Every employee earns a certain number of leaves in their yearly quota. The number of earned leaves depends on the period they work for a particular company. This is called accrued leave, leave accrual, or earned leave.
How many of these accrued leaves employees can avail monthly, quarterly, half-yearly, and yearly count entirely on a company’s HR policy.
In many companies, employees can carry through accrued leaves to the next year if remain unutilized. Some companies also pay their employees for unused accrued leaves after the year elapses.
Example of an Accrued Leave
Accrued leave for paid employees and hourly employees aren’t the same. The nature of their contracts differs, and so do their accrued leaves.
For example, a paid employee may accrue or earn 2 days of paid leave for every month they work. That means 12 days of paid leave in 6 months and 24 days in a year.
However, an hourly employee can accrue 0.075 hours’ paid leave per hour. If they are on a 40-hour work week, the accrued leaves will be 3 hours weekly. The monthly, half-yearly, and yearly accrued leaves for the employee will be 12 hours, 72 hours, and 144 hours respectively.
So, the annual accrued leave for the hourly employee will be 18 days as per the hourly allotment.
Accrued Leave Categories
Once an employee joins a company and works for them, they accrue different types of paid leaves as they serve over time. Here are various types of accrued leaves —
Paid Time Off
PTO or paid time off is a time away from work that employees enjoy as part of their job without any loss of pay. It takes different forms depending on a company’s policy. Employers typically offer casual leave, sick leave, vacation, federal holidays, etc. as part of a paid time off facility.
Many companies today take advantage of PTO software to smoothen and speed up the process of PTO requests and approval.
Sick Leave
Companies offer sick leave to their employees for short-term illnesses. By submitting applications or requests, employees can take sick leave to recover from their sicknesses. Fever, cold, and flu are some of the symptoms & illnesses for which employees can ask for sick leave.
Although sick leaves are paid leaves, some companies can offer unpaid sick leaves for long-term illnesses.
Medical Leave
Unlike sick leave, medical leave is offered by employers to employees for long-term illnesses. If employees undergo severe health issues and can’t focus on their work, they can take unpaid medical leave.
They can also take medical leave to take care of their sick family members and look after babies after birth. Medical leave usually lasts from a few weeks to months.
Examples of serious health conditions include injury, depression, prenatal health issues, and so forth.
Disability Leave
It’s a kind of paid leave granted to employees experiencing physical or mental disability issues. This leave allotment provides disabled employees with the opportunity to recover from this type of condition with proper treatment.
Physical or mental impairments, dementia, hearing loss, ADHD, etc. are some of the conditions for which employees can take disability leave.
Bereavement Leave
Employees can take bereavement leave for losing a family member or a loved one to mourn the departed member’s death. Most companies incorporate this type of leave in their benefit plan. Whether bereavement leave will be paid or unpaid entirely hinges on a company’s policy.
Additionally, the allotment of the number of hours or days for bereavement leave is also under the jurisdiction of the company. Some companies may choose to offer leave hours or days depending on employees’ relation to the deceased member.
FMLA Leave
Apart from these leave types, employees can also earn FMLA leave in different forms — Continuous, intermittent, and reduced schedule leaves.
According to the US Department of Labor, an employee must work at least 1 year with 1,250 hours of total work and work at a location where the company hires 50 or more employees within 75 miles to be eligible for this type of leave.
It allows up to 12 weeks of unpaid and job-protected leave in 12 months for valid family & medical needs. Parental, paternity, and maternity leave fall under FMLA leave.
How Does Accrued Leave Work?
Accrued leave doesn’t follow any fixed rule. Rather, its allotment and usage rely entirely on a company’s policy. But companies typically offer accrued leaves to employees depending on their contract types, positions, tenure, etc.
While working for a company, employees earn hours of accrued time off periodically. Accrued leave usually follows a monthly, quarterly, or annual schedule. Based on these schedules, different companies offer hours or days of accrued time off to their employees.
After being eligible for accrued leave, employees can apply to enjoy their desired number of accrued time-offs. Once approved by the HR dept, they can enjoy their time away from work while still being paid in full.
And of course, the accrued leave balance is readjusted after the approved hours or days are taken away from the balance.
Calculating Accrual Leave
Calculate accrued leave based on the 2 following factors —
- Total paid leave either PTO as a whole or a particular type – an employee can accrue in a year.
- The rate at which employees accrue it—hourly, daily, weekly, monthly, or annually.
Hourly
Divide the amount of leave an employee can accrue in a year by the number of hours they are expected to work during that year to calculate the hourly accrued leave.
For example, a full-time employee may work 2100 hours in a year. 82 / 2100 = 0.039. The employee accrues 0.039 hours of leave for every hour they work.
Daily
Divide the amount of leave an employee can accrue in a year by the number of days they are expected to work during that year to calculate the daily accrual leave.
For instance, a full-time employee may work 264 days a year. 82/ 264 = 0.310. The employee accrues 0.310 hours of leave for each full day they work.
Monthly
Divide the amount of leave an employee can accrue in a year by 12 to calculate the monthly accrued leave.
For example, 82/12 = 6.83. So, the employee accrues 6.83 hours of leave each month.
Annual
If you leverage an annual accrual method for your company, an employee has to work for a full year before they get entitled to the full amount of paid leave.
That’s why a handful of companies tap into this approach. Companies using an annual accrual method in their leave policy tend to restrict it to long-term employees only.
It’s a Wrap!
Accrued leave is a crucial concept in a company’s leave system. So, an HR team must properly plan and execute it in their respective companies to treat employees fairly and comply with labor laws.
At the same time, it’s also a basic right of employees to be entitled to accrued time off based on their status and service duration.
When an employer handles this accrual leave system aptly and conveniently for employees, it also boosts employee morale, satisfaction, retention, and overall productivity.
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