PTO Payout Laws by State — Guide for 2025

When your employment ends, what happens to the unused PTO hours you’ve accumulated in the meantime?

Relevant federal regulations, mostly contained in the Fair Labor Standards Act (FLSA), don’t require employers to provide PTO payout for unused days. 

However, state regulations vary and some states allow you to request payment for unused PTO upon leaving a job. 

Since PTO payout laws differ from state to state, this guide’ll cover:

• Basics of PTO payout laws in the US,
• PTO payout laws by state, and
• Frequently asked questions about PTO payout laws.

So, let’s begin.

*Note: The information regarding PTO payout laws and regulations by state has been checked and updated for 2025. 

• Federal law doesn’t require unused PTO payouts from employers.
• In most states, unused PTO payouts are regulated by individual employment agreements and company policies. 
• If an employment agreement promises unused PTO payouts, almost all states have specific penalties for employers that withhold payment. 
• Most states allow employers to implement use-it-or-lose-it policies, establishing a deadline for using accrued PTO.
• In practice, most use-it-or-lose-it policies prevent employees from carrying over vacation leave from one year to the next.

PTO payout laws in the US — the basics

Before we get to the PTO payout laws by state, we’ll cover some basics related to paid time off, such as::

• What is PTO,
• What is PTO payout,
• What is vacation pay and how does it work, and
• What is a use-it-or-lose-it policy.

Let’s dive in.

What is PTO?

PTO or Paid Time Off is a benefit that employees receive to take leave from work while still getting paid. Employees usually take time off for vacation, sickness, or other personal matters.

Some of the most common types of PTO include:

1. Holiday leave — time off for holidays like Christmas Day, Independence Day, Thanksgiving, etc., 
2. Sick leave — time off to recover from an injury or illness, 
3. Bereavement leave — time to come to terms with loss, make funeral arrangements, and similar, in case of the death of a family member, close relative, etc.,
4. Vacation leave — to take a break from work to rest, spend time with family and friends, travel, etc.,
5. Family leave — to take care of a seriously ill family member or bond with a newborn or adopted child,
6. Military leave — to perform duties (active or inactive) in the National Guard or as a reserve of the Armed Forces, and
7. Jury leave — to take time off to report for jury duty. 

Bear in mind that both state laws and employment agreements dictate if any type of leave will be paid or not, and PTO accrual rates vary across states and industries.

What is vacation pay and how does it work?

Vacation pay is the monetary compensation employees receive when they take paid time off from work. 

It is not to be confused with vacation time, which is the number of paid vacation days employees have accrued with their current employer. 

Typically, the daily compensation employees receive on vacation time is equivalent to their usual daily rate. However, the compensation may vary based on their employment agreement and the company’s policies. 

This type of PTO is used for an employee’s break with family, partner, or other personal reasons. 

According to the US Bureau of Labor Statistics, the average number of paid vacation days is 11 days after 1 year of work in private industries and 13 days after 1 year in state and local governments.

Therefore, how many days of PTO you get depends on:

• Your length of employment, 
• Whether you work in the public or private sectors, and 
• Your employer.

🎓 Want to learn more about the difference between PTO and vacation? Check out our detailed blog post on the subject: PTO vs. Vacation: What Is the Difference?

What is PTO payout?

A PTO payout is a monetary compensation for employees’ unused paid time off upon termination of their employment agreement. 

Depending on company policy and state regulations, the employer may give a PTO payout to an employee for their unused paid time off upon termination, resignation, or retirement. Some employers may also pay out unused PTO at the end of the calendar year. 

PTO payout is based on the accrued vacation time an employee hasn’t used by the end of their employment. 

Most employers don’t view other types of PTO (like sick or bereavement leave) as earned wages, and don’t provide payouts for them when employment is terminated. Even in states where PTO payouts are mandatory by state law, the relevant regulations don’t prescribe payouts for other types of leave. 

A company’s PTO policy defines: 

• How much PTO an employer offers, 
• How an employee can accrue PTO, and 
• How an employee can use it. 

Companies with unlimited PTO policies generally don’t offer any PTO payouts. When employees don’t accrue PTO days based on their employment agreement, their PTO time isn’t considered earned wages. As a result, there’s no unused PTO to pay out as wages at the end of employment. 

What is a use-it-or-lose-it policy?

A use-it-or-lose-it policy is a PTO rule sometimes included in employment agreements. It stipulates that employees must use their PTO by a certain date (for example, by the end of the calendar year) or forfeit it. 

In other words, if you don’t use your PTO by a certain date, your employer can take away your unused PTO days. 

What’s more, this type of time off policy doesn’t allow employees to transfer unused PTO from one year into the next year.

In some states, use-it-or-lose-it policies are illegal. In others, employers can implement a use-it-or-lose-it policy as long as it is clearly explained and presented to all workers.

PTO payout laws by state

PTO payout laws differ from state to state. 

Some states don’t require PTO payout by law as it mostly depends on employment agreements. 

In other states, PTO payouts are mandatory. However, this only applies to earned vacation time. Even in states with mandatory PTO payouts, the law doesn’t force employers to pay out unused sick leave and other types of PTO. 

Here’s a table that outlines PTO payout laws in each state: 

State	Is vacation pay required by state law?	Are use-it-or-lose-it policies legal?	Are unused PTO payouts required by state law?	What are potential employer penalties for not paying out unused PTO?
Alabama	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	Specific penalties aren’t outlined in Alabama state law, but the court may award damages after civil litigation.
Alaska	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay the employee’s regular wage for each day of the delay, up to 90 working days.
Arizona	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay treble damages (3 times the amount of owed wages), plus interest on the owed amount.
Arkansas	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay double the amount of owed wages.
California	No, vacation pay depends on the employment agreement and company policies.	No, use-it-or-lose-it policies are illegal.	Yes, PTO payouts are required by state law.	An employer must pay employee’s regular wage for each day of the delay, up to 30 working days plus interest.
Colorado	No, vacation pay depends on the employment agreement and company policies.	No, use-it-or-lose-it policies are illegal.	Yes, PTO payouts are required by state law.	An employer must pay twice the amount of owed wages or $1,000 (whichever is greater) for accidental failure to pay. Willful failure increases the penalty by 50%.
Connecticut	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay double the amount of owed wages plus legal fees.
Delaware	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay 10% of unpaid wages for each day of the delay, except Sundays and legal holidays, plus a civil penalty of between $1,000 and $5,000.
Florida	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay legal fees after a breach of contract dispute.
Georgia	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer is liable for a misdemeanor charge, potentially resulting in jail time and/or a $1,000 fine.
District of Columbia	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay 10% of the owed amount per each working day the payment is delayed up to 3 times the owed amount.
Hawaii	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay the total amount of owed wages in damages with a yearly interest of 6% and a fine of between $2,000 and $10,000.
Idaho	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay a $750 fine, or up to 3 times the owed amount if a wage claim is won at the District Court.
Illinois	Yes, state law mandates at least 40 hours of paid leave in a 12-month period to every employee.	No, use-it-or-lose-it policies are illegal.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay 5% of the owed amount for each month of the delay and an administrative fee of between $250 and $1,000. Employers who fail to comply with an order to pay from the state’s Department of Labor also pay a penalty of 20% of the unpaid wages and a penalty of 1% of the unpaid wages to the employee for each day the payment is delayed.
Indiana	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	Yes, PTO payouts are required by law but only if the requirements from the employment agreement have been met.	An employer must pay up to two times the owed amount, if payment has been withheld willfully.
Iowa	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay 5% of the owed amount for each day of the delay.
Kansas	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	If the employer has withheld payment willfully, they must pay an additional 1% of the owed amount for each day of the delay (from the 9th day, excluding Sundays and holidays), up to 100% of the owed.
Kentucky	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay a fine ranging from $100 and $1,000.
Louisiana	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	Yes, PTO payouts are required by state law.	An employer must pay up to 90 days of wages at the employee’s daily rate or full wages at the employee’s rate for the period of the delay, whichever is less.
Maine	Yes, employers with more than 10 employees must provide 1 hour of paid leave for every 40 hours worked, up to 40 hours per year.	Use-it-or-lose-it policies are allowed for separate vacation PTO if outlined in employment agreements or company policies but not for the 40 hours of state-mandated PTO.	Yes, PTO payouts are required by law for employers with more than 10 employees (excluding public employees).	An employer must pay a reasonable interest rate on the owed amount, attorney fees and 2 times the unpaid wages in damages.
Maryland	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay up to 3 times the owed amount, plus attorney’s fees.
Massachusetts	No, vacation pay depends on the employment agreement and company policies.	Yes, if outlined in employment agreements or company policies, and if employees have a reasonable opportunity to use PTO within the time limit.	Yes, PTO payouts are required by law unless the employee was terminated due to their fault or delinquency.	An employer must pay treble damages plus legal fees.
Michigan	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay damages up to twice the owed amount, legal fees, and a $300 civil penalty.
Minnesota	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay an amount equal to the employee’s average daily earnings at their regular pay rate for each day of the delay, up to 15 days.
Mississippi	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay potential damages awarded by the court in a breach of contract claim.
Missouri	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay interest on the owed amount, plus legal fees.
Montana	No, vacation pay depends on the employment agreement and company policies.	No, use-it-or-lose-it policies are illegal.	Yes, PTO payouts are required by state law.	An employer must pay 110% of the owed amount.
Nebraska	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	Yes, PTO payouts are required by state law.	An employer must pay two times the amount of unpaid wages, if the payment was withheld willfully.
Nevada	Yes, employers that have been in operation for more than 2 years and have 50 or more employees must provide 0.01923 hours of paid leave to full-time employees for each hour worked, except for temporary, seasonal, or on-call workers.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay an administrative penalty of up to $5,000 and interest on the owed amount.
New Hampshire	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay 10% of the owed amount for each day of the delay, except Sundays and holidays, up to 100% of owed wages.
New Jersey	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay a fine ranging from $500 to $1,000 for the first violation, from $1,000 to $2,000 for subsequent violations, as well as damages up to 200% of the unpaid amount and legal fees.
New Mexico	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer is liable for a misdemeanor charge, plus an additional 60 days of wages.
New York	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	Yes, PTO payouts are required by law unless employment agreements or company policies state otherwise.	An employer may be charged with an offense classified as larceny and treated as either a misdemeanor (up to $1,000 owed) or a felony (over $1,000 owed).
North Carolina	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	Yes, PTO payouts are required by law unless employment agreements or company policies state otherwise.	An employer must pay damages of up to 100% of the owed amount, interest on the owed amount, and legal fees.
North Dakota	No, vacation pay depends on the employment agreement and company policies.	Yes, if outlined in employment agreements or company policies, and if employees have a reasonable amount of time to use this PTO.	Yes, PTO payouts are required by law except in cases of voluntary separation, where an employee has worked for less than 1 year or provided fewer than 5 days of notice. Employers also don’t have to pay out awarded but not accrued PTO.	An employer must pay up to 30 additional days of wages, depending on the length of the delay, plus interest on the owed amount.
Ohio	Yes, vacation pay is required by law for public sector employees. Vacation pay in the private sector depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	Yes, PTO payouts are required by law for public sector employees. In the private sector, PTO payouts depend on the employment agreement and company policies.	An employer must pay damages equal to 6% of unpaid wages or $200, whichever is greater.
Oklahoma	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay damages equal to 2% for each day the payment is overdue, up to 100% of the owed amount. Misdemeanor charges resulting in 6 months of jail time, a $500 fine, or both.
Oregon	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay a civil penalty of $1,000, plus wages at the employee’s regular rate for up to 30 days, depending on the length of the delay.
Pennsylvania	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	30 days after the scheduled payday, the penalty includes 25% of the unpaid amount or $500, whichever is greater. Employers may also be liable for legal fees and face a misdemeanor charge. If the employer does not explain their failure to pay within 10 days after receiving a claim, they are also liable for 10% of the unpaid wages.
Rhode Island	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	Yes, PTO payouts are required by law after one year of employment.	For missing wages up to $1,500, employers face misdemeanor charges that may result in jail time and a minimum fine of $400. For missing wages over $1,500, they may face felony charges with a fine of up to $5,000 and jail time.
South Carolina	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay a civil penalty of a maximum of $100 and up to 3 times the amount of owed wages, plus legal fees.
Tennessee	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer may face a misdemeanor charge with a fine of up to $500 and a civil penalty between $500 and $1,000.
Texas	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay an administrative penalty of up to $1,000. For intentional nonpayment, an employer may be charged with a third-degree felony, potentially resulting in a fine of up to $10,000 and jail time.
Utah	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay wages for up to 60 days, depending on the length of the delay. Also, a penalty of 5% of unpaid wages for each day of the delay, up to 20 days.
Vermont	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay a civil penalty of up to $100. For intentional non-payment, employers may also face a civil penalty of up to $5,000.
Virginia	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay a civil penalty of up to $1,000. For intentional non-payment of wages up to $10,000, employers may face a misdemeanor charge, or a felony charge for amounts greater than $10,000. Employers may also be liable for 100% of the unpaid wages in damages and a yearly interest of 8%.
Washington	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay up to 2 times the amount of unpaid wages in damages, plus 1% per month in interest and attorney’s fees.
West Virginia	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay twice the amount of unpaid wages in damages and legal fees.
Wisconsin	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer must pay up to $500 in fines, potential jail time, and up to 100% of the unpaid amount in damages.
Wyoming	No, vacation pay depends on the employment agreement and company policies.	Use-it-or-lose-it policies are allowed if outlined in employment agreements or company policies.	No, PTO payouts are required only if promised in employment agreements and company policies.	An employer may face a misdemeanor charge and up to $200 for each day of the offense. Also, employers may be liable for up to 100% of the unpaid amount in damages.

FAQs about PTO payout laws by state

To provide more helpful information about PTO payout laws, we’ve answered some of the most frequently asked questions on the topic.

What happens to your PTO when you leave a job?

Depending on the company’s policy and state laws, employers may or may not pay their employees for earned and unused paid time off after they leave a job. 

That being said, some employers can choose not to provide PTO payout after termination (if no state law requires them to do so).

Only a few states have regulated the employer’s policy on payment of unused vacation time, but in most cases, employers set their own rules for PTO payout. 

Therefore, if you’re considering leaving your job, check your employer’s PTO policy to see if they pay out earned paid time off upon separation of employment.

🎓 Need some useful PTO templates to present your PTO policy to your employees? Here are 11 PTO policy templates that you can use for free: PTO Policy Templates

In what states is PTO payout required?

If a state you work in doesn’t regulate PTO payouts, see if your employer has a PTO policy stating your rights to PTO payout upon employment termination.

Most of the states that require payment for unused paid time off have laws that only apply to earned vacation time. Also, some states require PTO payout, but only after certain conditions are met, and others classify vacation pay as wages and include them in an employee’s final paycheck.

To see the states that have laws requiring payment of the unused PTO upon termination, take a look at the list below:

• California,
• Colorado,
• Illinois,
• Indiana,
• Louisiana,
• Maine,
• Massachusetts, 
• Nebraska,
• North Dakota, and
• Rhode Island.

For instance, regarding North Dakota PTO payouts, private employers may impose certain limitations depending on whether the employee separates from them voluntarily or terminates their employment for some other reason.

Also, according to the State of Rhode Island Department of Labor and Training, if the employer provides vacation and the employee works for them for at least 1 year, they must pay that employee for any remaining accrued vacation time upon termination.

Which states allow companies to decide on PTO payout?  

In the majority of states, an employer is obligated to provide PTO payout only if their company policies and/or the employment agreement clearly promise PTO payout. 

These are the states where the company’s policy (or the employment agreement/contract) dictates whether unused PTO is paid upon termination:

• Alaska,
• Arizona,
• Arkansas,
• Connecticut,
• Delaware,
• Florida, 
• Georgia,
• District of Columbia,
• Hawaii,
• Idaho,
• Iowa,
• Kansas,
• Kentucky,
• Maryland,
• Michigan,
• Minnesota,
• Missouri,
• Mississippi,
• 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, and
• Wyoming.

Which US states have no PTO payout regulations?

Certain US states have no statutory requirements regarding the payment of accrued vacation after an employee is discharged or quits a job. In these states, you should also refer to your employment agreement and company policies.

These are the states that have no PTO payout laws:

• Alabama,
• Florida,
• Georgia,
• Mississippi, and
• South Dakota.

Which states prohibit a use-it-or-lose-it paid time off policy?

Some state laws ban the implementation of use-it-or-lose-it policies, making the relevant clauses null even if they exist in your employment agreement or company policies.  

The states where the use-it-or-lose-it policy is prohibited are:

• California,
• Colorado,
• Louisiana,
• Maine,
• Massachusetts,
• Montana, and
• Nebraska.

Is PTO required by law?

There is no federal law mandating that employers must offer PTO to employees. 

As the Fair Labor Standards Act (FLSA) doesn’t require employers to pay employees for the days they’re not working such as vacations or holidays, PTO is regarded as more of an agreement between an employer and an employee.

However, despite the lack of laws requiring them to pay employees for time not worked, most employers choose to offer paid time off to their employees to boost morale and increase employee productivity.

🎓 Want to learn more about the importance of measuring employee productivity and the best measurement methods? Check out our blog post on this subject: How to Measure Employee Productivity

How are payouts for unused vacation days calculated?

To calculate how much they owe employees for unused PTO, employers have to determine their total PTO hours and calculate their PTO payout, but also withhold taxes according to the guidelines provided by the IRS. 

As the IRS states, vacation pay is not always treated as supplemental wages, that is, wages in addition to regular wages. However, when vacation pay is paid as a vacation payout, it is treated as a supplemental wage payment and subject to a flat 22% supplemental income tax.

For example, to calculate the PTO payout for an hourly employee, the employer has to:

• Determine the total PTO hours the employee has accrued, 
• Calculate how much payout they’ve earned before tax deductions, and 
• Withhold taxes. 

To explain in more detail how payment for paid time off can be calculated, we’ll give you an example.

Let’s say an employee accrued 30 hours of PTO, that is, accumulated 30 hours of PTO at the end of their employment. To calculate how much payout they’ve earned before tax deductions, we’ll say they make $13 per hour. As the employee has 30 hours of PTO and their hourly rate of pay is $13, this is how we calculate how much PTO payout they’ve earned:

$13 per hour x 30 PTO hours accrued = $390 of the PTO payout before taxes the employee has earned

Now that the employer knows how much PTO payout the employee has earned, they can multiply this number by the federal supplemental tax rate. 

They do it like this:

$390 x the supplemental income flat rate tax of 22%(0.22) = $85.80 which is how much the employer should withhold from the PTO payout for federal income taxes

Do companies in New York pay unused vacation time?

According to the New York State Department of Labor, whether an employee must get paid for unused PTO depends on the established rules of the employer’s vacation policy.

However, if an employee has earned vacation time and there’s no written forfeit policy, the employer must pay out the unused PTO upon termination. This forfeit policy would have to state employees must use the PTO within a certain pay period.

Therefore, in New York, if a company doesn’t have a written policy that forfeits your right to be paid for unused earned vacation, employers are required to pay you for your unused paid time off.

🎓 For more information about New York labor laws, read our ultimate New York Labor Laws Guide: New York Labor Laws Guide

Do I get paid for unused sick days after I quit?

The FLSA doesn’t require employers to pay employees for sick leave. However, as the US Department of Labor explains, “for companies subject to the Family and Medical Leave Act (FMLA), the Act does require unpaid sick leave.”

As for paid sick leave, currently, residents of 14 states, along with Washington, D.C., have the right to paid sick leave under state law.

Although there are no federal laws requiring employers to pay for unused sick leave, some employers may choose to pay accrued sick leave upon termination of employment.

So, whether you get paid for unused sick days after you quit your job depends on several factors:

• Whether the state you work in has paid sick time laws requiring employers to pay for unused sick days upon termination of employment,
• Whether your employer has a PTO policy that includes paid sick leave, and if they have it, whether that policy clearly states what happens to your accrued sick leave upon termination, and
• Whether your employer is required by a collective bargaining agreement or some other legally binding agreement to pay for accrued sick time when an employee leaves their employment.

For example, according to the California Labor and Workforce Development Agency, paid vacation benefits are considered wages and must be paid to the employee through their final paycheck in California. 

However, an employee doesn’t have the right to cash out their unused sick days unless their employer’s policy states that these days have to be paid.

🎓 Need more information about minimum wage, overtime, breaks, and other important labor regulations in California? Take a look at our California Labor Laws Guide: California Labor Laws Guide

Accrued PTO payout conclusion and disclaimer

As every state has its own rules and regulations regarding payment of unused paid time off, check whether your state regulates unused PTO payouts upon termination.

For that purpose, see if:

• Your state has a law requiring your employer to pay for unused PTO upon termination, and
• Your employer has a PTO policy that clearly states your right to a PTO payout.

We hope this PTO payout laws by state guide has been helpful. We also advise you to check out links we’ve provided, as most of them lead you to official government websites and other relevant sources.

Please note that this guide was updated and checked in Q1 of 2025, so any changes to PTO payout laws that were made later may not be included.

We strongly advise you to consult with the appropriate institutions and/or certified representatives before acting on any legal matters.

Clockify is not responsible for any losses or risks incurred, should this guide be used without further guidance from legal or tax advisors.

Are you an employer looking for a user-friendly solution to keep track of your employees’ vacation time and work hours? As a trusted time tracking platform, Clockify allows you to effortlessly monitor and calculate billable hours and vacation time. With Clockify, you can save time, enhance efficiency, and stay compliant with PTO payout laws.