Human Resource Blog

How important are accruals and how do they work?

How important are accruals and how do they work? What’s the standard? It’s not a law and it’s a applied benefit that a company gives to their employees to earn, correct? T from Tennessee wants to know.

Hi *T*!! Great to hear from you again!

Accruals are pretty important. They are how most employers track an employees entitlement to benefits such as vacation or sick leave. There is no law that an employer must provide these benefits. But if the employer does provide these benefits, and does not apply the policy consistently to all workers, then the employer may be guilty of illegal discrimination. So having accurate accruals is the best practice.

Under most payroll systems, an employee with one week of vacation accrues about .0192 hours of vacation per hour worked, up to 40 hours per week. Thats about .77 hours per week. Computerized payroll systems handle this automatically.

Many companies recognize a difference between accrued vacation and earned vacation. For example, an employee begins to accrue vacation on the day they are hired, but are not permitted to use it until their 1-year annivarsary. Under this system, the vacation time is accrued but not earned until the annivarsary date. (Some employers refer to earned vacation as *vested* vacation.)

It is also important for the employer to deduct any used vacation or sick time from the accruals so both the employer and employee know how much paid time off the employee has available. Under a union contract or employer policy, a Tennessee employer may be required to pay workers for unused vacation at termination. So having a record of accruals provides a record of payments due.

Does that answer your question? If not, feel free to post another one.