Business Math: Calculating Time Off By Hours Worked

Let’s Talk Business Business Math Business Math: Calculating Time Off By Hours Worked

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    Chelcy
    Keymaster
    There are several ways to calculate time off but only one of them is ideal for employees who work variable schedules. The by hours worked accrual rate ensures that employees only earn time off by the number of hours they actually work. This might amount to earning less than or more than the other rates would provide. This rate is good for part time workers, periodic workers, and it satisfies many state and local sick time requirements.

    Accruals By Hours Worked

    The by hours worked accrual rate is particularly great for employees who work a variable number of hours per year or take periods of unpaid leave. By using this rate, you can have the accrued time off only reflect that time spent at work. Likewise, if your employee puts in extra hours, you might want him to be able to earn 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. Here’s how to do it:

    The Calculation

    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 you can figure out the fraction of an hour that they should earn for each hour they work.

    Let’s say the employee should get 2 weeks, or 80 hours per year. There are 52 weeks in a year but he won’t be working 2 of them so we’ll multiply 40 hours times 50 weeks to get 2000 hours. 2000 hours is how many hours the employee would work if he worked full time and took 2 weeks off (this does not include paid holidays. You might want to subtract those out too).

    Divide 80 by 2000 (max hours to earn per year/hours worked per year) to obtain .04. So for every hour our employee works he should earn .04 hours of time off. (If the employee actually worked full time, he would earn 80 hours of time off. Since the accrual rate by hours worked is usually used for employees who don’t work full time, the employee may never actually accrue that much time off.)

    Once we’ve set this number in the system, our employee will earn appropriate time off regardless of whether he works 50 hours a week or 30.

    Example

    To see this in action, let’s say our employee averages 50 hours a week for the whole year and took 2 weeks off. So, 50 hours times 50 weeks gives us 2500. 2500 multiplied by .04 gives the employee 100 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 60 – not quite a full two weeks.

     

    SOURCE: https://www.timesheets.com/blog/2013/11/calculating-time-off-by-hours-worked/

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