Paid time off (PTO): how accrual works and what the law says

What PTO is

Paid time off is time away from work that your employer pays. Some employers give separate vacation and sick days; others put them into one bank of PTO hours that you can use for any purpose.

The employer’s policy sets the terms. As Colorado’s labor agency lists them, the employer may set the amount of paid vacation, how it is earned (for example, by hours, weeks or years of work) and whether there is a cap on how much you can save up. Read your written policy or handbook first.

Sources: Colorado Division of Labor Standards and Statistics, INFO #3E: Payment of Earned Vacation upon Separation of Employment

How accrual works

Most accrual policies spread a yearly amount over the year. The days off a year times the hours of a day off are the PTO hours a year. Divided by your paychecks (52 weekly, 26 every two weeks, 24 twice a month, 12 monthly), that is what each paycheck adds. Divided by the hours you work a year (your hours a week times 52), it is the PTO you earn per hour worked.

The California Labor Commissioner gives the same arithmetic: 10 work days a year × 8 hours a day = 80 hours, and 80 hours ÷ 52 weeks = 1.538 hours of vacation earned per week. Your payroll may round to two places or to a different period.

Sources: California Labor Commissioner (DLSE), Vacation FAQ

Worked examples

Full time, 10 days: 10 days off of 8 hours and a 40-hour week are 80 PTO hours a year. That is 3.08 hours every two weeks, 1.54 a week, 3.33 twice a month and 6.67 a month, or 0.0385 hours per hour worked: 1 hour off for every 26 hours worked.

Full time, 15 days: 15 days off of 8 hours and a 40-hour week are 120 PTO hours a year. That is 4.62 hours every two weeks, 2.31 a week, 5.00 twice a month and 10.00 a month, or 0.0577 hours per hour worked: 1 hour off for every 17.33 hours worked.

Part time: 10 days off of 5 hours and a 25-hour week are 50 PTO hours a year. That is 1.92 hours every two weeks, 0.96 a week, 2.08 twice a month and 4.17 a month, or 0.0385 hours per hour worked: 1 hour off for every 26 hours worked.

The part-time worker earns at the same rate per hour worked as the full-time worker with 10 days: the policy is proportional to the hours. These figures come from the PTO accrual calculator; change the days or the hours there to see your own.

Sources: California Labor Commissioner (DLSE), Vacation FAQ

Federal law does not require paid vacation

The U.S. Department of Labor says the Fair Labor Standards Act (FLSA) does not require payment for time not worked, such as vacations, sick leave or federal or other holidays. These benefits are matters of agreement between an employer and an employee (or the employee’s representative).

The FLSA also does not require vacation, holiday, severance or sick pay, or immediate payment of final wages to terminated employees. Whether unused PTO is paid when a job ends is decided by state law and by your employer’s policy.

Sources: U.S. Department of Labor, Vacation Leave; U.S. Department of Labor, Handy Reference Guide to the FLSA

California: vacation is wages

There is no legal requirement in California that an employer provide paid or unpaid vacation. But once there is a policy, practice or agreement to provide it, earned vacation is wages: it is earned, or vests, as you work. In the Labor Commissioner’s example, a worker entitled to 10 work days a year has earned 5 days after six months.

A “use it or lose it” policy, which takes away vacation not used by a date, is illegal under California law. A reasonable cap is allowed: once the balance reaches the cap, no more vacation accrues until it falls below it. An employer may also set a period at the start of the job, even the whole first year, when no vacation is earned, as long as it is not a subterfuge.

A PTO plan that combines vacation and sick leave follows the same rules: it is earned day by day, it cannot be forfeited, it can be capped and what is unused is paid when the job ends.

When the job ends for any reason, unless a collective bargaining agreement says otherwise, all earned and unused vacation must be paid at the final rate of pay (Labor Code section 227.3), in the final paycheck. In the Labor Commissioner’s example, a worker with 15 days a year (120 hours) quits on the 219th day of the year with no vacation taken: 219 ÷ 365 = 60%, 60% of 120 hours = 72 hours, and 72 hours × $13.00 = $936.00.

Sources: California Labor Commissioner (DLSE), Vacation FAQ

Other states: the rules differ

Colorado: employers are not required to offer paid vacation, but when they do, vacation pay is wages under the Colorado Wage Act. Unused vacation must be paid when the job ends, whether you are fired or resign, and no policy can forfeit vacation already earned. Paid leave usable for any purpose, whatever its name (“personal days,” “PTO”), counts as vacation pay.

Washington: the Department of Labor & Industries calls vacation time a voluntary benefit that employers can choose to pay out on a final paycheck. If you believe you are owed an agreed-upon benefit, it points you to an attorney or small claims court. Paid sick leave has separate requirements.

Other states have their own rules. Check your state’s labor department and your employer’s written policy before you count on a payout.

Sources: Colorado Division of Labor Standards and Statistics, INFO #3E: Payment of Earned Vacation upon Separation of Employment; Washington State Department of Labor & Industries, Getting Paid

PTO per paycheck with common days off

• How much PTO do I earn per paycheck with 5 days a year?
• How much PTO do I earn per paycheck with 10 days a year?
• How much PTO do I earn per paycheck with 12 days a year?
• How much PTO do I earn per paycheck with 15 days a year?
• How much PTO do I earn per paycheck with 20 days a year?
• How much PTO do I earn per paycheck with 25 days a year?