Paid Time Off Payout Laws by State

By hrlineup | 30.12.2020

Have you ever wondered why some employers, even after implementing a PTO policy, still find themselves in trouble with the law? They consider their employees’ needs, but do they follow the legal procedure while setting up the PTO policy? Understanding the law in business is very important. It helps you and your workers when making decisions involving which PTO policy to implement. There are three primary PTO policies that are commonly used in organizations. See below;

Accrued time off

It is the accumulated time an employee was given and didn’t use. Depending on organizations, employers usually pay for this when terminating an employee or at the end of the year. So it is up to an employee to decide whether to use it at the appropriate time or wait until the said time for employer’s compensation.

States such as Alabama, Rhode Island, South Carolina, West Virginia, Hawaii, to name a few, do not have specific laws regarding accrued time. It is up to the employer to draft a policy that fits both parties. Other states such as Colorado, Illinois, Indiana, Kansas, and Louisiana, only let the employer pay for accrued time when relieving the employee of their duties.


Some states do not allow this PTO policy because it restricts employees from rolling over time or cashing it out. These states are California, Montana, Nebraska, among others. Other countries such as  Colorado, Illinois, Indiana, and Kansas allow it though there are restrictions to the period of usage. The employee uses it within a period that an employer sets failure to which they lose their rights to that time.

Vacation pay

In states like South Carolina, West Virginia, and Wisconsin, vacation pay to employees is applicable and should be treated as wages. Even though laws in states like these only allow for vacation pay to be implemented at the end of the year, employers can still pay for it as PTO depending on employee agreement.


Do not risk your business and workers’ safety by not understanding and following the law. Abiding by state rules as an employer can be beneficial. Though some employers use all the listed three policies, you do not need to do the same. It all depends on the size of your business. Upcoming business can at least introduce one PTO policy to motivate employees and hence improve growth.

It is also not advisable to operate your business without any form of PTO because it might cost you. High employee turnover may be one of the consequences of not implementing a PTO policy. The law may have strict regulations on matters of employee PTO. However, it is wise to introduce and implement the system within the jurisdiction of the state.