Business Math Series: 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. I’ve written a whole post about it here but today I am going to dedicate a whole post on the most complicated method: by hours worked.
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 each pay period.
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…
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.
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.
If you don’t already have an account with Timesheets.com, give us a call so that we can help you set one up. Tracking accruals with Timesheets.com is painless and you won’t have to remember a single calculation because they are all done for you!