How to calculate Paid Time Off (PTO) & Vacation Days

Posted by Damien on Apr 25, 2021
This article covers PTO calculations for the US. Head here if you'd like to calculate annual leave for Australia instead.

How much paid time off or vacation time am I entitled to?

In the USA, there’s no federal requirement to grant employees paid time off including any of the 10 federal holidays.

This means that the exact amount of PTO you’re entitled to can vary from workplace to workplace.

However, the state or county you’re in may have laws that entitle you to a certain amount of sick leave.

For example, Californian employers must allow employees to take up to 24 hours or 3 days paid sick leave per year. There are also extra requirements for paid time off provisions if you’re a contractor working with the federal government.

Ultimately, this means that there are 3 key places you’ll need to look to understand how much vacation and PTO time you’re personally entitled to:

  1. State and County Legislation (for the bare minimum PTO you’re entitled to)
  2. Your employer’s PTO & Vacation policy (for understanding how your PTO is accrued, when you’re entitled to it and how to apply for it)
  3. Your own employment contract (for specific additional vacation entitlements you’re entitled to)

How is Paid Time Off accrued and allocated?

The 3 most common PTO systems in the US are based on:

  1. Traditional PTO Policies, which allocate a number of leave days for specific purposes, such as:
    • Vacation Leave
    • Sick Leave
    • Bereavement Leave
    • Jury Duty

    The exact number of days allocated for each will varies between workplaces, but is often accrued gradually over time or (less commonly) provided to employees as a lump sum on a set date each year.

    Whilst this is the most common form of PTO policy, it is declining in use due to the amount of tracking and administration required to keep track of all the different types of PTO that each employee claims.

    You may need to justify your leave with documentation (for example, from a medical professional) to claim paid time off if your organisation uses a more traditional PTO policy.

  2. PTO Bank/PTO Plan Policies, which typically lump all PTO into one pool which you can use for any purpose you choose.

    This leave can also be accrued gradually over time or provided in a lump sum and is relatively easy to manage as you usually don’t need to prove why you need to take the leave as it’s no longer relevant to your employer.

    However, it can lead to problems if you choose to use all of your PTO for a vacation and then fall sick for example, so most employees with a PTO Bank or Plan are encouraged to keep a few days spare wherever possible.

  3. Unlimited Leave Policies, which are far less common but growing rapidly in use amongst more progressive organisations, allow employees to take as much leave as they need so long as they are still able to perform their tasks adequately.

    Whilst you may expect that employees would go on vacation endlessly given this freedom, in practice, workplaces with unlimited leave policies tend to take fewer vacation days than similar workplaces with more traditional PTO policies.

    This is possibly due to perceived judgement from managers and coworkers (“everyone will think I’m lazy if I go on vacation”) or due to the fact that most organisations that currently employ such policies expect a high enough level of output from their employees that they do not feel time off is feasible (“I can’t go on vacation - I have too much work to do!”).

How do I work out how much PTO I’ve accrued?

If you receive your leave entitlements as a lump sum on a set date, it’s simple to work out how much PTO you’ve accrued - you gain the specified amount on the specified date (generally, a set date or the anniversary of your first day).

If, however, your PTO is accrued gradually over time, it’s most likely going to be accumulated and measured in hours or days, so:

  1. A normal working week is 5 days (assuming you’re contracted to work 8 hours per day, that’s 40 working hours).
  2. If you receive 2 weeks PTO each year, this equates to 10 days (5 days × 2 weeks)
  3. Every calendar day you accumulate 0.22 hours of PTO (10 days x 8 hours / 365 days)

So in this scenario, you’d accumulate less than 15 minutes of PTO each day. Let’s call this the accumulation rate.

Two formulas give us your PTO entitlement in hours and days.

Hours accumulated = Calendar days employed × Accumulation rate

Days accumulated = Calendar days employed × Accumulation rate / The Number of Hours in Your Standard Working Day

Let’s say you’ve worked hard for 10 months and need some time off. We’re also going to assume that your normal working day is considered to be 8 hours. All you have to do is plug in the numbers.

10 months is around 304 calendar days (yes, we counted)

304 days × 0.22 = 66.92 hours accumulated

304 days × 0.22 / 8 = 8.36 days accumulated

If you work part-time, you need to adjust the accumulation rate like this.

0.22 × Average days worked per week / 5

For example, if you work 3 days per week your accumulation rate is calculated as follows.

0.22 × 3 / 5 = 0.13

Other Things to Keep in Mind

  • PTO will often have an expiry, meaning that if you don’t use your annual leave within a certain amount of time after receiving your entitlement, you may lose it.

  • Alternatively, your employer may set a maximum amount of PTO you can accrue, which has a similar effect but is tracked slightly differently.

  • Your employer may also have specific rules on how much time off you can take and when you can take it.

Track Your PTO Automatically in Bindle

Now you’ve got the hang of the formulas, you might be tempted to fire up Excel and create a spreadsheet. Hold that thought…

We created Bindle to solve all the problems you hit when you try to manage Paid Time Off and Vacation days using email and spreadsheets.

Bindle gives staff and managers direct access to request, view and manage their paid time-off. It’ll even sync up with your existing team calendars. 

Try Bindle for free
Better than spreadsheets &
email for managing staff time off.
Free set up. Awesome support.
No credit card required.

Established 2014. Made with ☕️ and the occasional 🍺 in California and the Blue Mountains of New South Wales, Australia.

© 2020 Bindle Software
Stock photos by Freepik