Accrued Leave – Definition
The amount of leave accrued by an employee during their employment with a company is known as accrued leave. The number of leaves an employee takes will be based on the tenure they have worked in the organisation. Think of it as leave that ”grows” each day you work.
It implies that as long as the workers effectively contribute to the company’s growthy, they have equitable access to take time off. For instance, employees eligible for 24 leaves annually may get 2 days per month.
What are the Different Types of Accrued Leaves?
The different types of leave entitlements are primarily based on the labour laws and regulations. The types are as follows.
- Annual Leave: Paid leave for vacation or personal time accrued over the year
- Sick Leave: Leave granted for medical reasons may accrue based on company policy
- Maternity or Paternity Leave: Leave obtained for parental responsibilities
- Compensatory Leave: Leave attained as compensation on holidays worked
- Carer’s Leave: Leave accrued for caring for dependents in emergencies or illness
Besides these, some companies are offering customised leave types, such as study leave or wellness leave.
How is Annual Leave Accrued?
Annual leave accrual is calculated based on the employee’s total working hours, days, or months over the year. The most common methods include:
Monthly Accrual: Employees earn a fixed portion of their leave entitlement every month. For example, if the annual leave entitlement is 24 days, an employee may accrue 2 days per month.
Pro-Rata Accrual: For employees who work part-time or join mid-year, leave is acquired based on the proportion of time worked in a year.
Pay Period Accrual: Leave is calculated and added to the employee’s balance with each payroll cycle (e.g., weekly or bi-weekly).
How to Calculate Accrued Annual Leave?
Accrued leave = (Number of Days Worked / Total Days in a Year) x Annual Leave Entitlement
For example, if an employee has worked 6 months (182 days) out of a year and their annual leave entitlement is 24 days:
Leave = (182 / 365) x 24 = 11.97 days
This means the employee has earned almost 12 days of leave.
Employers can also use HR software to automate this process and ensure accuracy.
Can employees accrue medical leave?
Whether sick leave accrues depends on the company’s policies and local labour regulations.
In many cases:
Accrued Sick Leave: Employees earn sick leave similarly to annual leave, accumulating a fixed amount over time.
Non-Accrued Sick Leave: Sick leave is granted as a lump sum at the start of the year or employment period without the need for accrual.
For instance, an organisation offering 10 sick days in the beginning of the year while others may allow employees to accrue one sick day per month.
Accrued leave systems are a vital part of modern workplace policies, ensuring employees’ entitlements are earned fairly while giving employers a structured way to manage absences. Whether it’s annual leave, sick leave, or other types of time off, understanding and implementing proper accrual methods benefits employers and employees.