PTO Rollover and Payout
Three questions arrive together every December and every time someone resigns: does unused PTO roll over, can the employer make it expire, and must it be paid out when the employee leaves? Federal law says nothing about any of them. State law answers all three, differently, and the written policy fills whatever gap the state leaves. In California, Colorado, Montana and Nebraska accrued vacation is wages that cannot be taken back; in roughly twenty states it must be paid out at separation; in the rest the handbook decides, provided it is clear.
The calculator values a PTO balance under the rule for your state and policy. The rest of the page explains the three mechanisms, lists the states where the law overrides the policy, shows how to write a rollover cap that is lawful everywhere, and covers the sick leave laws that run on separate rules.
PTO payout calculator
A guide to the common rule, not legal advice; most states apply their rule to vacation and PTO, and many leave sick leave to the policy. Check the current statute for your state and your written policy. Nothing typed here leaves your browser.
Rollover, use-it-or-lose-it and payout: three different questions
- Rollover is whether unused hours carry into the next year. Most policies allow some, often with a cap (40 or 80 hours is common). Rollover is a policy choice everywhere.
- Use-it-or-lose-it is a policy that makes unused hours expire, usually at year end. Lawful in most states if the policy is written and employees have a real chance to take the time; unlawful in the states that treat accrued vacation as earned wages, because wages cannot be forfeited.
- Payout at separation is whether the employer must pay the cash value of unused hours when employment ends. Required by statute or case law in around twenty states; elsewhere the policy controls, and a silent policy usually favours the employee.
The confusion comes from treating these as one rule. A state can require payout and still allow use-it-or-lose-it (Illinois, Massachusetts), or ban use-it-or-lose-it and therefore require payout (California, Colorado). The lawful alternative to expiry in the strict states is an accrual cap: once the balance reaches the cap, no more accrues until some is used. Nothing already earned is taken away, so it survives in every state, and it is the mechanism the calculator recommends when a rollover cap would otherwise forfeit hours.
State rules
| State | Payout at separation | Use-it-or-lose-it | Notes |
|---|---|---|---|
| California | Required | Not allowed | Accrued vacation is wages (Labor Code 227.3); caps on accrual are allowed, forfeiture is not; paid at final rate on separation |
| Colorado | Required | Not allowed | Nieto v. Clark's Market (2021): earned vacation cannot be forfeited; payout required on separation |
| Montana | Required | Not allowed | Accrued vacation is wages; forfeiture policies unenforceable |
| Nebraska | Required | Not allowed | Earned vacation is wages (Roseland, 2009); payout on separation |
| Massachusetts | Required | Allowed with notice | Payout required on separation; use-it-or-lose-it allowed only with clear notice and a reasonable chance to use it |
| Illinois | Required | Allowed with notice | Payout of earned, unused vacation required (IWPCA); use-it-or-lose-it allowed if the policy says so and employees get a reasonable chance to use it |
| Louisiana | Required | Allowed with notice | Payout required where the policy allows accrual; forfeiture clauses in the policy are enforced only if clear |
| Maine | Required | Allowed with notice | Employers with 10 or more employees must pay accrued vacation on cessation (26 MRSA 626, from 2023) |
| Rhode Island | Required | Allowed with notice | Payout required after one year of service |
| North Dakota | Required | Allowed with notice | Payout required, except an employee who quits with under five days' notice after less than a year may forfeit if the policy says so |
| New York | Policy controls | Allowed with notice | Written policy controls; forfeiture allowed only if the policy states it clearly |
| Texas | Policy controls | Allowed with notice | Written policy controls; no statutory payout right |
| Florida | Policy controls | Allowed with notice | No statute; policy or contract controls |
| Washington | Policy controls | Allowed with notice | No statute for vacation; paid sick leave is separate and carries over up to 40 hours |
| Pennsylvania | Policy controls | Allowed with notice | Policy controls; a silent policy generally favours payout |
States not listed generally let the written policy control, with the usual condition that a forfeiture or no-payout rule must be stated clearly and communicated in advance; several (Arizona, Minnesota, Wisconsin among them) have case law treating a silent policy as a promise to pay. Union contracts and public-sector rules set their own terms. The final paycheck laws page gives the deadline by which any payout must be made, and the PTO accrual calculator works out the balance in the first place.
Writing a policy that works in every state
- Define accrual precisely: hours per pay period, when accrual starts, and the rate by tenure. Ambiguity is read against the employer.
- Use an accrual cap, not an expiry date. "Accrual stops at 1.5 times the annual allowance until hours are used" is lawful everywhere. "Unused hours expire on December 31" is unlawful in four states and contested in several more.
- State the payout rule and apply it consistently. If the policy promises payout, every departing employee gets it; if it conditions payout on notice or on leaving in good standing, that condition is enforceable only outside the earned-wages states.
- Separate sick leave. Around twenty states and many cities mandate paid sick leave with their own carryover rules (Washington and California carry over, with annual use caps) and generally no payout requirement. Keep it in its own bucket, or a combined PTO bank inherits the stricter rules of both.
- Pay at the final rate. Where payout is required, it is at the employee's rate on the last day, not the rate when the hours accrued.
- Reconcile at year end, in writing. A statement to each employee of the balance, the cap and what carries over prevents the January dispute. The vacation tracking guide covers the record-keeping.
Unlimited PTO sidesteps accrual entirely, which is part of its appeal to employers; the unlimited PTO policy page explains the one California case where it did not.
Key takeaways
- Rollover, use-it-or-lose-it and payout are three different questions; federal law answers none of them and state law answers each differently.
- California, Colorado, Montana and Nebraska treat accrued vacation as wages: no forfeiture, payout required. Around twenty states require payout; the rest follow a clear written policy.
- An accrual cap is lawful everywhere; an expiry date is not. Use the cap.
- Sick leave runs on separate state and city rules with their own carryover and usually no payout.
- Pay out at the final rate, by the final paycheck deadline for the state.
Frequently asked questions
Does PTO roll over to the next year?
Only if the policy says so. Rollover is a policy choice in every state, commonly capped at 40 or 80 hours. The restriction is on the other side: in states that treat accrued vacation as wages, the employer cannot make unused hours expire, so the policy must use an accrual cap rather than a rollover limit that forfeits hours.
Which states prohibit use-it-or-lose-it vacation policies?
California, Colorado, Montana and Nebraska, where accrued vacation is earned wages that cannot be forfeited. Several others (Massachusetts, Illinois, Louisiana) allow expiry only with clear notice and a fair chance to use the time. An accrual cap, which stops further accrual rather than removing earned hours, is lawful everywhere.
Do employers have to pay out unused PTO when you quit?
In around twenty states, yes, by statute or court decision: California, Colorado, Illinois, Louisiana, Maine (employers with 10 or more employees), Massachusetts, Montana, Nebraska, North Dakota and Rhode Island among them. Elsewhere the written policy controls; a silent policy is often read as a promise to pay. The calculator on this page applies the common rule for the state selected.
How is PTO payout calculated?
Unused hours multiplied by the employee's hourly rate on the last day. For salaried employees the hourly rate is the annual salary divided by 2,080 unless the policy or state rule says otherwise. The payout is wages and goes through payroll with normal withholding.
Can an employer cap PTO accrual?
Yes, in every state, including those that ban forfeiture. A cap stops further accrual once the balance reaches a stated level until hours are used; it does not take away hours already earned. California's labour commissioner specifically endorses caps as the lawful alternative to use-it-or-lose-it.
Does sick leave have to be paid out?
Generally no. State and city paid sick leave laws require carryover of unused hours, usually with annual caps on accrual and use, but almost none require payout at separation. Employers that combine sick leave and vacation into one PTO bank should expect the bank to be treated as vacation for payout purposes in the strict states.