The PTO Payout Laws by State 2024

When an employee leaves your organization, there are special implications for how employers must handle any remaining PTO balance for the employee. While it might seem like it's no longer relevant, in some cases the balance may be considered compensation. You may need to pay the employee for any PTO they haven't used.

For the most part, it's left to the discretion of two main entities: you (the employer) and the state where your business operates. Most of the time, you are free to decide whether or not to pay out PTO, but some states have specific laws requiring you to pay it out in cash.

Since laws around employment practices are changing all the time, it's important to keep current on requirements to remain compliant. But different states have different laws governing your PTO, and it can be difficult to keep track of them all. This is particularly problematic for companies with employees in multiple states.

At Criterion, we put together this one-stop resource to help you learn your state’s position on PTO payout.

What is PTO?

PTO (or Paid Time Off) is a policy that gives employees a pool of hours to take time off work and still get paid for it. Different plans offer different ways to use the allotted time. Some only allow employees to use PTO during approved times. Other PTO plans allow the time to be used anytime for any reason, such as family emergencies or vacations.

Common types of PTO include:

Jury duty leave
Sick time
Paid holidays
Vacation time
Bereavement leave
Military service leave
FMLA

Note that it's not uncommon for corporations, especially larger ones, to lump employees' vacation and sick days with their personal days off.

What is PTO Payout?

PTO payout is when you pay employees the cash value of their unused paid time off at the end of their employment. As an employer, you can typically choose whether or not to give the employee their PTO payout, but some states have specific laws about how to handle PTO payout.

There is no consensus about the number of annual vacation days companies should give in the United States. However, employees in the private sector have an average of 15 vacation days after five years of service. This number may increase to 20 for employees with up to 20 years of service in the private sector.

It’s also important to note that not all types of PTO are considered the same in a legal sense. Some states have laws specifically about unused sick leave (time used to recover from illness), but leave vacation time (time used to rest and relax) to the company’s discretion, and vice versa. Some have laws concerning both.

What’s more, federal employees are generally allowed 11 annual paid holidays, due to the legally required holidays for federal workers in the US. These include:

January 1: New Year’s Day
Third Monday in January: Birthday of Martin Luther King, Jr.
Third Monday in February: Washington’s Birthday
Last Monday in May: Memorial Day
June 19: Juneteenth National Independence Day
July 4: Independence Day
First Monday in September: Labor Day
Second Monday in October: Columbus Day
November 11: Veterans Day
Fourth Thursday in November: Thanksgiving Day
December 25: Christmas Day

It’s also worth noting that, while many states leave this up to the discretion of the employer, certain labor unions may have policies that require PTO payout. Always be familiar with any collective bargaining agreements for local labor unions that pertain to your workforce.

What Is a Use-It-or-Lose-It Policy?

The use-it-or-lose-it policy requires your employees to use their PTO by a certain day or lose it. Most often, it means you cannot transfer the accumulated PTO over to another year past a particular date. These policies are illegal in some states including California, Montana, Nebraska, and more recently, Colorado.

How to Calculate PTO payout

Here's how to calculate an employee’s PTO payout.

First, find out their annual PTO hours. Multiply the number of PTO days by the hours they work in a typical workday. This provides the employee’s total PTO hours for the year. For instance, if an employee has 10 PTO days in a year, and they work 8 hour days, their total PTO hours are calculated as follows: 10 × 8 = 80 hours.
Next, divide this by the number of pay periods to get the number of PTO hours they receive every time they are paid. If the employee is paid monthly, divide the annual PTO hours by 12. If they are paid twice a month, divide by 24. This provides the PTO hours accumulated per pay period. In this case, let's say the employee is paid 12 times a year. So, every pay period, they get 80/12 = 6.666 hours of PTO
Next, multiply this by the time worked to get the employee’s accrued PTO. Do this by multiplying the PTO hours per pay period by the number of pay periods worked. If the employee worked for seven months, their accumulated PTO is 7 × 6.666 = 46.662 hours.
Next, convert it to days if needed: Divide the total PTO hours by 8 to get the number of PTO days. In this case, since they work 8 hours per day and have 46.662 hours of accrued PTO, then it would be 46.662/8 = 5.833 days.
Note that if they have already taken PTO, you’ll need to subtract this from the total accumulated time. If they have taken 8 hours of PTO, this leaves the employee with 38.662 hours total or 4.833 days in this case.
To get the amount owed, multiply the hours by their pay per hour. If the employee is paid $10.00 per hour, the PTO payout owed would be $386.62.

PTO Payout Laws by State

NOTE: This information is correct to our knowledge, however laws can change at any time. For the most up-to-date information, check with your local legislature.

The PTO payout laws are different in every state of the US. For instance, not all states have PTO payout laws, and for those that do, the PTO laws may only apply to certain types of PTO.

Here are the PTO laws in the 50 states of the US and Washington, D.C.

Alabama

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Alaska

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Arizona

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Arkansas

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

California

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

California considers accrued vacation pay as wages and thus must be paid. However, companies are required to only issue payouts for unused sick days if the company policy or employment contract explicitly mandates it.

Colorado

PTO payout required for unused vacation time? Yes. Vacation pay is considered wages protected by the Colorado Wage Act.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Colorado's Healthy Families & Workplace Act (HFWA) states that employees should be allowed to carry up to 48 hours of unused sick leave from one year to another. Even if the company has its own policy for PTO, this requirement must be met.

Connecticut

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Delaware

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

District of Columbia

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Unused sick leave must carry over yearly but won't be paid upon termination. Also, any PTO payout requirement for vacation days is contingent on the agreed contract or policies between the employee and employer.

Florida

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Georgia

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Hawaii

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Idaho

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Illinois

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Accrued vacation days must be paid, no matter the contractual agreement between the employee and employer.

Illinois allows use-it-or-lose-it policies.

Companies are mandated to only issue payouts for unused sick days if the company policy or employment contract explicitly mandates it.

Indiana

PTO payout required for unused vacation time? Yes. Vacation pay is considered a form of compensation covered by the Indiana Wage Payment Statute.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Unused vacation time must be paid. However, companies are allowed to set certain conditions before the accrued amount will be paid out.

Iowa

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Kansas

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Kentucky

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

The state considers vacation pay a form of wages. However, the Supreme Court in Kentucky ruled that "No Kentucky statute requires an employer to compensate an employee for accumulated vacation time. Nor is there an inherent right either to a vacation or to payment for unused vacation time.” Essentially, vacation pay is a matter of contract between employer and employee.

The ruling of the Supreme Court supersedes here.

Louisiana

PTO payout required for unused vacation time? Yes, however, the law is somewhat ambiguous.
PTO payout required for unused sick leave? Yes, however, the law is somewhat ambiguous.

Any Special Exceptions?

Louisiana requires employers to compensate employees for any unused earned vacation time when they leave their jobs. According to the law, vacation pay is considered a form of wages that have been accrued by the employee but not yet used or compensated for prior to their departure. Although Louisiana courts may differ in their interpretation of policies that allow employees to forfeit vacation pay under specific circumstances, some court decisions suggest that employers are generally obliged to pay out unused vacation time, regardless of the reason for separation. To ensure compliance with the law, employers who have policies regarding vacation pay forfeiture should seek guidance from an employment lawyer.

While Louisiana's Wage Payment Act doesn't specifically address sick leave as constituting wages, recent court decisions indicate that when employees fulfill the requirements to earn promised benefits, they become vested rights. The Act applies to all forms of compensation, even those classified as vacation only. Consequently, it is likely that Louisiana mandates employers to compensate employees for any unused paid sick leave upon their departure from the job.

Maine

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Effective January 23, 2023, all unused accrued vacation time must be paid out upon termination or separation for employees in Maine. However, if the employer has 10 employees or less, they are exempt from this rule.

Sick leave is not required to be paid out when an employee leaves the company, however if the employer’s PTO policy combines vacation and sick leave, the payout rules do apply.

Maryland

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? No. The Maryland Department of Labour calls sick leave ‘a contingency of illness’ and thus cannot be claimed at the end of employment.

Any Special Exceptions?

In Maryland, vacation pay is considered wages and must generally be paid to employees in cases of separation. However, there are specific circumstances where employers are not obligated to provide such payment.

This includes situations where there is a written policy that clearly outlines the forfeiture of accrued paid time off (PTO), the employer notifies the employee of their PTO benefits at the start of their employment, and when the terms of the policy explicitly state that the employee is not entitled to receive any unused PTO upon the termination of their employment.

Massachusetts

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Employers must pay accrued vacation pay and cannot enforce any contrary policy.

However, for sick leave, the payment of the accrued amount is up to the policy of the employer. The Massachusetts Wage Act does not consider sick leave as a form of wages.

Michigan

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Minnesota

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

In Minnesota, only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Mississippi

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Missouri

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Montana

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? No, but the law is not totally clear.

Any Special Exceptions?

In Montana, the law is a bit unclear regarding the payout of accrued PTO at separation.

First, according to the Montana Department of Labor and Industry and in line with the Attorney General, vacation time must be considered wages and paid out at separation. But the Montana Department of Labour also says it should be based on an employer's policy.

Although it is not explicitly specified whether the Montana law applies to sick leave or if combined vacation and sick leave policies must be compensated, we recommend employers separate vacation and sick leave in their written policies or contracts. By doing so, any forfeiture terms can be clearly outlined. Additionally, it’s best to obtain written acknowledgment from employees to ensure both clarity and compliance with the stated policies.

Nebraska

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Accrued vacation and sick leave are seen as fringe benefits and are considered wages. However, sick leave isn't mandated to be paid after employee separation unless an agreement states otherwise.

Furthermore, unused accrued PTO may not be paid by the employer to the employee upon termination if the employee does not meet certain requirements stated in the employment contract.

Nevada

PTO payout required for unused vacation time? No, except under certain conditions.
PTO payout required for unused sick leave? No, except under certain conditions.

Any Special Exceptions?

In Nevada, businesses with a workforce of 50 or more employees must offer a designated amount of paid leave that corresponds to the number of hours worked, specifically, one hour of paid leave for every 50 hours worked.

Nevertheless, according to the law, there is no obligation for employers to compensate employees for any unused accrued paid leave upon separation from employment. Employers have the freedom to establish their own PTO policy, encompassing vacation or sick leave, as long as it adheres to the minimum requirements mandated by the law. Unless the employer's policy explicitly guarantees the payout of unused accrued leave, Nevada does not impose a requirement for such compensation.

New Hampshire

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

In New Hampshire, if an employer has a policy or agreement for PTO, it is considered as wages that should be paid based on the conditions stated in the policy or agreement. This means employers can have PTO policies that don't pay out unused PTO when an employee leaves the company as long as the employees acknowledge and accept this policy. The same rules also apply to unused paid sick leave.

New Jersey

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

New Mexico

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

According to the New Mexico Administrative Code, vacation pay is considered a type of wage, and under the New Mexico Wage Payment Act, all unpaid wages must be provided to employees upon separation from employment.

In compliance with New Mexico's Healthy Workplaces Act (HWA), employers are required to offer paid sick leave to employees, granting 1 hour of sick leave for every 30 hours worked. However, the HWA does not mandate employers to compensate employees for any unused sick leave when they leave their jobs. While the law permits the implementation of a single PTO policy that aligns with the requirements of the HWA, it’s unclear whether the exemption for sick leave payout extends to employer-specific sick leave policies. It is likely that employers are not obligated to pay out unused paid sick leave, but any policy lacking explicit adherence to the HWA may require legal clarification.

New York

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Employers in New York may not pay employees accrued vacation pay under certain conditions. However, the employer must have informed the employees in writing of the said conditions. If not, they must pay out unused vacation time.

North Carolina

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

As per the regulations of the North Carolina Wage and Hour Act (NCWHA), once vacation pay is earned, it cannot be revoked unless the employer has a written policy explicitly indicating the possibility of forfeiture. However, even if a forfeiture clause exists, the employee may still have the right to receive their accrued vacation pay when they depart from their job, depending on the precise wording of the clause and the circumstances surrounding their departure.

On the other hand, when it comes to unused sick leave, payment can only be ensured if the employer explicitly promises such compensation.

North Dakota

PTO payout required for unused vacation time? Yes, but with certain conditions.
PTO payout required for unused sick leave? Law is unclear.

Any Special Exceptions?

The North Dakota law doesn't allow any contract or policy that provides for the forfeiture of earned paid time off at employment separation.

However, if an employee quits of their own volition, their unused vacation pay may be held if the employee worked for less than a year, submitted less than five days' notice, and the employer informed said employee of these limitations in writing beforehand.

As for sick leave, in North Dakota, the definition of "paid time off" includes various types of leave that provide compensation like vacation time, personal days, or earned time. If an employer has a separate sick leave policy, it might not be clear if they are required to pay out unused sick leave when an employee leaves. However, it seems that the state's payout requirements for earned paid time off only apply to vacation time, not sick leave. To ensure clarity, North Dakota employers should have a written policy or contract with forfeiture terms and obtain a written acknowledgment from employees regarding unused sick leave.

Ohio

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? Law is unclear.

Any Special Exceptions?

Employers can establish a policy that permits the forfeiture of unused earned vacation time as long as this policy is effectively communicated to employees.

Furthermore, there is no definitive guidance from the Department of Labor or the courts regarding whether the regulations for compensating unused vacation time also extend to paid sick leave. However, considering the court's emphasis on earning vacation time based on length of service and hours worked, it is plausible that this principle could also apply to paid sick leave that is accrued gradually over time.

Oklahoma

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Oregon

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Pennsylvania

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Rhode Island

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Employers may only pay out unused vacation time if the employee has worked with them for more than a year. This is because, after a year, vacation time is considered wages.

South Carolina

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Even though South Carolina includes vacation pay in the definition of wages, the state has clarified that employers should only pay unused PTO if their company policy or employment contract explicitly mandates it.

South Dakota

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Tennessee

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

In Tennessee, PTO is considered a fringe benefit to be determined by the employer. Thus, employers can only pay unused PTO if the company policy or employment contract explicitly mandates it.

Texas

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Utah

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Vermont

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Virginia

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

Only pay out unused PTO if the company policy or employment contract explicitly mandates it.

Washington

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

The State of Washington considers vacation to be a voluntary benefit. Thus, employers can only pay unused PTO if the company policy or employment contract explicitly mandates it.

West Virginia

PTO payout required for unused vacation time? Depends on the wording of the employer’s contract or policy.
PTO payout required for unused sick leave? Depends on the wording of the employer’s contract or policy.

Any Special Exceptions?

In West Virginia, when an employee leaves a company, accrued vacation time is typically paid unless the employer's policy specifies a different time for paying earned fringe benefits (which vacation pay falls under) separate from the employee's departure.

However, the document containing the policy of the company must include how the accrued fringe benefits are calculated and the eligibility conditions. If the policy is too vague, the employer may have to pay the employee.

Finally, if there is no policy at all on accrued vacation or sick leave, then the employer must pay out unused PTO.

Wisconsin

PTO payout required for unused vacation time? No.
PTO payout required for unused sick leave? No.

Any Special Exceptions?

In the state of Wisconsin, when reporting for unemployment insurance, vacation and sick pay are classified as part of an employee's wages. However, it is important to note that the state specifies that the payout of these benefits is subject to the employer's policy. The employer's policy will determine whether they are obliged to compensate employees for any unused accrued benefit pay upon separation from employment. If the employer has a written policy that does not include forfeiture provisions, they are required to provide compensation for any unused vacation pay that the employee has earned when they leave the job.

Wyoming

PTO payout required for unused vacation time? Yes.
PTO payout required for unused sick leave? Yes.

Any Special Exceptions?

In Wyoming, while it is mandatory for employers to compensate employees for any unused earned PTO at the conclusion of their employment, employers have the discretion to implement policies that permit the forfeiture of such earned PTO upon separation. Similarly, employers have the freedom to set criteria that must be fulfilled before any earned sick or vacation leave is paid out.

However, for these policies to be legally valid, they must be explicitly outlined in clear and written terms. Employees must acknowledge and confirm their understanding of these policies in writing as well.

‍FAQ

Here are some of the frequently asked questions about PTO payout laws.

Q: When does a company have to pay out PTO?

A: Companies have to pay out for unused PTO when an employee's employment has been terminated, and the state's law, employment contract, or employer's policy has mandated them to do so.

Q: What happens to PTO when an employee leaves a job?

A: When an employee leaves a job, their PTO may or may not be paid out. Again, this is contingent on the state laws and the employer's policy. Suppose the terminated employee is in a state that regulates the employer's policies regarding PTO payout. In that case, the accrued PTO is calculated and the corresponding value is paid to the employee upon termination.

Q: Which US states require PTO payout?

A: Here are the US states that require PTO payout.

California
Colorado
Illinois
Indiana
Louisiana
Maine
Maryland
Massachusetts
Minnesota
Maine
Wyoming

Q: Which states prohibit use-it-or-lose-it PTO policies?

A: These are the states that prohibit use-it-or-lose-it policies.

Nebraska
Montana
Colorado
California

Q: Which US states have no PTO payout regulations?

A: Here are the US states that have no PTO payout regulations

South Dakota
Mississippi
Georgia
Florida
Alabama

Q: Is PTO required by law?

A: No, as per the Fair Labor Standards Act (FLSA), there is no obligation to provide compensation for time that employees do not work, including vacation days, holidays, and sick leave. The provision of payment for such time off is typically determined through a mutual agreement between the employer and the employee.

Final Thoughts

Whether or not your employee can cash in on their PTO after their job ends depends mostly on the state. Each state has its own rules, regulations, and exceptions governing PTO. As employers, it's always best to have a clear, non-ambiguous written policy that your employee has duly acknowledged and aligns with your state of residence.

It’s also important to recognize how complicated it can be to manage payroll, benefits, and other forms of compensation like paid time off. Doing this in basic spreadsheets or other types of software not built specifically for workforce management can be time-consuming, prone to error, and expensive. As an HR or payroll professional, you need technology to streamline and automate certain payroll calculations like overtime, union dues, deductions, PTO payout, and more.

Criterion HCM provides exactly that, with software designed to help companies process payroll quickly and accurately. You can configure the system to meet your needs and our team is always looking for ways to improve the software to both make the experience better and help your team remain in compliance with current laws.

Book a demo to learn how Criterion HCM can streamline your time off and payroll workflows.

DISCLAIMER: Note that laws surrounding PTO and similar subjects may change frequently. This article is meant as a general reference and should not be considered legal advice. It's always best to consult a lawyer before acting on any legal matter.