Importance of Accrual Policies
Giving your employees time off ensures that they have time to rest and get better. Accruals are used to calculate, accrue, and track the amount of paid time off (PTO), vacation, or sick time an employee has.
There are three types of accruals in the system - Vacation, Sick, and PTO. Policies can accrue time Per Hour, Per Pay Period, or Annually.
For hourly employees you can set up accruals to accurately accrue in several different ways:
- They can accrue based on the number of hours worked
- Hours can accrue by pay period
- Policies can accrue at a certain point of time, such as the beginning of the year, or on the employee’s anniversary date
For salaried employees:
- Time can accrue by the pay period
- Policies can also accrue at a certain point of time
To Create an Accrual Policy:
- Click on Settings (gear icon on left-hand navigation bar), then select Payroll Accrual Policies, and click the green +ADD button in the top right of the page.
- Name your policy. You can make it more specific by adding multiple policies of the same type. On the left, use the pull-down arrows to choose how often it accrues and expires, and the type of policy you are creating. Different types of paid leave include:
- Paid Time Off (PTO): Generally a combination of sick and vacation time. Most companies offering PTO require employees to use it when they are out, regardless of the reason.
- Vacation: Generally intended to be used for time off when the employee is not sick. These are most commonly coupled with a sick policy.
- Sick: Generally used when an employee is out because they are sick, or someone in their immediate care is sick. Many employers require a doctor’s note for more than 1-2 sick days in a row to prevent people from using sick time instead of vacation time.
- Once the options you wish to include in your policy have been selected, fill in the criteria for each option to the right Policy Setup. Example 1 below can be used as a reference if your accrual policy is set to only have one step. If your accrual policy has multiple steps that employees can reach over time, refer to Example 2.
- Example 1: Your company provides a PTO or Vacation policy to your employees that states each year they will receive 80 hours of PTO or Vacation (either work in this scenario). The policy states they will accrue the time off on a per pay run basis. Your company runs payroll bi-weekly (26 times per year). You allow employees to carry over hours from year-to-year but you never want them to have over 80 available. There is also a caveat; employees cannot earn PTO/Vacation hours for the first 3 months they work for the company. Here is what this policy should look like:
- The example above shows the employee's hours do not expire. The employee is limited to a balance of 80 hours at any given time. If you prefer a use it or lose it policy, then you would set hours to expire on either the anniversary date or on January 1st (most common, sets a unified expiration date for employees).
- Example 2: Your company provides a PTO or Vacation policy to your employees that states each year for their first 3 years they will receive 80 hours of PTO or Vacation. After the first 3 years, they will receive 120 hours of PTO or Vacation. At 5 years, they increase to 160 hours of PTO or Vacation for the rest of the time they are with the company. According to the policy, they will accrue this time on a per pay run basis. Your company runs payroll bi-weekly (26 times per year). You allow employees to carry over hours from year-to-year but never want them to have more hours available than they are allowed to accrue in that year. Employees begin accruing hours immediately upon starting. Here is what this policy would look like:
- Once you have set up the accrual policies your company will need, you can assign those to employees by going to the Employee Menu (2 head icon in left-hand navigation bar), choose the first employee you would like to add policies to, click the Other link at the top of the page, and you will be displayed with Leave Policies.
- Here you can choose from the Vacation, Sick, and PTO tabs to see options for each employee. When you go to Choose Policy it will display each policy you have created for the particular type you are in.
- The Anniversary Date is very important. That tells OnPay when we should base our calculations from. This is typically the employee’s hire date.
- If the employee has never accrued time, you can leave the Last Accrual Date blank. If the employee has never accrued time, the Amount Available will be blank until they begin to accrue time.
Here is an example of the PTO Policy setup for a new employee:
As you use the PTO, Vacation, or Sick pay types prebuilt into OnPay, you will reduce the number of hours an employee has available.
If you have any questions please do not hesitate to contact us!