What is Paid Time Off? 

Paid time off, is the number of paid vacation days an employee can take within a period of time. PTO can be classified in terms of personal time off, sick leave, and parental leave. 

Is Paid Time Off Mandatory? 

In the United States, there is no federal law that requires private employers to give paid time off. But if they do offer PTO, they need to adhere to the standards set by the Equal Employment Opportunity Commission

According to the EEOC, an employer’s PTO policy cannot discriminate on the basis of ethnicity, color, religion, sex, or disability. But they can segment leave policies on the basis of tenure, location, employment status, and hours spent at work.

What Happens to Unused Paid Time Off? 

Americans are notorious for being workaholics and 52% of American workers don’t use up all their paid time off during the year. 

So what happens to this unused time off when an employee leaves?   

While there are no federal laws that require employers to pay out unused PTO, an employer must pay out unused PTO if:

  • They operate in a state that mandates PTO payout
  • The employee works from a state that mandates PTO payout 
  • The employee’s employment contract includes the clause

What are the Types of PTO Policies? 

One-Time PTO Bank

In this method, the employee is given a total number of PTO days for the year. If they join anytime in between the year, they are given these days are pro-rated. 

Accrued Time Off

When an employer uses accrued time off policy, it means that an employee is granted a fixed number of days as PTO for time worked. 

For instance, every employee is given 1.5 days of accrued paid time off for every month that they work. 

Unlimited Time Off

This PTO policy is discretionary. Employees can apply for “unlimited” time off but it is subject to approval by their manager. 

Common Leave Types Offered in a PTO Policy

There can be many other leave types offered, but these are the most commonly used ones. 

Tracking Vacations and Approving Leaves with AB


Related Terms
Unpaid Time Off
Time Off Management
PTO Banks