Set up and manage time off policies

A time off balance will go negative automatically if an employee uses time off they do not have. Admins with the required permissions can also save a negative balance in the employee's details screen under the time off section. 

• Time off only accrues on regular payrolls. 
  • For off-cycle and bonus payrolls, you'll need to manually update the time off balance for that employee if time off should have accrued. 
  • Policies with a custom accrual period are not tied to payroll, and time off grants will occur on the first day of the new accrual period.
• Time off does not accrue for new hires mid pay period.
  • If you hire an employee in the middle of a pay period, you'll need to manually add in the appropriate accrual amount. Time off will start accruing on the first full pay period.

Negative time off balances / borrowing time off before it's accrued

You can specify whether employees are allowed to request more time off than they have available on a specific time off policy. In other words, you can determine whether they can have a negative time off balance.

• If an employee uses more time off than they’ve accrued and the policy allows this, their time off balance for that policy will go into the negative.
  • The employee can work toward a positive balance by accruing time off on future payrolls based on hours worked. Or, you can manually edit their balance as needed.
• If employees are not allowed to request more time off than they have available, they will not be allowed to submit a request that would put them in the negative.
  • Admins or managers with required permissions can still record time off for the employee that results in a negative balance.

Change this setting for an existing policy 

1. Sign in to Gusto.
2. Click Time & Attendance and select Time off.
3. Click the Policies tab.
4. For the policy you want to change, click the 3 dots on the right and select Edit. 
5. On the second "Settings" step, find the question “Can employees request more time off than they have available?” and make a selection of Yes or No.
6. Select Save and continue.
7. On the following steps, click Save at the bottom of the page until you’ve finished.
   • Changes will take effect immediately.

Note: If you’re changing the policy to no longer allow employees to request more time off than they have, the change will not apply to any existing pending time off requests on that policy. You'll have the option to decline those requests as an admin or manager with required permissions.

Accrual periods

For policies with A) accruals based on hours worked or B) fixed accrual amounts earned throughout the year, the accrual period is the calendar year. It begins on the day payroll is submitted for the last payroll in December.

For policies with a fixed accrual amount each year, accrual periods last a full year and begin on the date you select when setting up a time off policy. This can be the beginning of the calendar year, the beginning of a custom fiscal year, or the employee’s anniversary of hire date.

Several things happen when a new accrual period begins:

• Time off grants: If the policy has a fixed accrual amount that’s earned all at once, employees will be granted their entire amount of time off. The actual date employees receive hours in their time off balance can vary depending on the policy’s accrual type. See the Fixed accrual types section below.
• Hours carryover: Any unused hours from the previous accrual period carry over to the new accrual period, with any carryover or max balance limits applied.
• Yearly limits reset: If the employee reached the max yearly accrual limit in the previous accrual period, they can begin accruing hours again.

If you have employees who earn a set amount of time off each year (vs. earning time off based on hours worked), select Fixed amount each year for the accrual method when setting up a new time off policy. See the section on “Accrual periods” to understand what happens when an accrual period resets.

Note: For employees who work multiple jobs within Gusto, we only support time off accruals for the employee’s main job, which is the first job listed under the employee’s compensation section.

There are three types of fixed amount accruals: throughout the year, beginning of year, and anniversary accrual. 

Throughout the year accrual (recommended)

Employees accrue time off during each pay period throughout the year. On the day payroll is submitted for a pay period, accrued time off appears in employees’ time off balances.

• This method may help reduce the company’s financial liability, since some states require all granted time to be paid out if an employee is dismissed. 
• If you add an employee to this type of policy in the middle of an accrual period, they’ll receive a prorated total amount for the first accrual period. They will continue to accrue proportionally at each pay period.
• For milestone accrual rates on these policies, new accrual rates will take effect on the first day of the pay period after the milestone has passed.
  • Example: If an employee’s anniversary is November 10 and the next pay period starts on November 15, the new rate will be applied to time off accrued starting on November 15.
  • If the milestone occurs on the first day of a pay period, the new rate will take effect immediately.

Beginning of year accrual

Employees accrue their entire time off amount at the beginning of each calendar year, based on the first pay period of the year. 

• The first pay period of the year is the pay period that contains January 1. Examples of pay periods that are considered the first of the year:
  • Pay period that starts on Jan 1 and ends on Jan 15 (Jan 1 is at the beginning of the pay period).
  • Pay period starts on Dec 20 and ends on Jan 5 (Jan 1 falls in the middle of the pay period).
  • Pay period that starts on Dec 17 and ends on Jan 1 (Jan 1 is at the end of the pay period).
• When employees receive their entire time off grant depends on when the time off policy was created or last edited and saved. To check when employees will receive accrued hours:
  • Sign in to Gusto.
  • Click the Time & Attendance section and select Time off.
  • Select the Policies tab.
  • Next to the policy, click the 3 dots and select View.
  • Find the "Accrual details" section.
  • Find the “Employees receive hours on” setting.
    • If your policy states “Jan 1”, employees will receive their entire time off grant on Jan 1 each year. See the Custom date or fiscal year section below for more details.
    • If your policy states “The day payroll is submitted for the first pay period of the year (ending on or after Jan 1)”, employees will receive hours on the day a payroll admin submits payroll for the first pay period of the year that ends on or after Jan 1. This uses the legacy system of accruals.
    • To update these policies so that accruals happen on Jan 1 instead of the first pay period of the year:
      
      • Click the Time tools section and select Time off.
      • Select the Policies tab.
      • Next to the policy you want to change, click the 3 dots on the right and select Edit.
      • Make sure All at once (beginning of year or custom date) is selected for the accrual rate on the first step, then click Save and continue. The policy will be updated once you save that step.
      • Continue through the next steps if you have more changes to make, or you can exit out of the "Edit Policy" workflow since the accrual date will already have been updated.
      • Employees will now receive their time off grants on Jan 1 each year.
• For milestone accrual rates, new accrual rates take effect in the first pay period of the year after the milestone happens. The first pay period of the year is the pay period that contains Jan 1.
  • If the milestone occurs on the first day of the first pay period of the year, the new accrual rate will take effect immediately in the same pay period. 
  • If the milestone occurs after the first day of the first pay period of the year, the new accrual rate will take effect in the next first pay period of the year.
  • Eligible employees will receive the new accrual amount on the day payroll is submitted for the eligible first pay period of the year.

Custom date or fiscal year

Employees will accrue their entire time off amount on the first day of the accrual period set by the policy. This is the beginning of the calendar year by default, and can be set to any day of the calendar year. Choose this option if you're aligning your accrual period with your company’s fiscal year.

• You’ll be able to select which date the accrual period should be reset. By default, this is set to the beginning of the year (Jan 1)—see what happens at the beginning of each accrual period.
• New accrual rates will take effect on the first day of the next accrual period after the milestone has passed, and eligible employees will receive the new amount on that day. If the milestone occurs on the first day of the accrual period, the new accrual rate will take effect immediately.

Anniversary accrual 

Employees accrue their entire time off amount in the pay period when the employee’s hire-date anniversary happens. Accrued time off will appear in employees’ time off balances on the day payroll is submitted for that pay period.

When employees will receive their entire time off grant depends on when the time off policy was created or last edited and saved. To check when employees will receive accrued hours:

1. Sign in to Gusto.
2. Click the Time & Attendance section and select Time off.
3. Select the Policies tab.
4. Next to the policy, click the 3 dots and select View.
5. Find the "Accrual details" section.
6. Find the “Employees receive hours on” setting.
   • If your policy states, “The employee’s anniversary of hire date”, employees will accrue hours on the exact date of an employee’s work anniversary.
   • If your policy states, “The day payroll is submitted for the pay period that contains the employee’s work anniversary”, employees will receive hours on the day a payroll admin submits payroll for the pay period that contains the employee’s work anniversary. This uses the legacy system of accruals.
   • To update these policies so that accruals happen on the date of the employee’s work anniversary instead of the day payroll is submitted:
     • Click the Time & Attendance section and select Time off.
     • Select the Policies tab.
     • Next to the policy you want to change, click the 3 dots on the right and select Edit.
     • Make sure All at once (each anniversary of hire date) is selected for the accrual rate on the first step, then click Save and continue. The policy will be updated once you save that step.
     • Continue through the next steps if you have more changes to make, or you can exit out of the "Edit Policy" workflow, since the accrual date will already have been updated.
     • Employees will now receive their time off grants on the date of their work anniversary each year.
   • New accrual rates will take effect on the same day that accruals happen—outlined above—and depends on when your policy was created or last edited.

Admins and managers with the correct permissions can record time off for an employee.

Negative balances: Admins and managers can always record time off for employees that results in a negative balance, even if the policy does not allow employees to request more time off than they have available.

1. Sign in to Gusto.
2. Click the Time & Attendance section and select Time off.
3. On the Time off requests tab, click Record Employee Time Off.
4. Enter the employee’s time off details.
5. When you're finished, select Record time off.

When you record time off for an employee, it’s automatically approved. We’ll email the employee to let them know you’ve submitted time off for them.

A carry-over limit is the amount of accrued (or unused) time off that can be carried over from one calendar year to the next. Some employees earn more time off on the anniversary of their hire date, while others earn it on January 1.

You can choose how to handle carryover limits at the end of the calendar year. At this time, Gusto does not support paying out hours that do not carry over to the new year.

Carryover limits can be set for the following policy types:

• Fixed – All at once (beginning of the year)
• Fixed – Earned throughout the year in pay periods
• Hourly – Accrued by hours worked

Heads up: Carry-over limits are not supported on the policy type “Fixed – All at once (each anniversary date)”.

Choose from two carry-over limit options:

• Yes, there’s a limit
• If you do not want hours to rollover, enter 0 for the “Max carryover” amount.
• No, all hours can be carried over
• Reductions due to a carryover max will be accounted for in the Time off balances report

Some state sick time mandates do not allow for time off balance resets, so balances will not automatically zero out at year's end unless an admin manually zeroes out the balance on an account.

Time off and sick time policies will calculate using the employee's regular hourly wage amount automatically, and this cannot be changed.

• Example: If an employee earns $35/hour, $35 will be the hourly rate used for time off or sick time in Gusto.

Hourly

Enter the actual hours worked in step one of the payroll run, then enter the actual time off hours taken in step two of the payroll run where time off is entered.

• Example: If an hourly employee should be paid for a total of 71 hours worked, but 12 of those hours were time off, enter 59 hours for regular hours, and 12 hours for time off.

Salaried

Leave the standard hours worked as-is, then enter the time off hours taken in the time off box—the time off hours entered will automatically reduce the regular hours worked/reported.

• Example: If your salaried employee usually works 80 hours a week but took 6 hours of time off during the pay period, leave their standard 80 hours as-is, then enter 6 hours for time off—their paystub will automatically adjust to reflect 74 regular hours works and 6 time off hours paid.

Dismiss an employee

Gusto will default to paying out time off upon dismissal based on how you created your time off policy. Remaining sick time hours will not automatically pay out.

• Only limited time off policies can be paid out (except unpaid time off). 
• If you want to manually pay out time off for any reason, you'll have the option to pay out any remaining time off during the dismissal payroll.

Learn more about dismissal paycheck requirements by state.

Rehire an employee

Employees will automatically regain any time off balance that they had at their dismissal.

Limited time off polices mean you can set a limit to how much time an employee can take off in a given year. 

1. Sign in to Gusto.
2. Click the Time & Attendance section and select Time off.
3. Click Add Policy.
4. From the dropdown, select the policy type you’d like to create.
5. Name the time off policy.
   • Some cities and states have mandatory sick time regulations—be sure to check your state’s mandatory sick leave policies. If applicable, you can set up and name a sick policy that applies to your employees in that given state or city.
6. Select Yes, there is a limit to the amount of time off your team can take.
   • When an employee is dismissed, time off in a limited policy will automatically be paid out on their dismissal paycheck.
7. Select the way you’d like your team to accrue hours.
   • For fixed: Enter the total time off per year and how it’s earned.
   • For hourly: Enter the amount of time off hours that employees will accrue based on the actual number of hours worked.
8. Click Save & continue.
9. Choose if you want employees to go through a waiting period before they can start accruing hours and requesting time off. If so, enter how long it is.
   • Waiting period: The allotted period of time an employee must wait before they can begin accruing time off. For example, an employee must have a 30-day waiting period before they can accrue time at their company.
10. Choose if you want your employees to have a max balance per year. If so, enter that amount.
    
    • Maximum balance: The maximum amount of time off hours that an employee can have at any given time. If an employee has reached their max balance but uses some time off during a given pay period, they may still accrue back up to their max balance. For example, an employee earns 10 hours of time off every month, but they have a max balance of 20 hours total. 
11. Choose if you want your plan to have a carryover limit.
    • Carry-over limit: The amount of accrued (or unused) time off that can be carried over from one calendar year to the next. Some employees earn more time off on the anniversary of their hire date, while others earn it on January 1.
12. Select the dismissal payroll settings by choosing if you would like employees to be paid out their remaining unused time off balances.
13. Click Save & Continue.
14. Choose if you’d like your employees to earn by tenure. If so, enter the anniversary when they’ll begin to earn additional hours and the total they’ll receive. Then, click Add Milestone. 
    • Earn by tenure: Sometimes used to determine when an employee will get an increase in time off. For example, an employee receives an additional 24 hours of time after 2 years of tenure with their company.
15. Click Save & Continue.
16. Click the + icon next to the employees you want to enroll. 
17. Click Save & Continue.
18. Add any existing balances for employees. 
    • If your employees have an existing balance, enter those hours.
    • Employees moving to this policy from another will carry over their accrued hours.
19. Click Create Policy.

You can view and update your policy by clicking the Time & Attendance section and select Time off.

For Plus and Premium customers, we recommend you also set up time off requests for your team. This enables your employees to request time off in Gusto and automatically records the hours in payroll once they’ve been approved.

Once you’ve completed setting up time off, you can edit or cancel your policy at any time. 

Information you can change at any time

• Policy name
• Policy description
• The accrual method
• Waiting period
• Max balance and carryover limit

Edit a time off policy

1. Sign in to Gusto.
2. Click the Time & Attendance section and select Time off.
3. Click the Policies tab.
4. For the policy you want to change, click the 3 dots on the right and click Edit. 

Any changes you make to your policy will affect all enrolled employees.

1. Sign in to Gusto.
2. Click the Time & Attendance section and select Time off.
3. Click the Policies tab.
4. For the policy you want to delete, click the 3 dots on the right and click View. 
5. Click Delete Policy on the right-hand side.

If you're unable to delete the policy, it means there are still pending time off requests. These requests will need to be deleted before you can delete the policy.

Once a policy is deleted, employees will no longer accrue or be able to request time off, but their balances will remain on file if you should want to re-add the policy at a later time.

1. Sign in to Gusto.
2. Click the Time & Attendance section and select Time off.
3. Click Add Policy.
4. From the dropdown, select the policy type you’d like to create.
5. Name the time off policy.
6. Select No, it's unlimited.
   • When an employee is dismissed, time off in an unlimited policy will not pay out on their dismissal paycheck.
7. Click Save & continue.
8. Click the + icon next to the employees you want to enroll. 
9. Click Create Policy. 

You can view and update your policy by clicking Time & Attendance section and selecting Time off. 

For Plus and Premium customers, we recommend you also set up time off requests for your team. This enables your employees to request time off in Gusto and automatically records the hours in payroll once they’ve been approved.

Once you’ve completed setting up time off, you can edit or cancel your policy at any time. 

Information you can change at any time

• Policy name
• Policy description
• The accrual method
• Max balance and carryover limit

Edit a time off policy

1. Sign in to Gusto.
2. Click the Time & Attendance section and select Time off.
3. Click the Policies tab.
4. For the policy you want to change, click the 3 dots on the right and click Edit. 

Any changes you make to your policy will affect all enrolled employees.

1. Sign in to Gusto.
2. Click the Time & Attendance section and select Time off.
3. Click the Policies tab.
4. For the policy you want to delete, click the 3 dots on the right and click View. 
5. Click Delete Policy in red on the right-hand side.

If you're unable to delete the policy, it means there are still pending time off requests. These requests will need to be deleted before you can delete the policy.

Once a policy is deleted, employees will no longer accrue or be able to request time off, but their balances will remain on file if you should want to re-add the policy at a later time.

You can keep track of paid holidays for when your employees do not work but receive regular wages, and Gusto will automatically pay your team for those holiday hours when you run payroll.

Just like a sick policy, this type of policy should be added if employees are not working but being paid for their time away.

Reminders

• Employees will be paid for the full 8-hour holiday day—this cannot be changed.
• Federal holidays will be observed on Friday or Monday, if the holiday falls on a Saturday or Sunday, respectively. 
• Federal holidays selected will automatically apply to all future years.
• Custom paid holidays will need to be created individually for each year, and you can create holidays up to three years in advance.
  • Custom holidays cannot be created if the date is in the past. 
  • Custom holidays are available to Plus and Premium customers—upgrade your plan at any time. 
• Holidays cannot be removed once the holiday has passed. 

Create a holiday pay policy

1. Sign in to Gusto.
2. Click the Time & Attendance section and select Time off.
3. Click the Polices tab.
4. Click the Holiday Pay tile.
5. Select your company's paid federal holidays.
   • We'll automatically count them as paid time off when you run payroll.
6. [Plus and Premium customers only] Click Add Custom Holiday if you'd like to add your own company holidays here (ex. day after Thanksgiving).
   • Name your holiday.
   • Enter a date range for the holiday and click Save.
   • If a custom holiday date range overlaps with a preexisting federal holiday, Gusto will not double-count the holiday hours for that day.
   • The Custom Holiday time off feature is available to Plus and Premium customers—upgrade your plan at any time.
7. Review all holidays and click Continue.
8. Add employees you'd like to enroll in the Paid Holiday policy.
9. Click Create Policy.

You can now sync the holiday pay schedule to your personal calendar if you'd like. Employees will also be able to see the holiday schedule in their Gusto dashboards.

Once you've set up a holiday pay policy, you can make the changes below as needed. 

 Remove a paid Federal holiday

1. Sign in to Gusto.
2. Click the Time & Attendance section and select Time off.
3. Click the Policies tab.
4. Scroll to the "Paid Holidays" policy and click the 3 dots on the right-hand side.
5. Click view.
6. Click edit under Federal Holidays on the right-hand side to change the current settings.
   • Changes made to federal holidays will only affect future dates.
7. Uncheck or check the desired holiday name.
8. Click Save.

Change or delete a custom holiday [Plus and Premium plans]

Custom holidays are available to Plus and Premium customers—upgrade your plan at any time. Custom holidays can only be edited for a future date, not if the date has already passed.

1. Sign in to Gusto.
2. Click the Time & Attendance section and select Time off.
3. Click the Policies tab.
4. Scroll to the "Paid Holidays" policy and click the 3 dots on the right-hand side.
5. Click view.
6. Click edit next to the custom holiday.
7. You can edit the custom holiday title and date.
8. Click Update holiday to save changes or exit.
9. If you need to delete the custom holiday entirely, click Remove Custom Holiday.