PTO, or paid time off, is when employees get paid even though they’re not working. It covers vacation, sick days, personal time, and holidays. It’s a key benefit that lets employees step away from work without losing income.

Why does PTO matter?

  • Flexibility: Employees take time off when they need it.
  • Better productivity: Regular breaks keep employees focused and motivated.
  • Higher job satisfaction: A good PTO policy makes jobs more appealing.
  • Health benefits: Time off reduces stress and supports mental and physical well-being.

How does PTO work?

PTO policies vary by company, but most are based on tenure—the longer you work, the more PTO you earn. Employees typically accrue PTO over time and need manager approval to use it.

Key PTO policy features:

  • Accrual rate: How fast employees earn PTO, usually based on hours worked.
  • Carryover limits: Some companies let unused PTO roll over; others don’t. Some states require carryovers or payouts.
  • Usage approval: Employees typically need approval before taking PTO.
  • Tracking system: Most companies track PTO balances and usage.
  • Holiday pay: Some include holidays in PTO; others have separate policies.

Are employers required to offer PTO?

No, there’s no federal law requiring PTO. But some states, cities, and counties have rules about vacation and sick time. Employers should check local laws to stay compliant.

What is unlimited PTO?

Unlimited PTO means there’s no set number of vacation or sick days. Employees take time off as needed—with manager approval.

Potential benefits:

  • More trust and autonomy: Employees manage their own time.
  • Attracts top talent: A big perk for job seekers.
  • Cost savings: No need to track or pay out unused PTO.
  • Better company culture: More flexibility often leads to higher morale.

But it’s not perfect. Some employees may feel pressured not to take time off. Others might be unsure how much is too much. Clear guidelines help prevent confusion.

How does PTO work for hourly employees?

Hourly employees often have different PTO policies than salaried workers.

Key differences:

  • Accrual based on hours worked: PTO is earned based on total hours worked.
  • Separate vacation and sick time: Unlike salaried employees, hourly workers may have separate policies for each.
  • Pay rate: Some companies pay hourly employees their regular rate during PTO; others don’t.
  • Part-time employees: Often have different PTO limits or accrual rates.

A clear and fair PTO policy ensures all employees—hourly or salaried—know what to expect.

How is PTO calculated?

PTO calculation depends on company policies, but the general formula is:

Accrual rate × Hours worked = PTO earned

Example: If an employee earns 0.5 PTO hours per hour worked and works 40 hours in a week, they accrue 20 PTO hours that week.

Companies may use:

  • Flat PTO rates: All employees earn the same amount.
  • Tiered systems: Employees with longer tenure earn more PTO.

Explaining PTO calculations in an employee handbook or policy guide helps avoid confusion and builds trust.

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