Guide to PTO Accruals: Everything you need to know

It’s just time off, right? You work, you earn it, you use it. But once you start getting into how it’s earned (hourly accruals, probation periods, rollover caps, negative balances), it turns into a chore.

Most people don’t know how their PTO works until there’s a problem with denied time off requests or a surprise deduction after they’ve already taken the time off.

So if you’ve ever tried to explain PTO accrual to your team and ended up second-guessing yourself halfway through, this one’s for you. In this post, we'll explain how to calculate PTO accruals, where companies go wrong, and what matters most if you want a PTO accrual policy people can trust.

How does PTO accrual work

A lot of employees start a job thinking they just “get” two weeks off. But they accrue PTO hours over time and usually not quickly enough for that Bali trip they’ve been eyeing in month two.

The confusion starts with the assumption that paid time off is handed out like a signing bonus. It’s not. Unless you’re on a front-loaded policy (which most aren’t), your PTO balance ticks up a little each pay period. Work a week, earn a sliver. Work another, earn a bit more.

Unless someone spells that out, ideally during onboarding, or better yet, in Slack when someone types /pto, people will be confused. Or worse, they’ll make plans based on time they don’t actually have.

The problem is, most management teams don't explain how accrual works. The HR pto accrual calculator just shows a number. Maybe it’s in hours, maybe it’s in days, or maybe it says “5.68” and leaves employees guessing whether that means they can take next Friday off.

It sounds like a small thing, but it negatively impacts trust. People assume they’ve been shorted, managers can’t explain it, and suddenly you’re dealing with policy friction over a 3-day weekend.

Accrual is just math (but it gets complicated)

Let’s say someone gets 80 PTO hours in a calendar year. Depending on how your system is set up, the number of hours and their PTO accrual rates could break down like this:

• Hourly PTO accrual: 80 hours ÷ 2,080 work hours = 0.0385 hours per hour worked
• Monthly PTO accrual: 80 ÷ 12 months = 6.67 hours per month
• Per pay period: 80 ÷ 26 biweekly periods = 3.08 hours every paycheck

So far, so good. But this is the point where things usually stop making sense for employees and sometimes for managers, too.

Because alongside the math, PTO setups need context. What if someone’s part-time? What if they started in April? What if they’re still in their 90-day probation window? What if their balance reached the company’s PTO balance cap last pay cycle and stopped accruing entirely?

There’s also the tenure factor: one person can earn 80 hours of PTO a year, while someone else earns 120. Carryovers, lump sum, weekly PTO accrual, and different rules for salaried employees vs. hourly. None of this is obvious in the math tool, but it all impacts how your policy works in practice.

Now we see why the “just do the math” method isn't so reliable once people start accruing PTO.

Even if the formula is right, the logic behind it has to hold up and be easy to explain when someone inevitably asks. A solid accrual setup needs to handle all the edge cases before they create support tickets.

Let the system do the work, not your team manually fixing confusion after the fact. Install Palmy to automate PTO tracking and approvals directly in Slack. 30-day free trial and no credit card needed.

Why HR loves accruals (and payroll does too)

When you're running People Ops at a growing company, giving everyone their full PTO up front can be very risky. It's not uncommon that someone joins, takes all their time off, then exits in month three. Now the company has to cover the cost of time they technically hadn't earned.

Accrual-based systems protect you from that by tying time off to time worked, which keeps the risk lower. Payroll loves it too because accruals mean that annual PTO hours update gradually, not in bursts. They don't have to field PTO requests for massive time off blocks out of nowhere, but can instead track a steady stream that’s earned, logged, and easy to reconcile.

Also, without accrual, December becomes PTO chaos: Everyone’s trying to use what’s left before it's taken away, coverage gets smaller, and you’re patching holes instead of running the business. Accruals nudge people to spread their time off across the year, not hoard it for a last-minute escape.

It's true that accrual setups require planning, but once they’re in place, they save your team from last-minute firefighting and give you something rare in HR: predictability.

When employees stop tracking, problems start.

There’s a moment, usually sometime after onboarding but before their first real vacation, when an employee stops keeping track of their PTO. This can create problems.

Sometimes, employees assume they’ve earned “enough” and book a week off, but when payroll runs the numbers, they end up having negative PTO without even knowing it.

The problem is that most don’t know the difference between “accrued” and “available.” And plenty of HR systems don’t help. If your Slack bot or PTO dashboard shows a single number with no context, people are going to guess (and they’ll usually guess wrong).

This difference between what employees think they’ve earned and what they’ve actually got in their yearly PTO bank is one of the most common (and avoidable) pain points in any People team’s inbox.

The fix is simply better visibility:

• Show balances in plain terms
• Separate what’s accrued PTO vs. what’s usable
• Let people see how the number of days PTO accrued changes over time

When someone is planning to leave, whether for a vacation or a family emergency, they need clarity. If your system doesn’t make that easy, they’ll stop trusting the policy entirely, and you’ll be the one cleaning it up.

Prevent confusion before it hits payroll. Use Palmy to display real-time PTO balances inside Slack, so no one’s booking leave they haven’t earned. Go here to get a 30-day free trial. 

Clarity around accruals creates trust

If you’ve ever been involved with a company with vague PTO rules, you know how quickly things can turn sour. Someone gets denied time off they thought they’d earned. Another employee has more vacation days than everyone else, and nobody can explain why.

But more than how much PTO someone gets, employees care about whether the policy feels consistent. Part time employees often feel like they’re getting the short end of the stick, while new hires are surprised by probation periods. Even full time employees who’ve been around for a while start wondering if tenure actually matters, or if it's just HR lip service.

Tenure-based accruals, part-time rules, and different starting balances: they’re all fine, but only if they’re transparent. When expectations are clear from the get-go and there's logic behind it, people plan with confidence. That kind of predictability builds trust. But the second your rules feel fuzzy (or even selectively applied), people stop asking and start assuming.

A good accrual policy doesn’t need to be generous. It just needs to be explainable. Consistency is what earns you credibility, especially in the moments when someone doesn’t like the answer.

Front-loading, unlimited PTO, and other curveballs

Some companies skip accrual entirely and go with front-loading or unlimited PTO. Both sound great on paper. In practice, they come with their own complications worth talking about. Anyway, let's see what they are...

Front-loading

This is the simpler option, at least in theory. It gives employees 15 days on day one with no waiting or math. But when someone leaves halfway through the year after using everything, the costs fall back on the company. That’s why a lot of People teams still track daily PTO accrual in the background, even if employees never see it, so they can prorate usage or recover overages if needed.

Unlimited PTO

This one is a bit more complex. It looks generous and modern, and for some teams it works great. But without defined norms, it creates ambiguity. 

Some people push it too, while others barely take time off because they don’t want to look bad (or aren’t sure how much time off is “okay"). Since there’s no balance, there’s nothing to pay out when someone leaves. It's budget-friendly, but it can still leave employees feeling like they missed out on something they earned.

Whatever model you pick, expectation management doesn’t go away. People still want to know what’s normal, what’s too much, and how to make plans without second-guessing.

Palmy helps you define the rules, track usage, and manage edge cases, all without leaving Slack. If you need some order in managing your team's vacation, try Palmy for free. 

State laws, rollover limits, and legal landmines

Paid time off is a liability, and if you’re not paying attention to state laws, that liability can bite you.

Some states, like California, don’t allow “use-it-or-lose-it” policies at all. If an employee earns the time, they get to keep it. Other states require that unused PTO be paid out when someone leaves, whether they quit or get let go. Mess that up, and you’re not just dealing with a frustrated ex-employee: you’re opening yourself up to legal trouble.

It gets more complicated with rollover rules. Letting employees carry unused PTO into the next year sounds generous, but people sometimes stockpile six months of vacation and decide to use it all at once. That’s why a lot of companies cap how much they can roll over. Remember: if you don’t document that cap in your policy, it might not be enforceable due to the state's labor laws.

None of this is about cutting corners. These measures serve to protect the business while keeping things fair. Employees deserve to understand their PTO, but employers deserve predictability.

You don’t need to be a lawyer to write a solid PTO policy. But you do need to treat it like a compliance issue. Winging it can eventually become an expensive mistake.

Time off matters more for some

PTO gets talked about as if it’s a bonus. For most people, however, it’s how they manage life. Sick kids, burnout, dentist appointments, family emergencies, time to think, time to sleep—without paid time off, all of it gets shoved to the weekend or ignored until it turns into a bigger problem.

That’s why people care when their PTO balance doesn't look right. It might seem like entitlement at first, but it’s more about figuring out if they can take two days to deal with something without stressing about money or manager approval. When PTO accrual is vague, delayed, or wrong, it can feel like the company just doesn’t care.

Designing a workplace means accepting that people don’t leave real life at the door. If you want a healthy work environment, build a clear system, make it fair, and easy to use.

Final Thoughts

If people don’t understand your PTO policy, they won’t use it properly. They’ll either take too much or avoid using it at all. Either way, it turns into extra work for your team.

The fix isn’t a better spreadsheet but a policy that’s clear from day one:

• Track the hourly accrual rate accurately
• Make the rules obvious
• Set expectations that don’t require follow-up

That’s what makes it work. Nothing more.