Paid time off (PTO) is a set number of hours employees earn for vacation, sick days, or personal time, and the policy depends on the employer.
What it is
Paid time off (PTO) is a bank of paid hours an employer gives for vacation, sick days and personal reasons.
Law
There is no federal law requiring PTO in the US. The US is the only advanced economy without national paid vacation. Some states and cities require paid sick leave (about 13 states and DC).
Average
The BLS reports workers get an average of 11 vacation days after one year and 15 after five years.
Accrual
Earned per pay period (e.g., 1.54 hours per biweekly check for 10 days a year) or granted upfront.
Payout
Some states require unused PTO to be paid when you leave (California, for example).
Rollover
Policies vary: use-it-or-lose-it or carryover with a cap.
Holidays
Usually separate from PTO.
Request
Follow your handbook.
Common PTO policy types
- Traditional: separate vacation, sick and personal days.
- Combined PTO bank: one pool for all reasons.
- Unlimited PTO: no fixed amount, but approval is needed, and studies suggest employees often take less time off than with fixed policies.
US law
The United States has no federal law requiring paid vacation. The Fair Labor Standards Act does not require it. Some states and cities require paid sick leave, and a number of states have paid family leave programs. Check your state’s rules.
Average amounts
The Bureau of Labor Statistics reports that private industry workers in the US get on average about 11 paid vacation days after 1 year of service and about 15 after 5 years. Many employers also offer around 7 to 11 paid holidays.
Accrual methods
- Per pay period: for example, 3.08 hours each biweekly period to reach 80 hours a year.
- Front loaded: the full annual amount on January 1 or the hire date.
- Hours worked: 1 hour of PTO for each 30 hours worked.
Carryover and caps
Many employers let you carry over a limited number of days, or cap the total balance at a certain amount. “Use it or lose it” policies are banned in some states, such as California, where earned vacation is wages.
Payout at termination
Some states, including California, Colorado and Illinois, require payout of unused vacation, while others depend on the employer’s written policy.
Requesting time off
Check the employee handbook, submit your request early through the HR system or manager, and confirm approval in writing before booking nonrefundable travel.
Part-time workers
Eligibility for part-time employees depends on the employer, and many provide a prorated amount.
Tax treatment
PTO pay is taxed like regular wages.
Averages and legal rules
The United States has no federal law requiring paid vacation or paid time off. The Bureau of Labor Statistics reports that private industry workers average about 11 paid vacation days after 1 year of service, about 15 after 5 years, about 17 after 10 years and about 20 after 20 years. Paid sick leave is required by many states and cities. The Family and Medical Leave Act gives eligible employees up to 12 weeks of unpaid, job protected leave. Employers set their own rules in handbooks or contracts, and they may use separate vacation and sick banks, or a combined PTO bank.
Accrual, caps and payouts
PTO is usually accrued per hour or pay period, for example 1 hour for every 30 hours worked, or granted at the start of the year. Many companies cap carryover or accrual, and “use it or lose it” policies are allowed in some states but banned in others, such as California. On leaving a job, a few states, such as California, Colorado and Illinois, require payout of accrued unused vacation, while others depend on company policy. Request time off in advance in writing and check blackout periods. Part time employees may accrue at a prorated rate. Read the policy before planning big trips.
Based on data from the Bureau of Labor Statistics and the US Department of Labor
