per week and 52 weeks per year). Now we’ll divide 80 by 2080 (vacation hours per year/hours worked per year) to obtain .0384. So for every hour our employee works he should earn .0384 hours of vacation.

Once we’ve set this number in the system, our employee will earn appropriate vacation hours regardless of whether he works 50 hours a week or 30.

### Example

To see this in action, let’s say our employee averages 50 hours a week for the whole year. 50 hours times 52 gives us 2600. 2600 multiplied by .0384 gives the employee 99.84 hours of vacation. That’s an extra couple of days he’s earned.

Conversely, if the employee only averaged 30 hours per week for the year, he would only get 59.9 – not quite a full two weeks.

To set this up in the Timesheets system, you’ll visit the Settings page for the employee and then click the Options tab. At the bottom of this page you will find the accruals settings where you can enter your prefigured values.

## 3 thoughts on “Calculating Vacation Time Based on Hours Worked”

1. Joe Consultant says:

The US government says there is 2087 work hours per year. I am a contractor paid by the hour with no PTO at all. This means I have to figure in the 5 major holidays as well as anything else where I might not be able to make up the time on other days in the pay period. I went with a 2 weeks of vacation, 5 days of “sick” time and the major holidays a total of 20 days or 160 hours of PTO.

2087 – 160 = 1927 This gives me my target maximum hours worked
160 / 1927 = 0.083 or 8.3% The rate of accrual I need to set aside to go into my PTO savings.
For me the actual value is calculated after taxes and other payroll deductions such as healthcare insurance.

Anyone see something wrong in this calculation?

• The calculation looks good. And keeping track of your accruals as a contractor is very smart!