Accounting Best Practices, Fifth Edition

17–18. Automate Vacation Accruals

A topic that is of considerable interest to employees is how much vacation time they have left. In most companies, this information is kept manually by the payroll staff, so employees troop down to the payroll department once a month (and more frequently in the prime summer vacation months!) to see how much vacation time they have left to use. When employees are constantly coming in to ascertain this information, it is a major interruption to the payroll staff, because it happens at all times of the day, never allowing them to settle down into a comfortable work routine.

A simple solution is to include the vacation accrual in employee paychecks. The information appears on the payroll stub, and shows the annual amount of accrued vacation, net of any used time. By feeding this information to employees in every paycheck, there is no need for them to inquire about it in the payroll office, eliminating a major hindrance. However, there are several points to consider before automating vacation accruals. The first one is that the payroll system must be equipped with a vacation accrual calculation option. If not, the software must be modified with custom programming to allow for the calculation and presentation of this information, which may cost more to implement than the projected efficiency savings. Another problem is that the accrual system must be set up properly for each employee when it is originally installed. This start-up problem is caused by ...