What are Accrued Benefits?

by Investing School on May 25, 2012

Simply defined, accrued benefits are those benefits earned over time. They are provided above and beyond the basic salary. This can be coverage earned through a pension plan, vacation time, sick days or paid time off. These benefits are often based upon the amount of time the individual has been with the employer. A trial period may be required before any benefits accrue.

Some benefits activate sooner than others. For example, you may qualify to put money into a retirement account as soon as your first paycheck but contributions made by your employer may not be fully vested for several years. Furthermore, some benefits are directly related to the salary scale.

Accrued benefits are also considered a form of compensation, even though they may not have immediate financial applications. For example, you may earn vacation time in order to get paid your regular salary while taking time off. Shares in an employee stock ownership plan is another example of accrued benefits that are not paid immediately; rather, they are made available either after a certain amount of time or at retirement.

Some of your accrued benefits may be ‘carried over’ to another time period. Sick time or vacation time are some of the most commonly carried to the next fiscal year. If your company doesn’t offer this option it is prudent to use up all of your accrued benefits before they expire. Accrual policies should be clearly defined and available to anyone who wishes to read them.

If you have specific accrued benefits ‘saved up’ they may be used to help you plan for your retirement.

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