Last updated on October 1, 2024
Understanding Paid Time Off (PTO) for Hourly Employees
📢 News flash: Paid time off (PTO) is not just for your full-time, salaried employees!
Did you know that hourly employees are often entitled to similar, if not the same, PTO as salaried team members?
It’s true! Offering the right PTO for hourly employees is key to keeping your team satisfied, staying compliant, and managing your workforce effectively. In this article, we'll break down how PTO works for hourly employees and explore how to navigate legal requirements to craft a policy that works for your team.
What is Paid Time Off (PTO)?
Paid time off (PTO) is a benefit that allows employees to take time off work while still getting paid. PTO is an umbrella term that includes a wide range of leave types like vacation, personal time, and sick days. While PTO is offered by many employers, it's also federally mandated in most countries. To learn more about PTO regulations in your country, consult our leave laws guide.
What is an Hourly Employee?
Hourly employees, as the name implies, are paid by the hour, meaning that their earnings reflect how much they’ve worked. This is different than salaried employees who receive a fixed wage regardless of hours worked. This hourly pay structure offers employees much more flexibility but can make the calculation of PTO slightly more complex compared to salaried employees.
Do Hourly Employees Get PTO?
The short and sweet answer? Sometimes!
Paid time off for hourly employees depends on your country’s laws and your company’s policies. Often, if your government mandates PTO for salaried employees, they will also have regulations for shift workers.
For example, hourly employees in Canada are entitled to the same number of PTO days as salaried employees. In the UK, shift workers also have the same number of weeks off as full-time employees, but if they work fewer days per week, it will add up to fewer days in all.
For countries like the US, however, which have no federally mandated PTO, it is completely up to the employer. Some employers choose not to offer PTO to hourly workers, while others base accruals on the hours worked.
Ultimately, whether hourly employees receive PTO varies by location and employer policies.
PTO for Salaried Employees vs Hourly Employees
The main difference between PTO for salaried employees and hourly employees is the way they are calculated and accumulated.
Salaried employees usually have a set number of hours or days included in their employment package. This amount is not dependent on how many hours they worked, but instead, is steady and predictable.
Hourly employees accrue PTO based on hours worked. This means that the more hours they work, the more paid time off they will receive. For example, an employee working 10 hours per week wouldn’t have the same PTO amount as an employee working 25.
Understanding these differences is important for creating a fair and transparent PTO policy.
Why Offer PTO to Hourly Employees?
In some countries, like the US, companies can decide if they want to offer PTO to hourly employees, leading many businesses to question if it's worth it. When shaping their leave policies, they might wonder if PTO for shift workers provides enough benefits to justify the cost.
Here are a few reasons why they should consider it:
Reduce Absenteeism
PTO policies can help reduce the number of unscheduled absences at work, providing better workforce management and productivity. A clear PTO policy for hourly employees will allow them to schedule their days off effectively, ensuring that your team remains fully staffed with minimal disruptions.
Competitive Recruitment
It’s proven that employees value benefits when looking for a job. In fact, a 2024 report found that 53 percent of employees prioritize working somewhere that lets them maintain a healthy balance. For 81% of parents, work-life balance even ranked higher than salary (Gallup).
Providing PTO as part of your compensation package can give you a significant edge in attracting, recruiting, and retaining employees, helping you build a capable and committed team.
Improve Work-Life Balance
Happy teams are productive teams. PTO is an essential component of work-life balance, providing employees the freedom to recharge and address personal matters outside of work. This flexibility helps maintain a positive work environment, enhancing overall job satisfaction.
Types of Paid Time Off for Hourly Employees
Now that you understand the importance of PTO, here are a few types of leave you may want to offer your hourly employees:
🤒 Vacation Days
Sick leave is a type of paid time off that allows employees to rest and recuperate when they’re not feeling well. Offering paid sick leave for hourly employees ensures they return to work quickly and healthily while also reducing the risk of illness spreading throughout your workforce.
✈️ Vacation Days
Vacation leave offers employees time off to relax and recharge, whether it's for a holiday, staycation, or pursuing personal interests. It's an investment in their well-being and long-term productivity.
🧑🏻🎄 Holidays
Holidays vary by federal and local governments and include cultural and religious observances like Christmas or Thanksgiving. While many organizations close on these days, others, like hospitals or pharmacies, may offer higher pay to incentivize staff to work.
⏰ Personal Time
Personal leave is a very flexible type of PTO that can be used with less notice than typical vacation days and in smaller increments, like half days. It gives employees the freedom to handle unexpected events, such as family emergencies.
Creating a PTO Policy for Hourly Employees
Once you’re ready to start defining your PTO policy for hourly employees, you’ll want to make sure to do the following:
Learn the Law: Begin by understanding the laws relevant to your business, state, and country. Some states have specific requirements for PTO accruals. For example, in California, employers are required to provide 40 hours of sick time annually or at least one hour of paid sick leave for every 30 hours worked. Ensuring compliance with the law is essential to avoid legal headaches.
Include Deadlines: Outline how long in advance you’d like employees to request leave in order to give your team time to plan accordingly. If this differs depending on leave type, make sure to clarify the deadlines for each.
Define Accrual Rates: Explain to your team how PTO is accrued and at what cadence hours are added to their balance. Will it be based on the number of hours worked, or will there be a fixed amount given annually? Will their balance be updated daily, weekly, or monthly? Clear communication about these details is essential for transparency, helping employees understand how much time they will receive and when it will be available.
Outline Leave Types: Make sure your team understands what types of PTO are available to them and how each should be used. Being upfront about the types of leave available ensures employees know their options and use each one appropriately.
Unused PTO Policy: Define what happens to unused PTO hours. Will they roll over to next year, be cashed out, or will they be lost? Your team needs to know!
Calculating PTO for Hourly Employees
After creating your policy, it’s time to start doing the math! Calculating vacation hours for hourly employees can be done in several different ways, but here are some common methods:
Yearly Accrual Rate
This is the simplest method, where PTO is given as a lump sum at the start of the year. Employees can use their PTO anytime, but once it's used up, they need to wait until the following year for hours to be added to their balance. If an employee starts mid-year, their PTO is prorated. For example, if someone starts in July and the company offers 10 days of PTO annually, they will receive 5 days for the remainder of the year.
Hourly Accrual Rate
This method works best for employees with varying schedules. PTO is calculated based on the number of hours worked. For example, an employee working 40 hours a week accrues a small amount of PTO for every hour worked. If they work fewer hours in any given week, their PTO accrual will reflect that.
Daily Accrual Rate
Ideal for employees with full-day shifts, this method calculates PTO based on days worked rather than hours. For instance, if an employee works 4 days a week, they accrue a portion of a vacation day for each day worked. If they work more days in a month, they’ll accrue more PTO.
Monthly or Bi-Weekly Accrual Rate
This straightforward method breaks down PTO into equal increments, either monthly or bi-weekly. For example, with 80 hours of PTO annually, an employee might accrue a set number of hours each month or pay period. This approach provides consistency, as employees receive the same amount of PTO regardless of the number of hours they work.
Still unsure if you’ve got it right? Try our handy PTO accruals calculator.
Managing Paid Time Off for Hourly Employees, Made Simple
PTO tracking is no vacation! Especially when it’s done manually.
Between juggling salaried and hourly employees, full-time and part-time team members, and remote and in-office departments, it’s clear that no matter how good your math skills might be, all the variables make it nearly impossible to manage by hand.
Leave management software is no longer just nice-to-have. It's non-negotiable.
Imagine a world where your leave balances update themselves, accruals are automatically calculated, teams are magically notified of who’s off and when, and compliance is no longer a constant worry. It’s all possible with Vacation Tracker!
Our PTO tracking solution is designed to make managing paid time off for salaried and hourly employees straightforward and efficient through powerful features like:
Custom Leave Policies: Create and assign unique leave policies for different locations, giving you the flexibility to tailor PTO management to your organization's needs.
Hourly Leave Tracking: Set leave durations as short as one hour to offer your team the utmost flexibility in how they use their PTO.
Automatic Accruals: All you need to do is choose your accrual type – be it monthly, semimonthly, biweekly, or weekly and Vacation Tracker automatically calculates and updates leave balances for each employee.
Length of Workday: Instead of the standard fixed 8-hour day, our latest feature lets companies customize their workday duration for each location. This flexibility accommodates varying work hours, ensuring accurate hourly leave tracking.
Wallchart and Calendar Views: Easily plan and visualize time off to stay on top of overlapping PTO and organize schedules accordingly. Managers can ensure that shifts are adequately covered and that there are no staffing gaps during peak times.
Whether you're a small business or a growing company with complex policies, Vacation Tracker ensures seamless, error-free PTO management tailored to your unique needs.
Ready to simplify PTO management for hourly employees? Try Vacation Tracker free for 7 days!
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