When you leave a job with unused paid time off, the balance may or may not be paid out. Whether it is depends on where you work and on your employer’s written policy. How much it is worth is a simpler calculation.
Is a payout required?
The Department of Labor explains that the federal Fair Labor Standards Act does not require payment for time not worked, such as vacations. So federal law does not require a PTO payout. State law and employer policy fill the gap:
- Some states treat earned vacation as wages that must be paid at the end of employment. California’s Labor Commissioner, for example, states that earned, unused vacation must be paid when employment ends, and treats use-it-or-lose-it policies as illegal.
- Other states allow written policies that limit or forfeit unused vacation.
- Employers can always choose to pay more than the law requires.
Read your employee handbook or offer letter, and check your state labor department’s website.
Calculating the payout
Payout = unused hours paid × hourly rate
Hourly example
40 unused hours at $20.00 an hour: 40 × $20.00 = $800.00 before taxes.
Salaried example
Convert the salary to an hourly rate first:
Hourly rate = annual salary ÷ (hours per week × 52)
$62,000 at 40 hours a week is $62,000 ÷ 2,080 = $29.81 an hour. With 96 unused hours, the full balance is worth about $2,861.54.
If the policy pays out only up to 80 hours, the payout is 80 × $29.81 ≈ $2,384.62, and 16 hours are not paid.
Things that change the amount
- Payout caps or percentages. Some policies pay a maximum number of hours or a share of the balance.
- Combined PTO banks. When vacation and sick time share one balance, the payout rules can apply differently than to a vacation-only balance.
- Final accruals. Hours earned in your last pay period may be added before the payout.
- Taxes. A payout is paid as wages, so taxes and deductions apply to it.
Tools
- PTO payout calculator: value your balance with caps and percentages.
- PTO accrual calculator: see how your balance builds up.
- Salary to hourly calculator: find the hourly rate behind a salary.
Sources
- U.S. Department of Labor, Vacation Leave
- California Labor Commissioner, Vacation FAQ (example of a state rule)
About this guide. Written for US employees as general information, not legal or tax advice. Rules can differ by state, employer, and contract. See our methodology and disclaimer.