Time off policy renewals are impacted by the policy's accrual method, policy cycle date, and any carry over or max balance rules. And based on those rules, the accrual amount that is granted on the policy cycle date can also depend on the PTO balances that are marked as paid in the company pay period schedule.
Marking a pay period as paid
PTO is connected to payroll because employees are paid for these hours. To maintain accurate records and to keep PTO renewals accurate it is necessary to know if the time off requested was actually paid out or not.
For companies using Eddy payroll, the payroll is automatically marked as paid when the system sends paychecks to employees.
For companies not using Eddy payroll, the pay period must be manually marked as paid once your 3rd party payroll system has paid employees.
Accrual Method
When a PTO policy is created you specify an accrual method. This specifies the frequency (rate), and amount of time off hours employees will accrue in this time off policy. For Example:
If you put “40” in the “Accrual amount” section, and then select “Yearly on policy cycle date” in the “Accrual frequency” dropdown, employees will accrue 40 hours each year on the policy cycle date, which could be a specific calendar date, or it can be set to the person's work anniversary.
Policy cycle
The policy cycle date defines which day of the year will be used for: granting annual accruals, capping maximum annual accruals, and for limiting balances for annual carry-over rules.
Carry Over
You can choose to set a max limit on the number of time off hours an employee can carry over from year to year. When the policy cycle renews, anything over this limit will be taken away from the employee.
Max Balance
You can choose to set a max limit to the total number of time off hours an employee can earn. Once they reach this max balance, they no longer earn new time off hours, until they use some hours and drop below the limit.
Renewal FAQs
Q: When a time off policy renews annually does the carry over and max balances look at the available balance or the current balance? In other words, if an employee requests time off in August for a date in December but the policy cycle date renews in October, are those hours accounted for when the policy renews or does the employee get to use them?
A: We only offset PTO that is in the past but hasn’t been marked as paid when the renewal happens. So if they are taking 16 hours in Dec and the Max is 80, at renewal in Oct they will get 80 (assuming they have more than 80).