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What is accrued vacation leave?

By Catalogs Editorial Staff

Do you and your employees understand accrued leave?

Do you and your employees understand accrued leave?

Whether summer’s just around the corner, or months away, employees are always looking forward to those long glorious days of vacation. But before they start booking their cruise or making reservations for a long-awaited trip, it’s your job to make sure they understand how to compute accrued vacation leave.

Having a tool to allow employees to see and understand accrued leave will not only make it easier for them to make plans, it will save your HR department, legal department or managers’ time they would have to spend looking up and explaining available leave time over and over again.

Start with the definition

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The first step is making sure everyone understands the concept of accrued vacation leave. So let’s start with a simple definition. 

Accrued vacation leave refers to hours of paid time an employee can use for approved absences from work. The word “accrued” means that the time has added up from pay period to pay period. 

This is the most common way companies award employees vacation time. Some companies do offer employees their entire annual leave balance at the start of the calendar or fiscal year, but this is not typical.

Set up a way to track and share balances with employees

Knowing how much accrued leave is available at any given time allows employees to decide when to request time off, and how many hours they have to use. That allows them to pick and choose which events or trips are reasonable given their vacation hour balance.

Knowing how many hours are accrued is even more important if the company has a “use it or lose it” policy with regard to excess annual leave hours. There’s nothing worse for an employee than coming to the end of the year and realizing that they’ve just lost days worth of leave they didn’t even realize they had earned.

As the employer, knowing how many hours employees have earned is critical for accounting purposes (accrued leave is a liability on the balance sheet in most forms of annual accounting.)  If you have a pay-out on departure policy, and turnover rises, that could mean a large and unexpected expense just when you need to spend money on hiring and training new employees.

Having a good handle on accrued leave is also important when it comes to planning for staff coverage. Suddenly learning that half of your employees have weeks of leave they’re planning on taking can make routine scheduling into a nightmare.

You can invest in a software program to track and report on leave. Or if yours is a small business, you may be able to manage your record keeping with large wall calendars and a well-organized filing system. Make sure employees and managers alike can access and understand the leave balances and vacation request process.
Look to the future leave as well

Most employee vacations are planned well in advance of the actual date, so using a tool that let’s employees to see what their vacation leave balances will be at some date in the future is another critical piece of dealing with leave accrual.

Whether it’s a software package or a simple spreadsheet program, letting employees see future balances now makes their vacation planning easier, and will allow you to plan for staff coverage, schedule major events and even plan for annual report time when those liabilities are so critical.

Define accrued leave and annual vacation leave in your policy manual

The best way to make sure employees understand the concept of leave balances as well as the rest of your vacation policy is to put all of it in writing in your employee handbook. 

Even small businesses should have a written set of policies to cover things like paid leave, attendance, pay, performance reviews and other basic elements of your company. The written policy manual answers employee questions and may protect you from lawsuits in the event of a dispute.


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