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PTO Plan Design and Maintenance

PTO Plan Design and Maintenance

Creating and maintaining a successful PTO program

Paid Time Off (PTO) is one of the most valuable benefits employees consider when choosing their employer. Any employer wanting to attract and retain good employees should have a well defined PTO program.

While offering PTO may seem like simple task, it can be quite complicated. Employers and managers should put a lot of thought into their PTO program.

This guide will help you understand how to leverage a very powerful PTO tracking engine within AdvanStaff’s HR Cloud so you can accurately track PTO hours, save time, elevate employee happiness, and get back to work. As with all AdvanStaff programs, we are here to support you along the way.

An effective PTO program is:

  • easy to understand
  • easy to communicate
  • easy to administer
  • easy to automate

Knowing the terms below will help you understand what info is needed when building a PTO program:

What is a Benefit Accrual?

A Benefit Accrual is any paid leave that the employee receives as a benefit provided by the employer.  How much paid time off an employee receives is determined by each employers’ paid leave policy and is tracked in HRP in an hour(s) format.

What is Vacation?

Vacation is paid leave for time spent away from work by an employee.  Vacation is traditionally used for personal time off such as family activities, extra holiday time, or a short term leave of absence. 

What is Sick Leave?

Sick is paid leave for time spent away from work by an employee.  Sick leave is traditionally used for absences due to illness, medical appointments or a short term leave of absence due to medical conditions.

What is PTO?

PTO stands for personal time off.  PTO is a benefit that replaces the traditional forms of paid leave such as Vacation and Sick into one combined benefit. 

PTO Benefit PlanAlso known as an absence benefit plan.  This determines how much paid time off each employee can accrue.
PTO RegisterWhere the system keeps track of how much time each employee has accrued and taken. These are also called PTO Buckets
PTO ClassUsed to restrict the number of register types that can be assigned to an employee.  This helps to avoid employees being registered in more than one PTO register.  Typically, you should only create one class code for each type (ie – Vacation, Sick, PTO).
PTO Absence CodesAll absences, paid and unpaid are tracked with the PTO Absence Code.  Paid absence codes are associated with a PTO Register; unpaid absence codes are not.
Max Annual Accrual LimitThe maximum amount of PTO hours an employee can earn in one calendar year (based on seniority)
Once the max annual accrual limit is reached, the employee will no longer earn hours in their PTO bucket until the Accrual Anniversary Date is triggered (usually Dec 31st).
Maximum Carry Over BalanceThe maximum amount of PTO an employee can carryover from one year to the next.

This features encourages employees to use PTO throughout the year. A total use-it-or-lose it policy could result in a large amount of absence in December.
Carry-over ExpirationThe amount of time the carry-over hours expire.

Many plans do not require carry-over hours to expire, but they may cap the maximum PTO hours that a bucket can hold or the Max Accrual Limit.
Max Total Accrual LimitThe grand total any PTO bucket can hold.

This feature prevents employees from accruing an enormous amount of PTO which could cause hardship on the business later

Type of Paid Leave

Preferred Option: One combined benefit plan

  • PTO: Paid Time Off (Personal Time Off)
    • A blended benefit plan that includes both Vacation and Sick time all in one bucket / plan.
    • PTO is also generically used as any type of time-off plan.
    • Employee accrue PTO in a plan “bucket”.
    • Pay codes used:
      • PERSTIME – Paid Personal Time

PTO is the preferred method tracking method for tracking time off

  • It requires less maintenance for the Client to administer
    • only tracking one balance instead of two
  • It requires less maintenance for AdvanStaff to administer and audit
    • employees only need to be enrolled in one benefit plan;
    • the payroll processor keys in hours taken by using any leave pay code assigned in the setup.
    • Simple processes lead to less errors and minimize the need for audits and balance adjustments. Depending on the complexity of the audit, audit time may require a billable service to the client. The goal is to eliminate billable services in as many cases as possible.
  • Employees can utilize their leave as needed
    • i.e. an employee who experiences health problems can “forfeit” their vacation time in lieu of sick.

Other Options: separate benefit plans for VACATION & SICK

    • Paid leave for time spent away from work by an employee. 
    • Traditionally used for personal time off such as family activities, extra holiday time, or a short term leave of absence.
    • Pay codes used:
      • Vacation – Vacation
      • VACSUPP2 – Vacation Supplemental 2 (will issue a separate check)
  • SICK
    • Paid leave for time spent away from work by an employee. 
    • Traditionally used for absences due to illness, medical appointments or a short term leave of absence due to medical conditions.
    • Pay codes used:
      • SICK – Paid Sick Leave
      • SICK-SUPP – Paid Sick Leave Supp (will issue a separate check)

Tracking HOLIDAY Balances

HOLDAY balances are not tracked for the following reasons:

  • Company holidays are not accrued and are pre-determined on a client level
  • Employees do not need to request HOLIDAY as time off

For these reasons, an employee’s company holiday “balance” will always zero out at the end of the calendar year.  In order for employees to be compensated for company holidays, they must be reported as holiday pay on the timesheet.

Seniority Tier – A seniority tier is a level at which an employee will receive an increase in benefit hours as a reward for length of service with an employer.  This is referred to in HRP as a Benefit Level.

Status Tier – A status tier is a different set of accrual rules for different types of employees.   Status Tiers are referred to in HRP as a Benefit Plan.  Common examples of status tiers are:

  • Full time vs. Part time
  • Exempt vs. Non-exempt
  • Office Staff vs. Field Staff
  • Staff vs. Management

Types of Hours

Carryover Hours – Carryover hours are the number of unused benefit hours that may be carried over from one 12 month period to the next.

Balance Hours – Balance hours are the result of adding carryover and current year accrued hours and then subtracting out any taken (paid) hours. 

Negative Balance Hours – Negative balance hours are the result of an employee taking more leave hours then they have available.

Accrual Anniversary Date: The date the PTO accrual engine uses to determine the employee seniority level and which accrual rate to apply to hours paid.

  • Seniority calculations are based on the employees hire date.
  • Each employee’s year-end will vary depending on the employee’s seniority date located in the employee’s master file.
    • The accrual table is customizable based on the number of months of service. These date ranges are called “bands”
    • An accrual band has an accrual “rate” assigned.
    • The accrual rate is then multiplied by each hours paid.

      For example:  Mary was hired on March 1, 2005.  Joe was hired on September 8, 2005.  Mary’s year end will be on March 1, 2006.  Joe’s year-end will be on September 8, 2005.

Carryover Date: The trigger date that a plan year resets. This is always Dec 31.

  • The following adjustments are made employee PTO buckets at the end of each plan year.
    • The annual PTO accrual maximum resets allowing employees who have reached their annual accrual limit to start accruing PTO hours again.
    • Year-end PTO balance carry-over limit to next year is enforced and applied to balance

Carryover Policy

A carryover policy is a paid leave policy that allows for unused benefit hours to be carried over from one 12 month period to the next.

“Use It-or-Lose It” Policy – A “use it-or-lose it” policy is a paid leave policy that does not allow for carryover of unused hours from one 12 month period to the next.

A common request for clients who do not allow for carryover will be a pay out at the end of their benefit year.  However, this is very difficult for our system to handle as hours must be posted prior to the reset date or it will throw the employee into a negative balance.  Please avoid this situation as much as possible.

Pay Out Policy – This refers to the employer compensating an employee for any remaining balance either at time of employment separation or at a year end reset.

Reset – The “reset” are the sequence of events that occur on a client and employee level when a year end basis is reached.  The sequence of events will vary depending if the policy rules setup does or does not allow for carryover hours.

If no carryover is allowed, the system will do the following:

  1. Zero out the accrued hours
  2. Zero out the taken hours
  3. Zero out the balance hours
  4. Starts accruing hours for the next benefit year

If the client elects to allow carryover hours, the system will do the following:

  1. Move the accrued hours to the carryover hours bucket
  2. Clear out the taken hours
  3. Update the balance hours
  4. Start accruing hours for the next benefit year

Building Your PTO Plan

To build out your PTO, you will need to outline the basic classes, benefit features, and auto-enrollment rules you want for each plan.

Getting started on the right track is the first, and perhaps most important step, when building a successful PTO program.

Keeping PTO plan designs simple, definable, logical, and easy to understand is the only recipe for success.

It would be convenient to assume that the PTO platform can accomodate any design imaginable. However, that would neither accurate nor wise. While the AdvanStaff HRIS platform is EXTREMELY flexible, keeping plan designs reasonably simple will improve your operation, save time, minimize audits, manual adjustments and provide the stability that your managers and employees deserve.

Before going live with PTO plan, we need to ensure it can be successful on ALL levels; thus review and approval from the various teams at AdvanStaff HR is necessary.

Is it better to start with a new plan(s), or to adapt an existing plan(s) to meet requirements?

First you will need to decide how many plans are required to accomplish your goals.

Questions to answer:

Q. Do you want one PTO plan to cover all leave, or do you need separate holiday and sick time PTO buckets?

Q. Can one plan cover all employees or will I need multiple plans for:

  • Executives or managers
  • Part-time or Full-time employees
  • State mandated plans PTO plans

All plans can have separate accrual levels based on seniority.

Benchmark plans are base plans guidelines created by the AdvanStaff HR team.

Each benchmark plan includes recommended logical settings to simplify configuration. Think of it as a head-start to get you on your way to defining a successful PTO program. Once basic configuration options are selected, the accrual tables can be added, an example of these are accrual rates and seniority bands.

Basic Settings

  • Carryover Date: Must be calendar year-end only
  • Accrual Anniversary Date: Generally based on hiring anniversary date

Client Choice Settings

  • Select accrual method
    • per hour worked, per pay period, per month, or annual lump sum
  • Maximum carry-over balance
  • Max accrual limit
  • Allow negative hours?
  • Display balance on the employees pay voucher?
  • Display balances in the employee self-service portal?
  • Base seniority dates on the employees original hire date, or last re-hire date?

Following are the recommended accrual methods.

A policy based on HOURS PAID per pay period means an employer assumes a full-time employee works (or is paid) 2080 hours per year (40 hours x 52 weeks = 2080 hours). The employer then determines the target number of PTO days to offer per year, which will in turn determine the PTO accrual rate per hour paid.


of Service
PTO days
(hours) per year
FormulaAccrual rate per hour paid
0-27 days
(56 hours)
56 PTO hours
— divided by —
2080 hours paid
.0270 PTO hours earned per hour paid
3-514 days
(112 hours)
112 PTO hours
— divided by —
2080 hours paid
.0539 PTO hours earned per hour paid
6+21 days
(168 hours)
168 PTO hours
— divided by —
2080 hours paid
.0807 PTO hours earned per hour paid

In the example above, an employee in their first two years of employment is expected to earn roughly 1.08 PTO hours per week of employment. (40 hours x .0270 = 1.08)

In the example above, an employee in their first 3rd to 5th years of employment is expected to earn roughly 2.516 PTO hours per week of employment. (40 hours x .0270 = 2.516)

In the example above, an employee in their first two years of employment is expected to earn roughly 3.228 PTO hours per week of employment. (40 hours x .0270 = 3.228)

These amounts would be added to the employees PTO register (bucket) when payroll is posted each week.


Fluctuating employee work hours?

  • Because hourly employees almost certainly have fluctuating hours, they will not get their maximum annual PTO own if they are paid less that 2080 in the year.

Keeps payroll liability for PTO to a minimum.

  • While some employee may not reach their maximum, the ones that work overtime will be capped at the maximum annual accrual amount.

Reconciliation and administration?

  • Because the plan design creates variable accrual balances by employee, it is more difficult to audit and reconcile. Auditing and adjustments may require assistance from they AdvanStaff HR technical team, although the Report Center pre-built reports can be very helpful.

Perfect for companies who maybe subject to mandated leave

  • An example is NV mandatory paid time off.

What is included in hours paid and why

Pay codes included in HOURS PAID are

  • Hours worked
  • PTO paid
  • Holiday paid

Many employers struggle with the concept that PTO hours accrue on PTO and paid vacation time taken.

However, once you really think about the logic and intention of this type of plan, then it makes perfect sense. The design is to award the employee XX amount of PTO hours per year based on 2080 hours PAID, not hours worked. Full time employees are given paid holiday hours and they will use PTO hours throughout the year. Their total hours worked + paid holidays + PTO = 2080 hours per year.

2080 annual paid hours are expected, thus the employee should accrue PTO on all hours paid so the target PTO award benefit can be achieved.

The employer may prefer awarding PTO on a flat per amount basis.

These types of plans award PTO based on any of the following events:

  • flat amount per pay period
  • flat amount per month (for semi-monthly pay cycles)
  • flat amount per year (at calendar reset)
  • flat amount per year (at hiring anniversary)


Good for consistent work hours (i.e. always 40 hours with minimal overtime)

  • Flat accrual is a basic design plan. It generally works better for stable employees with high trust and low turnover.

Easy to reconcile and administer

  • Because accrual amounts are flat, the registers are easy to audit and easy to administer.

Once the number of plans required and the accrual methods are known, the next step is to define the the auto enrollment rules so the program can run on auto pilot.

You can auto-enroll based on any number or combination of factors:

  • Create a benefit group (recommended)
    • Define a group and assign members to the group upon hire
    • Can have auto enrollment based on top-level factors
  • Custom build a program based on one or many of the following (has limitations):
    • Employee Type (FT or PT)
    • Pay Method (hourly vs salary)
    • Position Class (executive, management, employee)
    • Location (different by state, worksite location, etc)
    • Home Division
    • Holiday, Sick time, or PTO?

Ways to automate enrollment

Auto-enrollment processes should be discussed with AdvanStaff HR’s PTO specialist.

Once the above steps are complete, we are ready for final approval and to go live!

Steps for PTO plan approval:

  • Review plan by HR
  • Review plan by HRIS IT (our system people, they think like computers do.)
  • Review auto enrollment rules
  • Review purpose of the current plan, do the approved plan accomplish those purposes?
  • Build employee communications
  • Client sign-off
  • Employee enrollment

Once a plan can pass all of the above steps, it is ready to go!

Plan administration, AdvanStaff HR or in-house?

Will the PTO program put in place be administered by AdvanStaff HR / HRIS or will the client self administer the program? You can choose!

In order to maintain efficiencies and data consistency, AdvanStaff recommends clients follow AdvanStaff HR guided programs. We’ve been operating PTO plans for over 30 years for thousands of plans each year, we know what makes a plan successful (and what makes a plan fail.) AdvanStaff HR will collaborate with you to build a successful program.

The table below outlines whether or not a program is administered by AdvanStaff HR or by the client.

Advanstaff HR Administered Plans

  • Must follow suggested design rules (see benchmark plans below.)
  • Must pass approval from HR and HR-IT for:
    • compliance,
    • logic & system compatibility,
    • consistency,
  • May include plan maintenance & support (audits, adjustments, etc) if issues are system related.
  • Most recommended option!

Client Self-Administered Plans

  • Open plan structure design, more flexibility. You can do whatever you want.
  • HRIS approval not required, however client might be required to track PTO outside of the HRIS platform if the plan design is outside the scope of logic or capabilities of of the HRIS.
  • Clients are required to adjust PTO database records manually through the manager/admin portal.
  • PTO audits and adjustments requiring AdvanStaff HR-IT staff are often time consuming and complex and require an hourly billable service to correct.
View Only
Can design and administer plansView OnlyView OnlyLimitedFULL
PTO Setup
PTO Classes XView OnlyN/AX
PTO Benefit PlansXView OnlyN/AX
PTO Register Types XView OnlyN/AX
PTO Absence CodesXView OnlyN/AX
PTO Auto Enroll RulesXView OnlyN/AX
PTO Management Access (via manager portal using “Work Centers”)
Leave Request Management
PTO Adjustments and Maintenance
PTO Plan Setup and Enrollment
PTO Reporting
All Employee Related Functionality
Mass import new initial entries and adjustments
Employee level enrollment (one by one initial entry)
View / Edit PTO Auto Register Enrollment
– can initiate mass enrollment according to auto enroll rules
View / Edit Employee Register
– can make adjustment entries and delete registers
Employee PTO Register Inquiry (What is this?)X
Employee Voucher PTO Visibility Control
– can control visibility of employee accrual on the
employee paycheck
Employee Absence
Leave Module Functionality
Planned Time Off Requests
Manage Leave Request
Access PTO Approval Reports
PTO Reports
Employee PTO Detail Report (considered an HR report)
PTO Hours Taken Report (considered an HR report)
PTO Approval Report (considered an HR report)
Pay Period PTO Report (considered a payroll report)
Employee PTO Summary (considered a payroll report)
Employee PTO Accruals Report (considered a payroll report)
Eligible PTO Report (considered a payroll report)

Frequently Asked Questions

How are accrual rates calculated?

An accrual rate is always referred to as hours.  The rate is calculated based upon the total number of hours that can be accrued divided by the frequency of the accrual.

An example of a FLAT RATE per pay period accrual plan is as follows:

A semi-monthly employer would like their employees to accrue every pay period for a total of 40 hours of PTO per year.

To calculate the rate, the formula would be:

  12 (months per year) x 2 (pay periods per month) = 24 pay periods per year

  40 (hours of PTO) ÷ 24 (pay periods) = 1.6667 hours per pay period.

Sometimes an employer may refer to the accruals in days or weeks.  For a full-time employee, one day is equal to 8 hours.  One week is equal to 5 days or 40 hours. 

An example of a FLAT RATE per hour worked plan is as follows:

A bi-weekly employer would like their employees to accrue PTO on every hour PAID for a total of 80 PTO hours per year for a FULL-TIME employee.

To calculate the rate, the formula would be:

  52 (weeks year) x 40 ( hours per week) = 2080 hours pad per year

  80 (hours of PTO) ÷ 2080 (annual hours paid per year) = 0.03845 hours per per hours paid.

This model uses hours PAID. An employee will accrue PTO on paid holidays, or any paid PTO program so the expected hours are equal to 2080 hours per year.

Remember to convert the weeks and days into hours before attempting to calculate the hourly rate.

  1. How are benefit hours accrued ? Based upon the client’s payroll frequency.
    1. Every pay period.
    2. Weekly
    3. Bi-Weekly
    4. Semi-Monthly
  2. Monthly
  3. A lump sum received on anniversary
  4. Based on hours paid in a pay period

What types of benefit tracking does AdvanStaff offer?

  1. PTO
  2. Vacation & Sick Leave

Employers must choose one type of plan setup or the other, both benefit types are not recommended.