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How to Calculate Paid Time Off PTO Accrual Rates and PTO Banks - YouTube
Channel: Online Employee Time Clock by OnTheClock
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Hi thanks for checking out this video I'm Nicole聽
the COO of ontheclock.com and i wanted to get a聽聽
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video together in relation to how you calculate聽
pto accruals and pto banks for your employees聽聽
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because we get a ton of questions through our聽
support channel all the time about this topic聽聽
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and it can be labor intensive and error聽
pro so we wrote a blog article about it聽聽
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which is really helpful it does some working聽
examples for the accrual rate and then also that聽聽
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bank calculation but what i want to do today is聽
scan through that show you that article real quick聽聽
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and then also open the free tool that we have聽
where you can just plug your numbers in and walk聽聽
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through that and how that works because it's going聽
to be much faster and much less prone to errors聽聽
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for you so i'm going to share my screen and show聽
you how i get to this article i go to our site on聽聽
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theclock.com and click on more at the top and then聽
i go down to the otc blog and i'm going to search聽聽
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for the how to calculate pto paid time off rules聽
and bank balances article so let's start with pto聽聽
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and what is that so for the purpose of the article聽
in the video we use the abbreviation of pto聽聽
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and that includes any vacation days personal聽
days six days basically anything that you any聽聽
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days that you're paying employees to be off fall聽
under that bucket and so let's go down here now to聽聽
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pto accrual so this first section is going to talk聽
about how you get an approval rate and that is the聽聽
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time off that the employee employee is earning as聽
as the work year progresses so the most commonly聽聽
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used accrual rules are accruex hours per regular聽
hour works a crew x percent of regular hours聽聽
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worked or the most straightforward one is accrue聽
x hours per pay period so as we scroll through聽聽
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here you're going to see the working examples each聽
rule is spelled out for the accrual rate and then聽聽
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when we get down here we're going to be talking聽
about how you figure the bank and there's also聽聽
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examples there listed in the article which are聽
really handy i highly recommend you check them out聽聽
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but for the rest of this video here i want to聽
talk about the free pto tool near the end of聽聽
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the article so you just click on this link here聽
under free pto calculating tool it's in orange聽聽
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the free pto tool and i'm going to switch over聽
to that spreadsheet now and go through that so聽聽
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the spreadsheet is set up similar to the article聽
where we have step one is to find your full range聽聽
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and on tab two it's step two and it's to get your聽
total accrued pto thing so there's some notes and聽聽
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instructions at the top here so let's get started聽
going through those these yellow cells on both聽聽
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tabs are going to be the ones that you can adjust聽
to fit your business needs in your pto policy聽聽
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and number two here examples one and two these聽
are both figuring the rate so they're pretty聽聽
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much calculated the same but i wanted to list them聽
out separately just depends on which rule you use聽聽
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which would be which section you're going聽
to use to calculate but you will notice聽聽
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quite a bit of similarity in number three uh note聽
that depending on how weekends fall in leap year聽聽
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there's some years that have 260 typical聽
work days all the way up to 262 work days聽聽
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so you're going to see slight variances depending聽
on the year that you're looking at and especially聽聽
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if you're outside of this tool and you're just聽
using an average year you might use 260 let's say聽聽
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so that will show like i said a very聽
slight variation so just something to note聽聽
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um this tool assists with monday聽
through friday work weeks so聽聽
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you may count the days on the calendar and enter聽
in column c if you have a work week that falls聽聽
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outside of monday through friday for example聽
but if you're monday through friday this tool聽聽
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will work for you number four is if you would聽
like the holidays to count towards the april聽聽
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you're going to want to remove these from the聽
list in column i and j so this would be done by聽聽
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just highlighting and deleting and as you can see聽
the numbers over here are changing when we do that聽聽
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the reason we have these holidays here is because聽
we are making the assumption that when you set聽聽
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your rule to you know approve x hours per regular聽
hour worked you truly want regular hour worked聽聽
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and you don't want to count holidays in them so聽
it really depends on how your policy works but聽聽
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that's that's the reason for that so number five聽
holidays are only required for example one and two聽聽
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and holidays have to fall within the year that聽
you are entering in column a and b so if we go聽聽
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over here to january 1st to december 31st you're聽
going to notice that they're listed as 2021.聽聽
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as are these holidays here and so if we went聽
over here and put in um a holiday from 2022聽聽
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you're gonna see that nothing changes and that's聽
because this year has to match these years here聽聽
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and one other thing to note about holidays is if聽
you put in a holiday that is on a weekend it's not聽聽
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going to be subtracted because this formula over聽
here is already subtracting events so you need to聽聽
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make sure that you put the holiday date in here of聽
the day observed so for 2021 you're gonna notice聽聽
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that we've got 12 23 and 12 24 we wanted to聽
adjust those because the holidays happen to聽聽
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fall on a weekend this year so that's just one聽
other important note to make sure that this works聽聽
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so let's go back to our example so example number聽
one is going to be accrue x hours for regular聽聽
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hours so we get started here with entering聽
the things that make sense for your business聽聽
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so let's say you're giving the employee 40 hours聽
per year for pto that came from your policy聽聽
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on average the employee works 40 hours in a week聽
so we put 40 and on average they work five days聽聽
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per week so we put five the start date and end聽
date here could be anything that you want it to聽聽
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be this is a uh just a calendar year but it could聽
be the employee's anniversary date whatever makes聽聽
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sense for your business but in the example of聽
using this from january to december it's just聽聽
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a little bit more straightforward and so this聽
handy formula here is this equals net work days聽聽
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the spreadsheet is able to figure out how many聽
days were could be worked in a period of time聽聽
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monday through friday so how many聽
monday through fridays are occurring聽聽
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so it's excluding weekend so all you do is you聽
pick the first date the end date and then you're聽聽
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going to pick the range of dates that you want聽
removed which was going back to our holiday list聽聽
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where we're taking out those six so we get the聽
dates available to work minus the holidays is 255.聽聽
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so our accrual rate per hour worked ends up being聽
0.20 point sorry 0.020 very important to get that聽聽
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correct and as you notice even though they're聽
zeros here we still kept the four decimal points聽聽
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and i highly recommend that as well a system like聽
on the clock is going to use those four decimal聽聽
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points you're going to need them anyway but the聽
reason for that is the high level of accuracy聽聽
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needed when you're talking about this topic so聽
i recommend you don't round up or down on this聽聽
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so to get our accrual rate per hour worked we took聽
cell e in column g and we divided that out so we聽聽
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took e 15 here which is our uh paid time off given聽
for the year and we divided it by g 19 which is聽聽
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our regular hours with pto excluded here so this聽
is how we got our rate now if you look over here聽聽
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to get these figures we took um we wanted to get聽
our average hours per birthday so we just divided聽聽
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the 40 by five to get eight and we wanted to know聽
the regular hours expected to work for the year聽聽
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so we took c times e which is the dates available聽
times the workday hours per day on average and聽聽
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the regular hours that a person could work for聽
that year is 2040. but then you also needed to聽聽
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subtract the pto from that because again we're聽
looking to make sure that we're only tracking聽聽
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per our work so the end result here with聽
this point zero two 0 0 is that we looked at聽聽
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the maximum days amount possible to be worked聽
for the year and we subtracted our holidays聽聽
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and we subtracted ptos pto from it and then聽
divided it out to get our answer so example聽聽
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two is very similar we're plugging in the same聽
type of thing where you're giving the pto hours聽聽
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the employees um hours worked per week and then聽
their work days per week and we've got that start聽聽
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and end date again and we're doing the network聽
phase where we're looking at start date and end聽聽
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date how many mondays through fridays are in there聽
and we're subtracting those holidays so again聽聽
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we over here have some additional calculations聽
where we're looking at the regular hours worked聽聽
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and then we're subtracting the pto so聽
that we can get to our accrual percentage聽聽
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that excludes pto and holidays and only looks at聽
what you're giving in pto for every hour worked聽聽
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whether it is an hour or whether it's the percent聽
so example three here is going to be a through x聽聽
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hours per p period so the only thing you really聽
need to know for this one is how much time off聽聽
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you're giving the employee again it's much more聽
straightforward that's 40 hours in our example and聽聽
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you enter your start and end dates because what聽
we want to do is divide um the 40 hours by the pay聽聽
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period here so we're going to do the 40 divided聽
by how many pay periods you have and that's how聽聽
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you get your roll right here so again these聽
four digits and decimals highly recognize that聽聽
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so that's how you easily get in orange here your聽
full percentage is or your full rate um it's much聽聽
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easier to just plug these figures in and then聽
you don't have to worry about the math so let's聽聽
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move over to step two which is to calculate the聽
total approved pto bank so some of these cells聽聽
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here do pull from the approval rate because this聽
is generally the first step but some of these聽聽
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cells you can move around or not move around聽
but you can change if you'd like because you聽聽
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may have already figured this and you may only be聽
using this spreadsheet to get an accrued pto bank聽聽
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but there's a couple notes here so again just like聽
the first one the yellow cells are the ones that聽聽
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you're going to be able to adjust with information聽
that's relevant to your policy or to your business聽聽
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and number two we're entering the聽
start and end date of the pay period聽聽
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um so um that that's going to come from聽
that previous sheet because we want to use聽聽
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that rate already figured unless you already聽
have that so number three the approval rate is聽聽
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pulling from the ferrari tab so you can adjust聽
that so that would be this one right here so if聽聽
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you were like you know what i already know that聽
it's 0.4 you can adjust that no problem note聽聽
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that on a number four here depending on how聽
weekends fall leap year again some years are going聽聽
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to have 260 up to 260 days so there's going to be聽
a slight variance if you calculate outside of the聽聽
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spreadsheet and just use a general average for how聽
many days are in a year number five an example in聽聽
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one and two the average hours worked per day could聽
be left blank because that's really just figuring聽聽
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how many um pto hours are in the bank in terms聽
of days so let's say we got rid of that here this聽聽
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just wouldn't work then and you would just have聽
your answer in hours but if you want it by days聽聽
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you can you can put in that average and聽
then number six this is going to be your聽聽
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average or your answer again i should聽
say in orange just like on the first step聽聽
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so let's walk through this here example one聽
is accruing x hours per regular hour works聽聽
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so on average they work eight hours a day and聽
this particular employee has used two hours of pto聽聽
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in this time range so we went to the time cards聽
if you have a system like on the clock it works聽聽
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really easy it's really smooth to get the total聽
hours worked but if you don't you might have to聽聽
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do some manual calculations here so what we want聽
to do is um look at the total hours that they've聽聽
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worked from the time cards so this is a little bit聽
different than this tab was where we were putting聽聽
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in a start and end date the reason we use the聽
start and end date is so we can get an actual rate聽聽
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but at this point we're using that accrual rate聽
to calculate our total here but we need to look聽聽
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at the hours that the employee has actually worked聽
so far so that's why there's a difference there聽聽
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so we got these hours let's say from our time聽
cards let's say we went into on the clock we聽聽
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looked at time cards we got our totals of 160.聽
so the accrual rate comes over from that tab and聽聽
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in order to get the answer here we're going聽
to take the total hours work from time cards聽聽
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multiply that by c the accrual rate and then we聽
want to subtract um cell e 15 here which is the聽聽
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pto that they've already used because we don't聽
want to include that that's not in their bank聽聽
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anymore because it's gone so you'll see that your聽
total approved bank and hours ends up being 1.2000聽聽
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and in terms of days that's 0.15 you can see聽
here if you got rid of that it would go up so聽聽
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example number two is accrue x percent of regular聽
hours worked so what we want to do here is again聽聽
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the average hours per workday would be eight and聽
let's say this employee hasn't used any pto yet聽聽
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we went over to our time cards and we got聽
the 260 hours our accrual rate comes from聽聽
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the previous tab of 0.0408 but you can聽
change that if you want to whatever fits聽聽
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your need and you get a total answer here of the聽
pt hours in the bank of ten point six one two two聽聽
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and then we divide that out by that eight hours聽
worked in day to get one point three three days聽聽
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and finally our last example here is to accrue聽
x hours per pay period so you do again need a聽聽
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start and end date for this one so we're going聽
to do january to december just to make it easy聽聽
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and we list out the pay periods that you're聽
going to have for each one of these examples聽聽
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and you let's say are um we're going聽
to look here at our answer we took e聽聽
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8 or i'm sorry e 30 which is going to be our um聽
accrual rate and we multiply that by d 30 which聽聽
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is the 52 weeks in the year to get our pto hours聽
that are in our bank and if you wanted to divide聽聽
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that out to figure out the pto bank in days you聽
would just divide that again by the average hours聽聽
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worked in a day and you get five so this is聽
the much straighter straightforward option um聽聽
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basically what you're doing is you're just聽
looking at a period of a year for example聽聽
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and dividing it up by 52 to get your rate um聽
or whatever it might be if it's bi-weekly it'd聽聽
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be 26 that's semi-monthly you have 24 pay聽
periods and monthly you'd get healthy foods聽聽
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so i hope you found this useful and i would highly聽
recommend going back through this and just testing聽聽
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out these yellow cells this is a public worksheet聽
so you are able to download this save it make a聽聽
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copy whatever you want to do you can use it for聽
future reference and you know if you're not using聽聽
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a system already for tracking your employees聽
pto i highly recommend you come on over to聽聽
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our homepage here and if you scroll up to the top聽
right i already have an account so it's not going聽聽
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to show for me but there's normally a start a free聽
trial button up here it's 30 days no card required聽聽
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there's no setup fees there's no obligation no聽
contracts nothing like that and just give it a聽聽
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try you can figure out your pto approval rates聽
and plug it in and see what you think um i think聽聽
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that you'll find it's a lot more efficient and it聽
provides a lot more transparency to your employees聽聽
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so it's all around highly beneficial so give it a聽
try test out some of these numbers here to see how聽聽
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this works and please like share subscribe to the聽
video if you'd like to see more of these in the聽聽
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future please leave a comment or ask a question i聽
will definitely get back to you again i hope you聽聽
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enjoyed watching this video and you got something聽
out of it thanks for watching and have a great day
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