Left Your Company? You Might Be Entitled to a PTO Payout

By Marketing - Aug 25, 2022 8:00:00 AM - 7 MINS READ

Regardless of why you left a company, there is always some sort of offboarding involved. Before embarking on the next chapter of your life, you must bring all the tools necessary. Of course, you need the new skills you learned at your last company and a paycheck. But before you say your last goodbyes, ensure that you don’t forget anything important–including a PTO payout. 

Although not a federal requirement, some companies are willing to give you back the PTO days that you never used as money back. It seems only fair, right? Even though this is a reality in most parts of the country, some states have different policies. Before closing the door, ensure you know your company’s (and state's) policy to get all the compensation you're entitled to.

Does it matter why I left?

Did you quit your job? Were you laid off? Maybe you were fired– it doesn't matter. To be entitled to a PTO payout, all that is important is that you are no longer working for the company. This applies to all PTO, not just for vacation or sick time. 

Simple, right? But now, it’s time to get into the nitty gritty, which makes PTO payout a little more complicated. 

In California, for example, employers must pay out their employees at their current pay rate upon separation. However, some states can decide to use the same pay rate the employee earned when their PTO was enabled. On the other hand, states such as North Dakota have a policy in place that an employer can withhold PTO payment upon separation if the employee has given less than five days' notice or if they have been employed for less than a year.

PTO payouts are more complicated than they seem

 A payout can operate in several different ways:

  • Payout at your current hourly rate. States such as California must payout at the employee’s current hourly rate. For example, an employee who earned 18 days of PTO at $28 per hour will receive the same payout upon separation. 
  • Payout at the rate the employee made at the time PTO was earned. An employee who accrued PTO last pay period would receive the payout amount granted then as opposed to the present day. 
  • Wages may also qualify as earned PTO. Upon termination, employers must pay their employees PTO in wages earned for hours worked.

What if my company offers unlimited PTO?

PTO payout only applies to accrued paid time off, meaning employees earn PTO hours for the hours they work. In other words, you're only eligible for a PTO payout if you accrue PTO. 

But what about employees that receive unlimited PTO? Are they eligible for a PTO payout? Simple answer–no. With unlimited PTO, there is nothing to pay out, as employee PTO isn't tracked like accrued PTO.

Employees: Pay attention

If you are new to a company and are inquiring about PTO, the most important action you can take is to look into the employee handbook or contract. Not only do laws vary by state, but they can also be entirely dependent on the company itself. 

Some states, such as Texas, allow companies to deny payout altogether, while states such as Massachusetts require companies to payout for unused PTO. If your company operates across multiple states, make sure you know the law in your specific state. Check out a full list here.

We’ve outlined a few examples below. 

State                                                           Does the employer have to payout?

Alabama

No

California

Yes

Washington

No

Florida

No

New York

Yes (unless stated otherwise in the employee handbook/contract)

If a state requires companies to payout employees upon separation, and an employer fails to do so, employers can face a hefty fine or even be taken to court. 

If there is no state law or company policy that indicates a payout policy, make sure you don’t lose out on your earned PTO! Companies can also enact use-it-or-lose-it policies, meaning employees have until a set expiration date to use their PTO. 

Employers: Don’t break your PTO promise

Employers must pay attention to state laws when constructing their PTO payout policies. For example, employers must hold true to that promise if the policy states that employees are guaranteed a PTO payout upon separation. Breaking that promise is detrimental and illegal (especially when operating in states where payouts are required by law). 

Ask before you leave

Although the reward can be great, PTO payout policies require paying close attention to state laws and company policies. You are entitled to your rights, so stay well informed to ensure you receive the time and/or compensation you deserve. 

PTO Exchange can help you self-direct your PTO to make it more valuable to you and your lifestyle. Talk to your HR department and contact us today to learn more. 

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