How Does PTO Work for Hourly Employees?

In this article we’re going to explain how PTO works for hourly employees, and everything else you need to know about how paid time off works for this section of your workforce.

Calculating PTO is quite straightforward for salaried employees, but a little more confusing if employees are paid by the hour. We’ll look to clear up any confusion in this post and help you smooth out any kinks in your leave management workflow.

PTO for Hourly Employees – The Basics

Here are the quick hits on how hourly PTO works, which we’ll expand on in more detail later on.

• Hourly employees generally receive PTO just the same as salaried employees do.
• PTO is provided in units of hours, rather than days.
• Hourly PTO can accrue at the same frequency as with salaried employees, but accrues relative to the employee’s hours worked.
• Non-vacation types of leave, such as sick leave, bereavement or parental leave, are generally provided in days, but are converted to the hourly equivalent for payroll.

Defining PTO

Technically, paid time off (PTO) is any kind of leave of absence when the employee is paid as they normally would be.

So PTO covers everything from annual leave and vacation, to paid public holidays, sick leave, parental leave and every other type of leave that’s paid.

However, PTO is often used interchangeably with annual leave/vacation. For the purposes of this post, we’ll be using this meaning of PTO most of the time, except when we go into other types of PTO later on in the article.

Diving Deeper into PTO for Hourly Employees

Now it’s time to get into specifics and make sure you really understand how PTO works for hourly employees. If you have team members paid by the hour, and you provide them with PTO (as you should), you’re going to want to read this in order to minimize any headaches or confusion trying to manage leave in your company.

Do Hourly Employees Get Paid Time Off?

Hourly employees generally get the same benefits salaried employees do, including paid time off.

Hourly vs salary is not really a distinction between job roles, it’s a difference in how employees get paid. Hourly employees may end up working the same full-time schedule a salaried worker does, and thus has the same need for PTO to get a break from work every so often.

If hourly employees don’t get paid time off, it’s usually because of other reasons, such as being casual or part-time employees. 

If some employees don’t receive PTO, it should be clearly stated in employment contracts. It’s also important that this is not for discriminatory reasons, and that you still follow all relevant local laws regarding PTO.

What Happens to Unused PTO for Hourly Employees?

Unused PTO for hourly employees follows the same rules set out in your PTO policy for salaried workers. If unused PTO at the end of the year carries over to the following year, it should do so for all employees.

Any paid vacation days that are not used when an employee leaves their job should be paid out according to any relevant laws and your company policy, the same as anyone else.

Learn about each US state’s PTO payout laws, along with the legality of Use It or Lose It policies, in this post.

How Does Vacation Time Accrue for Hourly Employees?

PTO accrual may work differently for hourly employees than for others.

The main difference is that, in most cases, hourly employees’ PTO is calculated in hours, not days.

The accrual rate and frequency may be the same, but instead of earning 1 day for every month worked (for example), an hourly employee would earn 8 hours for every month worked (or the equivalent of a day’s work).

Hourly workers will usually officially accrue PTO with each pay period, which is also the most common way for vacation accrual to work for salaried employees.

How to Calculate Hourly PTO

Calculating hourly PTO works a little differently, even if the accrual rate and frequency is the same as for salaried employees.

The accrual rate will be relative to the number of hours actually worked. Let’s use an example.

Assume employees are paid and earn PTO each week. Full-time employees get 13 days of PTO per year, which works out to 0.25 days per week.

For salaried employees, it’s simple – each week 0.25 vacation days are added to their balance.

Hourly employees actually earn 0.00625 vacation days per hour worked. If an employee works a full 40 hour week, they earn 0.25 vacation days, the same as a salaried employee.

However, if they work more or less in a week, their accrued PTO changes. If an employee comes in on their day off and logs a 48 hour week, for example, they’ll earn 0.3 vacation days that week instead.

For non-accrued PTO (aka lump-sum PTO – when all an employees’ PTO is available at once, not steadily earned over time), it should work almost exactly the same as for salaried employees, with the only difference being PTO expressed as hours, not days.

If you want to calculate PTO accruals for hourly employees, use our free PTO Accrual Calculator to do it, and save yourself a ton of time and stress in the process.

How Does Vacation Pay Work for Hourly Employees?

You’ll calculate vacation pay at the employee’s regular working rate at the time of payout.

So if someone takes 40 hours of PTO, and at that time they get paid $20 per hour, they’ll be paid $800 (40 hours at $20 per).

If someone receives a pay rise just before taking vacation time, their vacation pay is usually paid out at the new rate (unless otherwise stated in the employee handbook).

How Other Leave Types Work for Hourly Employees

For leave types that don’t accrue over time, like sick leave (in most cases), maternity leave and paternity leave, hourly employees usually just receive the same amount of leave as other employees, expressed in days.

When these types of leave are used, the employee is paid for the equivalent of a day’s work, based on their regular working schedule at the time.

Let’s use a couple of examples.

1. Sick Leave

An employee (paid hourly) gets 15 days of paid sick leave per year. They work an 8 hour day, 5 days a week (Mon-Fri).

The employee is sick on Thursday and Friday and takes sick leave. In their next pay, they receive 16 hours paid out as sick leave, and two days are deducted from their sick day balance.

2. Parental Leave

The same employee can take 6 months of paid parental leave. Their child is born and they go on leave. For the 6 months, they’re paid their regular pay based on their regular working schedule of 40 hours per week.

3. Paid Holidays

Let’s say you pay employees a regular day’s pay for public holidays that fall on working days.

Local independence day falls on a Monday, and an hourly employee usually works an 8 hour day on Mondays. This employee will receive 8 hours holiday pay in their next pay.

Another employee usually works a shorter shift on that day, only 5 hours. This employee earns 5 hours holiday pay for that day.

Why Accrued PTO Works Better with Hourly Employees

PTO accruals are a great fit with hourly employees, because these people usually work irregular schedules.

The idea of getting paid hourly is to match how much someone gets paid with the time they actually work. So if someone works 35 hours one week and 47 hours the next, they get compensated accordingly.

Accrued PTO achieves the same goal. This matches their benefits to the work they put in, meaning those who go above and beyond and work longer hours get more paid vacation time as a reward.

Final Thoughts on PTO for Hourly Employees

If you’re running a business, it’s important to give your employees paid time off. That includes all workers, whether they’re paid by the hour or paid a regular salary.

Paid vacation time is a key part of ensuring your team members maintain a positive work-life balance, avoid burning out, and remain engaged and motivated in their job.

To maintain a high-performing team, make sure you have a good understanding how how PTO works for those who are paid by the hour, or who have irregular schedules, and set up systems that allow you to manage and track vacation time smoothly, without errors and without a excessive time investment.