1. Starting a new job
    2. What Happens to Your Unused PTO When You Leave a Company?

    By Indeed Editorial Team

    Published January 3, 2022

    Many companies allow employees to earn paid time off (PTO) so they can take vacation, sick leave or personal days. Depending on the company policy or state laws, some businesses may pay an employee for their unused PTO when they leave their job. If you're planning to leave a company, you may want to know what happens to your accrued PTO when you leave. In this article, we define unused PTO, explain what happens to this unused time off and provide a guide to help you understand how PTO works when you leave a company.

    Related: What Is PTO? Definition, Types and Tips

    What is unused PTO?

    Unused PTO is paid time off that an employee has earned while working at a company but not yet taken. While there are no federal or state laws requiring companies to offer PTO to their employees, many businesses choose to have a PTO policy to improve their employees' well-being and job satisfaction. A company's PTO policy may include vacation leave, sick time, holidays, personal days and family or medical leave.

    Often, companies establish a PTO policy based on industry standards or expectations. Many companies have policies that allow employees to accrue PTO by hours, days, weeks or pay periods. For example, an employee may earn five hours of PTO every two weeks. Some companies allow employees to accrue more PTO the longer they stay with a company. For example, employees may earn four weeks of PTO per year during their first five years with a company and then earn five weeks of annual PTO after five years.

    Related: How To Calculate PTO

    What happens to unused PTO?

    Employees may have unused PTO if they're unable to use their time off within a certain period, such as one year. Others may have unused PTO when they leave a company. While some states have laws mandating companies to pay employees for their accrued PTO when they leave, other states have no such regulations. Often, a company sets its own policy for unused PTO. Here are a few common PTO policies in many companies:

    Accrual cap

    Some companies set a limit to how much PTO employees can accrue while working for the company. For example, a company may allow an employee to earn no more than four weeks of PTO at one time. After employees reach this cap, they're unable to earn any more PTO until they use some of their vacation time. This policy encourages employees to use their PTO after reaching their cap.

    Accrual rollover

    Many companies allow employees to carry over their accrued PTO. For example, at the end of the year, companies may allow employees to roll over any of their unused vacation days into the next year. Some companies with rollover policies may limit the amount of PTO an employee can carry over. For example, they may allow employees to carry over five days of PTO each year. Many companies use this policy to give employees some flexibility with their PTO while still encouraging them to take time off.

    "Use it or lose it" policy

    In contrast to the accrual cap and rollover policies, the "use it or lose it" policy requires employees to take their PTO during a certain time frame. If employees are unable to use their PTO during that time, they forfeit those hours. For example, a company may require employees to use their annual three weeks of PTO by the end of the year. Companies may use this policy to make sure their employees are taking time off each year.

    Related: Guide To Understanding How PTO Works

    Different policies for unused PTO

    In many states, companies can set their own policies for unused PTO. Those states allow employers to decide whether to pay employees for their accrued PTO when they leave a company. In contrast, a few states have laws requiring companies to pay employees for their accrued PTO when they leave. Use this state-by-state guide to help you understand the laws where you live. Laws for each state are subject to change, so check with your state's Department of Labor for the most recent guidelines.

    States with no unused PTO laws

    Only a few states have no laws regarding the payment of unused PTO to employees when they leave a company. In these states, you may still be eligible to receive payment for your PTO depending on your company's policy. States with no PTO regulations are:

    • Florida

    • Georgia

    • South Dakota

    Related: Average Vacation Time: Definition and U.S. Averages

    States that require unused PTO payments with company policy

    Many states have laws requiring companies to pay employees for accrued PTO if it's stated in the company's policy. In these states, you may be entitled to receive a payment for your PTO if your employer has a policy to pay employees for this time when they leave. These states are:

    • Alabama

    • Alaska

    • Arizona

    • Arkansas

    • Connecticut

    • Delaware

    • District of Columbia

    • Hawaii

    • Idaho

    • Illinois

    • Indiana

    • Iowa

    • Kentucky

    • Maine

    • Maryland

    • Michigan

    • Minnesota

    • Mississippi

    • Missouri

    • Montana

    • Nevada

    • New Hampshire

    • New Jersey

    • New Mexico

    • New York

    • North Carolina

    • Ohio

    • Oklahoma

    • Oregon

    • Pennsylvania

    • South Carolina

    • Tennessee

    • Texas

    • Utah

    • Vermont

    • Virginia

    • Washington

    • West Virginia

    • Wisconsin

    • Wyoming

    States with unused PTO laws

    A few states have laws requiring companies to pay employees for their unused PTO without exceptions. If you work in these states, you can generally expect to receive payment for your PTO when you leave a company. These states are:

    • California

    • Colorado

    • Louisiana

    • Massachusetts

    • Nebraska

    States with exceptions to PTO laws

    Some states require companies to pay unused PTO, except in some situations. In these states, you may be eligible to receive payment for your PTO if you meet certain requirements. These states are:

    Kansas

    While Kansas requires employers to pay unused PTO if it's part of their company policy, the state allows employers to restrict their PTO policies. In Kansas, companies may set an anniversary date for employees when they can start earning PTO. If an employee leaves before their anniversary date, they aren't entitled to receive payment for PTO.

    North Dakota

    In general, North Dakota requires companies to pay employees for their unused PTO when they leave, though the state law has some exceptions. When an employee leaves voluntarily, there are some circumstances in which they may not receive payment for their accrued PTO. Companies in North Dakota can withhold payment for unused PTO if:

    • The company gave the employee a written notice about PTO payment limitations

    • The employee worked at the company for less than one year

    • The employee gave less than five days' notice, either verbally or in writing

    Rhode Island

    Rhode Island requires companies to pay employees for unused PTO if they've worked there for longer than one year. After one year, employees who leave a company can receive payment for any PTO they have accrued. Employees can accrue PTO through collective bargaining, a company policy or a written or verbal agreement with their employer.

    Tips for determining your company's PTO policy

    Here are a few tips to help you determine whether your company pays employees for unused PTO when they leave:

    • Review the employee handbook. Most companies that offer PTO to employees have written policies stating how they handle unused PTO when an employee leaves a company. Review the employee handbook or your employee contract to find this information.

    • Speak with the HR department. If you're unable to find your company's PTO policy in the handbook, ask your company's human resources (HR) department for this information. It's helpful if an HR representative can email you the PTO policy so you have it in writing.

    • Check early. When you begin to consider leaving your job, research your company's PTO policy so you have this information before you submit your notice. Checking early can help you decide whether to receive your unused PTO as a payment or use your accrued PTO before you leave.

    Disclaimer: This article is for information purposes only and is not intended to constitute legal advice; you should consult with an attorney for any legal issues you may be experiencing.

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