Template · Time off and attendance
PTO policy template
In short
A PTO policy explains how employees earn paid time off, how much they can bank or carry over, how to request it and what happens to unused hours when they leave. This template gives you a complete paid time off policy with accrual tiers, request rules, carryover limits and payout language to adapt to your state.
Paid Time Off (PTO) Policy template
Paid Time Off (PTO) Policy
Replace every [placeholder]. Check sections 5 and 8 against the paid sick leave and final pay laws in every state and city where you have employees before publishing.
1. Purpose
[Company Name] provides paid time off so employees can rest, deal with personal matters and look after their health and families without losing pay. PTO combines vacation, personal and sick time into a single bank that employees can use as they choose, subject to the rules below.
2. Eligibility
This policy applies to [all regular full-time and part-time employees / employees regularly scheduled for at least [20] hours a week]. Temporary, seasonal and agency workers are [not eligible / eligible as required by law]. Where a state or local law gives employees a greater right to paid leave, that law applies and this policy is read to comply with it.
3. How PTO is earned
PTO accrues each pay period based on length of service:
- Less than [2] years of service: [120] hours a year ([4.62] hours per biweekly pay period for full-time employees). - [2] to [5] years: [160] hours a year ([6.15] hours per pay period). - More than [5] years: [200] hours a year ([7.69] hours per pay period).
Part-time employees accrue at [0.0577] hours for every hour worked in the first tier, with the same proportion applied in higher tiers. PTO does not accrue on unpaid leave or on overtime hours [unless required by law]. Accrual starts on the first day of employment. Employees may use accrued PTO after [60 / 90] days of employment, except where state or local sick leave law allows earlier use for sick time.
4. Requesting PTO
Request planned PTO through [system or leave request form] at least [2 weeks] in advance for absences of [3] or more days, and at least [48 hours] in advance for shorter absences. Managers will respond within [3] business days. Requests are approved based on business needs; when requests conflict, [the first submitted / seniority] decides. Blackout periods, if any, are [describe, e.g. the last two weeks of December for retail sites] and will be announced at least [60] days ahead.
PTO is taken in minimum increments of [1 hour / 2 hours / half a day].
5. Using PTO for illness or emergencies
PTO may be used without advance approval for an employee's own illness or medical care, the care of a family member, or an emergency. Notify your supervisor as early as you can using the absence reporting process in the attendance policy. Unplanned PTO used for reasons protected by a paid sick leave law will not be counted against you under the attendance policy. [Company Name] will only ask for documentation where the applicable law permits it.
6. Carryover and maximum balance
Employees may carry over up to [40] hours of unused PTO into the next calendar year. Once your balance reaches [1.5 times] your annual accrual, you stop accruing until your balance falls below that cap. No PTO is lost once earned [in states where forfeiture is prohibited, the cap above replaces any forfeiture].
7. Holidays and other leave
Company-paid holidays are separate from PTO and are listed in the holiday schedule. If a holiday falls during scheduled PTO, it is paid as holiday pay and is not deducted from your PTO balance. Bereavement, jury duty, military leave, and leave under the Family and Medical Leave Act or state family leave programs are covered by separate policies. When you take FMLA leave, [Company Name] [may require / will allow] you to use accrued PTO at the same time, and you will be notified in writing.
8. PTO when employment ends
On separation, [Company Name] will pay out accrued, unused PTO [at the employee's final base rate of pay / only where required by state law]. Negative PTO balances [will / will not] be deducted from final pay, subject to state wage deduction rules. PTO may not be used to extend the last day of employment after notice of resignation is given [unless approved by HR].
9. Advances, donations and cash-out
PTO advances: employees may borrow up to [16] hours against future accrual with manager and HR approval.
PTO donation: employees may donate accrued PTO to a coworker facing a serious medical emergency under the leave donation program, as described in [document name].
Cash-out: employees [may / may not] cash out up to [40] hours of PTO once a year, provided they keep a balance of at least [40] hours.
10. Administration and acknowledgment
Your PTO balance is shown on [pay stub / HR system]. Report any errors to [HR Contact] within [30] days. [Company Name] may change this policy with at least [30] days' written notice; accrued PTO will not be reduced by a change.
I have received and read the Paid Time Off Policy.
Employee name: ____________________ Employee signature: ____________________ Date: __________
How to use this template
- Choose your model: a combined PTO bank, separate vacation and sick buckets, or unlimited PTO with a minimum use expectation.
- Set annual amounts by service tier and convert them to an hourly accrual rate per pay period and per hour worked for part-time staff.
- Check every state and city where you have employees for paid sick leave, paid leave and final pay rules, and adjust sections 3, 5, 6 and 8 to match the strictest one or add state addendums.
- Decide your carryover limit and accrual cap so balances stay manageable without forfeiting earned time in states that forbid it.
- Set request lead times and blackout periods that your schedulers can actually work with.
- Configure payroll or your HR system to accrue, cap and display balances before the policy goes live.
- Publish the policy in the employee handbook and collect a signed acknowledgment from each employee.
Choosing a PTO model
There is no federal law requiring paid vacation in the US, so the model is your choice within state rules. Three designs dominate:
- Combined PTO bank. One pool for vacation, personal and sick time. Easy to explain and administer, and employees like the flexibility. The trade-off: people come to work sick to save days for vacation, and more states now require paid sick time that a combined bank must satisfy.
- Separate vacation and sick leave. More administration, but you can set a sick leave policy that matches state law exactly and keep vacation rules simple. Often the better fit for multi-state employers.
- Unlimited PTO. Common for salaried professional roles, rarely right for hourly shift work, where coverage has to be planned. It also needs a written approval standard, or one manager says yes to everything and another says no.
For hourly, scheduled workforces such as contact centers, warehouses and clinics, we would use a combined or split accrual model with a clear request window. Unlimited PTO in a 24/7 operation tends to become "unlimited, if you can find cover", which is worse than an honest number.
Working out accrual rates
Start with the annual amount and divide by the number of pay periods or standard hours.
For a full-time employee earning 15 days (120 hours) a year on a biweekly payroll: 120 hours / 26 pay periods = 4.62 hours per pay period.
For part-time staff, accrue per hour worked: 120 hours / 2,080 standard hours = 0.0577 hours of PTO per hour worked. A part-timer who works 1,040 hours in a year earns 60 hours.
A cap stops balances from growing without limit. Setting it at 1.5 times the annual accrual (180 hours in the example) gives people room to save for a long trip while keeping your balance-sheet liability under control. Use a cap rather than a use-it-or-lose-it rule if you have employees in states such as California, where earned vacation cannot be forfeited.
State and local law notes
PTO rules are driven by state law, so treat this as a starting checklist and confirm the details for each location.
- Paid sick leave. Many states and cities require paid sick leave with their own accrual rates, carryover, permitted uses and documentation limits. A combined PTO bank can satisfy them only if it meets every requirement, including letting employees use the time for sick reasons without advance notice.
- Paid leave for any reason. A few states, such as Maine, Nevada and Illinois, now require a minimum amount of paid leave usable for any reason.
- Final pay. Some states, including California, Colorado, Massachusetts and Montana, treat earned vacation as wages that must be paid out at separation. Many others follow your written policy, so the wording in section 8 matters.
- Forfeiture. California and a few other states prohibit use-it-or-lose-it. Caps on accrual are generally allowed.
- Exempt employees. Deducting from an exempt employee's PTO bank for a partial day is generally allowed; docking their salary when the bank is empty usually is not.
If you run payroll in several states, a common approach is a single company policy plus short state addendums.
Running PTO in a high-volume, scheduled workforce
In a 600-person operation with three shifts, PTO approvals decide whether the floor is staffed. A few practices help:
- Build planned PTO into the forecast as shrinkage. A team where each agent takes 120 hours a year is losing about 5.8 percent of scheduled time to planned leave before any sickness.
- Publish a time-off slot calendar per team, showing how many people can be off per day, and approve against it. First-come approval within those slots feels fair.
- Ask for requests through one channel, such as a leave request form or the scheduling system, so nothing is approved in a hallway.
- Hold back summer and holiday slots until a set date, then release them in seniority or lottery order. That stops the most organized people from booking every Friday in July in January.
- Watch new-hire classes: most will have little or no balance for the first months, so have a clear rule for unpaid time off.
Common mistakes
- Copying a policy from another state without checking payout and forfeiture rules.
- A combined PTO bank that does not meet a city's paid sick leave rules, such as requiring two weeks' notice for all PTO use.
- No accrual cap, which leaves you with employees holding 400-hour balances and a large payout liability.
- Approving PTO informally and then disciplining a no-show the system knew nothing about.
- Changing the policy and reducing hours employees have already earned.
Keep the final policy with the rest of your employee handbook template and make sure the PTO and attendance policy use the same definitions.
Frequently asked questions
What is a standard PTO policy?
Many US employers offer around 15 to 20 days of combined paid time off a year for new full-time employees, rising with service. A standard policy covers eligibility, accrual rate, how to request time off, carryover, maximum balance and payout at separation.
What is the difference between a PTO policy and a vacation policy?
A vacation policy covers planned time away only, usually alongside a separate sick leave policy. A PTO policy combines vacation, personal and sick days into one bank. The choice affects how you comply with paid sick leave laws and how unplanned absences are handled.
Do employers have to pay out unused PTO?
It depends on the state. Some, such as California, Colorado, Massachusetts and Montana, require payout of earned vacation at separation. Many others follow the employer's written policy. Check the law in the state where the employee works.
How do you calculate PTO accrual per pay period?
Divide the annual PTO hours by the number of pay periods. For 120 hours a year on a biweekly payroll, that is 120 / 26 = 4.62 hours each pay period. For hourly part-time staff, divide annual hours by 2,080 to get an accrual per hour worked.
Can a leave policy template cover both PTO and sick leave?
Yes, if the combined bank meets every requirement of the paid sick leave laws that apply to your employees. Multi-state employers often find it simpler to run a separate sick leave policy and a vacation or PTO policy.