How PTO Conversion Complements California’s 2025 Paid Family Leave Law

Financial Wellness, Employers

California's new paid family leave (PFL) law for 2025 is designed to provide more expansive access to paid leave without employees having to rely on accrued vacation time. 

As this law aims to improve work-life balance for employees, businesses should consider how they can complement these changes with their own benefits offerings. One way is through a paid time off (PTO) conversion program, which can provide additional financial support during periods of leave.  

Here’s how your PTO conversion program can be positioned to align with the PFL law and offer employees greater peace of mind: 

Supplementing Income 

Although PFL provides financial support, it typically only replaces a portion of an employee’s wages—up to 60-70% of their regular pay, depending on their earnings. For many employees, this wage replacement may not be enough to cover all of their living expenses during a period of extended leave.  

Offering PTO conversion as a supplement to PFL benefits can help bridge that financial gap. For example, an employee could convert a portion of their accrued PTO into cash, providing the extra funds needed to maintain their standard of living without having to dip into savings or take on debt. Additionally, they could funnel converted PTO into emergency savings, creating a safety net that provides long-term financial stability. 

Emergency Savings Buffer 

Another key feature of PTO conversion is the ability for employees to use their unused PTO to create or grow an emergency savings account.  

With this offering, employees can be better prepared financially before they need to take family or medical leave. This is especially important since emergencies, such as a sudden illness or the need to care for a family member, often come without warning.  

Instead of having to rely solely on state-provided PFL benefits, which may be limited, employees who have used PTO conversion to build an emergency savings buffer will have greater financial flexibility and security. This can significantly reduce stress during an already emotionally and physically demanding time.  

Long-Term Financial Wellness 

Promoting PTO conversion as a tool for long-term financial wellness goes beyond addressing immediate financial needs during leave. Encouraging employees to regularly convert unused PTO into savings, 401(k) contributions, or Health Savings Accounts (HSAs) can lead to more proactive financial planning.  

Employees who use their PTO in this way will not only be preparing for family leave but also for other life events that require financial resources, such as buying a home, funding education, or preparing for retirement. This aligns with a broader trend of businesses helping employees focus on long-term financial wellness through benefits programs that encourage savings and financial literacy. 

Creating a Comprehensive Leave and Financial Wellness Program 

By aligning your PTO conversion program with California’s new Paid Family Leave law, you can provide employees with a more holistic approach to managing their time off and financial well-being.  

Employees will appreciate the flexibility and control that comes from having access to funds when needed most, without worrying about how their bills will be paid during their time of leave. As a result, your business will be viewed as compliant with state laws and as one that goes above and beyond to support employees during critical life stages. 

This integration of PTO conversion with PFL can also strengthen your company's overall benefits package, making it more attractive to both current employees and potential new hires. Offering robust benefits programs that focus on financial wellness and paid leave flexibility can reduce turnover, improve employee satisfaction, and boost morale—key factors in maintaining a productive and engaged workforce. 

Published on Oct 17, 2024 by Sam Lieberman

Subscribe to blog updates

Discover The Real Story Behind Unlimited PTO 

Unlimited PTO might not be as amazing as many HR executives make it out to be. Find out more with this research report conducted by Lighthouse Research and Advisory. 

Download