Paid time off, or PTO, is time that an employee gets paid for even though they’re not working. At many companies, employees accrue PTO hours while they work. Once earned, PTO can be used as either vacation time, sick leave, or personal time off.
Companies also have the option to offer “unlimited” PTO. In this case, employees don’t need to earn or accrue PTO in order to take time off. Since the PTO is unlimited, they have already “accrued” the time off before they need to take it.
PTO typically buckets together vacation days, sick days, and personal days in one package, and employees have the flexibility to use the time any way they want. However, some employers choose to treat vacation, sick, and personal time separately. Exactly how you define and accrue PTO at your company is up to you. Just be sure to follow your local requirements.
Do employers have to offer PTO as a benefit?
Nope, at the federal level, employers are not required to offer PTO to their employees. However, your state, county, and even city might have certain requirements on vacation and sick time.
What are the state laws on PTO and vacation time?
There are a number of state laws around vacation time. State laws tend to cover:
- Earned wages: Some states treat accrued vacation time as an earned wage, and therefore require employers to pay it out when an employee is terminated.
- Use it or lose it: Some states allow vacation policies to have an “expiration date,” whereas other states do not.
Heads up: Many states treat an employee’s entire PTO pool as vacation. So, if your state requires you to pay out accrued vacation days when employees leave your company, you might have to pay out all of their PTO (sick time and personal time), not just vacation.
As vacation and sick time laws differ from state-to-state, be sure to check your state’s Department of Labor website.Updated June 1, 2018
This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business.