Employees can earn time off according to different methods, which are normally specified in an employee handbook. Vacation can be accrued by:
- Hours worked
- Twice per month
- Every two weeks
- Once per month
Before an employer starts calculating prorated vacation time, he or she should know how many hours or days of vacation time he or she wishes to grant employees. Most companies choose to give employees vacation time based on yearly accrual because the calculations are simpler. For example, if an employee takes two days off for a trip, those two days are subtracted from the total for the year.
Some employers choose to have employees accrue vacation time based on hours worked. This method of calculating is best for part-time employees with non-standard schedules. If vacation time is calculated by hours worked, then full-time employees receive more vacation time than part-time employees. This also means that those who work overtime can be rewarded with more vacation days, because they work more hours.
4. Prorated Vacation – Full-Time Employees
In order to calculate vacation days for full-time employees, the following simple calculation can be performed:
- Take the number of days that an employee works during a set period of time.
- Divide that number by the total number of days in that period.
- Multiple that number by the employee’s accrual rate.
If the accrual rate is yearly, as is the case with most companies, then the employer can divide the number of days worked by the total number of days in the year, then multiply that number by the accrual rate.
Example: Susan works at Office Depot, where employees receive ten days of vacation per year. Susan was hired on April 1, and by the end of the year, she will have worked 274 days. In order to calculate how many vacation days she receives, we need to divides the number of days worked (274) by the total number of days in the year (365). The answer is .75. We now multiply .75 by the number of accrual days, which is 10 at Office Depot. Susan should receive 7.5 days of vacation.
5. Prorated Vacation – Part-time Employees
Calculating prorated vacation for part-time employees is a little more difficult. Because full days are not worked, hours should be used to calculate time off. We start by dividing the average hours a part-time employee works by 40 (the number of hours a full-time employee works). Then we multiple that number by the number of vacation days that full-time employees receive.
Example: Calvin works at 7-Eleven as a part-time employee. At 7-Eleven, full-time employees receive 10 days of vacation leave each year. Calvin works 20 hours per week. To determine Calvin’s earned vacation time, we divide the number of hours he works (20) by the number of hours full-time employees work (40). The resultant number is 0.5. Now, we multiple that number by the amount of vacation full-time employees receive. However, because we’re talking in hours, we need to convert vacation days to hours. Ten days of vacation equals 80 hours of vacation. So, 0.5 times 80 equals 40. Calvin should receive forty hours, or five days, of vacation.
6. Vacation Payout for Terminated Employees
If an employee quits or is fired, then he or she must be paid for any earned vacation days. Even if an employee did not use some or all of his or her vacation time, he or she is entitled to be compensated for that time. Those days or hours should be paid in the final paycheck.
Example: Polly is the manager of a soap company where employees receive ten days of vacation time each year. She fires her employee Gerard for taking bites of the soap samples. Gerard still has five days of unused vacation time. Polly is so mad at Gerard that she chooses not to pay him for the vacation days that he did not use. She tells him that he forfeited those days when he chose to eat the soap. Gerard hires a lawyer and successfully sues Polly for denied wages. He has the right to be paid for the unused vacation days.