Before hiring employees, you should decide if you will offer paid time off (PTO) and create a PTO policy. While PTO is not mandatory, over 75% of small business employees have access to it for sickness, vacations, and holidays. If you choose to offer PTO, be aware of your state's PTO payout laws, which might restrict use-it-or-lose-it policies where employees lose unused PTO after a deadline.
Accrued PTO refers to time off that employees have earned but not yet used, which can be used, cashed out, rolled over, or forfeited, depending on your business policies and state laws. Some businesses limit the amount of PTO that can be cashed out or rolled over.
Use-it-or-lose-it policies require employees to use their PTO by a specific date or lose it. This helps limit an employer’s payout liabilities but can be frustrating for employees. These policies are illegal in some states.
While businesses set their own PTO accrual rules, states with mandatory sick leave laws may dictate how accruals should be calculated, such as by hours, days, or weeks worked. Include these details in your employee handbook.
States don’t require paid vacation, but some regulate PTO accruals and payout, including whether unused days must be rolled over or paid out at the end of the year or upon termination. Employers should address these payouts in their policies, ensuring they align with state laws and business promises
|
State |
Does the State Have a Law Banning Use-it-or-lose-it Policies? |
Does the State Require That Employers Provide PTO Payout at Termination? |
|
Alabama |
No |
No: Not explicitly addressed by state law. However, an employer with a formal vacation policy may not unilaterally rescind that policy. Employers must notify employees in advance if they decide to discontinue paying accrued, unused vacation upon separation. |
|
Alaska |
No |
No: Not explicitly addressed by state law. An employer’s policy or agreement determines whether earned or unused vacation is paid on separation. |
|
Arizona |
No |
No: State law requires that every employee be paid “all wages due” when there is an employment separation, but this does not expressly refer to PTO. PTO payouts are covered under each employer’s policy and standards. |
|
Arkansas |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. Upon termination, resignation, or retirement of state employees, amounts due (including accrued unpaid annual or holiday leave due) should be included in the final pay to the employee for active work. |
|
California |
Yes |
Yes: Employees cannot be deprived of earned, unused vacation time, no matter the reason for separation, unless stipulated otherwise by a collective bargaining agreement. |
|
Colorado |
Yes |
Yes: All vacation pay must be accurately paid and delivered to the appropriate parties upon employment separation. |
|
Connecticut |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Delaware |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. If they do, the value of the accrued time must be paid within 30 days of separation. |
|
D.C. |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Florida |
No |
No |
|
Georgia |
No |
No |
|
Hawaii |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Idaho |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Illinois |
No* |
Yes: Unless both parties have met a willful agreement, an employer’s policy or agreement decides whether earned, unused vacation is paid on separation. |
|
Indiana |
No |
Yes: An employer’s policy or agreement determines whether earned, unused vacation is paid on separation. Without a policy in place, employees are entitled to any and all earned and unused vacation pay. |
|
Iowa |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Kansas |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Kentucky |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation |
|
Louisiana |
No |
Yes: Employers are required to pay employees any accrued, unused vacation time at separation. |
|
Maine |
No |
No: Private employers with 11 or more employees must pay those employees for any unused PTO. This state statute overrides any employer’s individual policies. |
|
Maryland |
No |
No: Without a written policy highlighting the forfeiture of pay for accrued, unused vacation to a separating employee, the employee must be paid a cash value for earned, unused vacation. |
|
Massachusetts |
No* |
Yes: Employers are liable to pay separating employees any earned, unused vacation time. |
|
Michigan |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Minnesota |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Mississippi |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Missouri |
No |
No: Final wages do not include vacation pay. |
|
Montana |
Yes |
Yes: Vacation pay is considered compensation, thus must be paid out at separation. A Montana Supreme Court decision established different rules for PTO vs vacation pay. PTO payout is determined by employer policy or contract. |
|
Nebraska |
Yes |
Yes: Employers are liable to pay separating employees any earned, unused vacation time. |
|
Nevada |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
New Hampshire |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
New Jersey |
No |
No: Earned, unused vacation will not be considered wages unless an employer’s policy, agreement, or union contract states otherwise. |
|
New Mexico |
No |
No: The New Mexico Supreme Court determined that accrued vacation was compensation of a fixed and definite amount in the same category as wages. |
|
New York |
No* |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. If there is no written policy, unused vacation pay must be paid out. |
|
North Carolina |
No |
No: The vacation policy must have an explicit forfeiture clause; otherwise, the unused vacation must be paid out. |
|
North Dakota |
No* |
No: Employers must pay a separating employee for earned, unused vacation time if the separation was involuntary. For voluntary separation, an employer must pay unless the employee receives written notice of the limitation at the time of hiring, the employee has been employed for less than one year, and the employee gave less than five days’ notice. |
|
Ohio |
No |
No: The courts have interpreted that vacation pay is a deferred payment of an earned benefit, and unless an employer’s vacation policy states to the contrary, an employee is entitled to be paid for unused vacation days. |
|
Oklahoma |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Oregon |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Pennsylvania |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Rhode Island |
No |
Yes: Employers are liable to pay separated employees accrued vacation pay if they have served one year or more at their organization. |
|
South Carolina |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
South Dakota |
No |
No |
|
Tennessee |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Texas |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Utah |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. If employers do not pay for accrued days upon separation, this must be stated explicitly in the contract or policy. |
|
Vermont |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Virginia |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
Washington |
No |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
|
West Virginia |
Yes |
No: If an employer has a written policy stating that accrued vacation time will not be paid at separation, they will not be liable to pay an employee. |
|
Wisconsin |
Yes |
No: If an employer has a written policy stating that accrued vacation time will not be paid at separation, they will not be liable to pay an employee. |
|
Wyoming |
Yes |
No: An employer’s policy or employee contract governs whether earned, unused vacation is paid on separation. |
Here's a summary of PTO payout laws by state:
It's important to stay informed about specific state laws to ensure compliance and transparency in your PTO policies.
Check out our easy-to-read chart below to see whether you can implement a use-it-or-lose-it PTO vacation policy. And, find out if your state requires you to pay employees for unused vacation time when they leave your business.
Keep in mind that many states do not address accrued vacation payout. Generally, this means employers are free to implement use-it-or-lose-it policies or refuse to offer PTO payout at termination. However, you should consult your state to make sure you are compliant with restrictions and ever-changing policies.
And again, even if your state does not ban use-it-or-lose-it policies or require PTO payout, you must do so if you say you will in your policy.
Average PTO Accruals for Healthcare and Retail.
| Healthcare - Full Time | |||||
|
Years of Service |
PTO Hrs |
Max - Hrs |
|||
|
0yrs - 4 yrs |
200 |
256 |
|||
|
5yrs - 10yrs |
240 |
296 |
|||
|
10yrs - 15 yrs |
288 |
344 |
|||
|
Healthcare - Non-Exempt |
|||||
|
Years of Service |
PTO Hrs |
Max - Hrs |
Sick |
Holidays |
Bereavement |
|
0yrs - 6 yrs |
112 |
No Max |
96 |
80 |
24 |
|
7yrs - 13yrs |
152 |
No Max |
96 |
80 |
24 |
|
14yrs - 29 yrs |
192 |
No Max |
96 |
80 |
24 |
|
30yrs - plus |
232 |
No Max |
96 |
80 |
24 |
|
Retail- Non-Exempt |
|||||
|
Years of Service |
PTO Hrs |
Max - Hrs |
Sick |
Holidays |
Bereavement |
|
0yrs - 5 yrs |
112 |
168 |
40 |
80 |
24 |
|
5yrs - 10yrs |
160 |
240 |
40 |
80 |
24 |
|
10yrs - 25 yrs |
200 |
300 |
40 |
80 |
24 |
|
25yrs - Plus |
240 |
360 |
40 |
80 |
24 |