What does Paid Time Off Mean? Everything Managers Need to Know

paid time off, paid leave

In this comprehensive guide we will look at the concept of paid time off, how much PTO employees are entitled to and when it can be used. 

What does paid time off mean?

Paid time off (PTO) refers to the days or hours of paid leave that an employee accrues over the course of a year. PTO can be used for vacations, sick days, holidays, and other approved absences from work.

The most common forms of PTO are vacation days, holidays, and personal days. Vacation days refer to the employee's leave for leisure or leisure activities. Employees typically earn it on an hourly or salaried basis.

Holidays refer to public holidays observed across the country, such as Thanksgiving and Christmas Day, where all employers adhere to the same holiday-related guidelines. Personal days are additional days off from work available to employees above and beyond that of their vacation and holiday leave time.

How does paid time off work?

The way PTO is accrued varies from company to company. Some companies may accrue PTO based on hours worked, while others may accrue it based on the employee's length of service with the company. Still other companies may offer a set amount of PTO to all employees, regardless of their hours worked or length of service.

  • Accrual of PTO: The method of PTO accrual varies between companies. Some may base it on hours worked or length of service, while others provide a fixed amount regardless of these factors.

  • Utilization of PTO: PTO caters to various needs, including vacations, sick leave, personal leave, and bereavement leave. Specific allowed uses are outlined in the company's PTO policy.

  • Payout of PTO: PTO is typically paid at the employee's regular hourly rate. Some companies may also offer the option to cash out unused PTO upon leaving the company.

Paid time off laws

In the United States, there is no federal law that requires employers to provide paid time off (PTO) to their employees. However, many states have enacted their own laws regarding PTO, and these laws vary from state to state.

States that Mandate Paid Time Off

Currently, 18 states and the District of Columbia have enacted laws that mandate paid time off for private-sector employees.

In these states, employers are required to provide a minimum amount of paid time off to their employees. The specific amount of PTO required varies from state to state, but it typically ranges from 40 to 80 hours per year.

State Minimum Paid Time Off
Arizona 40 hours
California 40 hours
Colorado 48 hours
Connecticut 40 hours
Maine 40 hours
Maryland 40 hours
Massachusetts 40 hours
Michigan 72 hours
Nevada 40 hours
New Jersey 40 hours
New Mexico 40 hours
New York 40 hours
Oregon 40 hours
Rhode Island 40 hours
Vermont 40 hours
Washington 40 hours
Washington,  D. C. 40 hours


The minimum paid time off in the District of Columbia

The District of Columbia requires employers with 100 or more employees to provide for each employee not less than one hour of paid leave for every 37 hours worked, not to exceed 7 days per calendar year. Employers with at least 25, but not more than 99, employees must provide for each employee not less than one hour of paid leave for every 43 hours worked, not to exceed 5 days per calendar year. Employers with 24 or fewer employees must provide not less than one hour of paid leave for every 87 hours worked, not to exceed 3 days per calendar year.

In 2023, the District of Columbia also implemented the Universal Paid Leave Act of 2016, which provides up to eight weeks of paid leave to employees who need to take time off for certain reasons, such as bonding with a new child, caring for a sick family member, or recovering from a personal illness.

Here is a table summarizing the minimum paid time off requirements in the District of Columbia:

Number of Employees Minimum Paid Time Off
100 or more 1 hour for every 37 hours worked, up to 7 days per year
25 to 99 1 hour for every 43 hours worked, up to 5 days per year
24 or fewer 1 hour for every 87 hours worked, up to 3 days per year


States that Do Not Mandate Paid Time Off

The remaining 32 states do not have laws that mandate paid time off. However, many employers in these states voluntarily offer PTO to their employees as a benefit.

Laws Governing the Accrual and Use of PTO

In addition to laws that mandate PTO, many states also have laws that govern the accrual and use of PTO. These laws vary from state to state, but they typically address the following issues:

  • Accrual rate: The rate at which employees earn PTO.
  • Cap on accrual: The maximum amount of PTO that employees can earn.
  • Use-it-or-lose-it policies: Whether or not employees are required to use PTO before it expires.
  • Payout of unused PTO: Whether or not employees must be paid out for unused PTO when they leave the company.

Employee Rights Regarding PTO

Employees have certain rights regarding PTO, even in states that do not have laws that mandate PTO. These rights include the right to:

  • Take PTO without penalty: Employers cannot penalize employees for taking PTO.
  • Request PTO: Employees have the right to request PTO from their employers.
  • Be informed of PTO policies: Employers must inform employees of their PTO policies in writing.

In the United Kingdom, statutory paid time off (PTO) is known as annual leave. Almost all workers are entitled to 5.6 weeks of paid annual leave per year. This is equivalent to 28 days of holiday for a full-time worker who works five days a week.

Accrual and Carryover of Annual Leave

Workers who work a standard five-day week begin accruing annual leave from the first day of their employment. The accrual rate is 1/12.3 of their weekly pay for each week they work. This means that a full-time worker will accrue 2.304 weeks of annual leave per quarter.

Annual leave can be carried over to the following year, but only up to a maximum of 28 days. Any unused annual leave that exceeds this limit will be forfeited.

Requesting and Taking Annual Leave

Workers have the right to request annual leave from their employer. Employers must consider all requests fairly and must not unreasonably refuse a request.

Annual leave must be taken during working hours, and it cannot be taken during periods of sickness or statutory maternity, paternity, or adoption leave.

Payment for Annual Leave

Workers must be paid their normal hourly rate for all annual leave they take. This includes bank holidays that fall within their annual leave period.

Additional Paid Time Off

In addition to annual leave, workers may be entitled to additional paid time off for specific reasons, such as:

  • Bank holidays: Workers are entitled to 8 bank holidays per year. However, employers are not required to give paid leave for bank holidays.
  • Sick leave: Workers are entitled to statutory sick pay (SSP) if they are off work sick for four or more consecutive days. SSP is paid at a lower rate than normal pay.
  • Parental leave: Workers are entitled to parental leave, which includes maternity, paternity, and adoption leave. Parental leave is unpaid, but workers may be eligible for statutory parental pay (SPP).

Unlimited paid time off

Companies are constantly seeking ways to attract and retain top talent. One increasingly popular approach is the implementation of unlimited paid time off (PTO) policies. Unlike traditional PTO policies that restrict employees to a predetermined number of vacation days, unlimited PTO allows employees to take as much time off as they need, provided they can manage their work responsibilities effectively.

The Benefits of Unlimited PTO

Proponents of unlimited PTO policies highlight several potential benefits for both employees and employers. For employees, unlimited PTO can provide:

For employers, unlimited PTO can lead to:

  • Increased productivity and retention: Well-rested and engaged employees are more likely to be productive and committed to their work, reducing turnover and associated costs.

  • Improved talent attraction: Unlimited PTO can be a compelling perk for potential employees, attracting top talent to the company.

  • Reduced administrative burdens: Eliminating the need to track and accrue vacation days can streamline HR processes and reduce administrative overhead.

Tracking paid time off

Employee working on Shiftbase planning tool, creating employee schedule

Employers need to track paid time off (PTO) for a variety of reasons, including ensuring compliance with labor laws, managing employee absences, and budgeting for payroll. There are several different ways to track PTO, and the best method for a particular employer will depend on the size of the company, the number of employees, and the company's specific needs.

Manual Tracking

Manual tracking is the simplest method of tracking PTO, but it can also be the most time-consuming. This method involves keeping track of employee absences on a spreadsheet or paper form. Manual tracking can be error-prone, and it can be difficult to keep up with changes in employee PTO balances.

Time Tracking Software

Time tracking software can be used to automate the tracking of PTO. This software can track employee absences, as well as the amount of PTO that each employee has accrued. Time tracking software can also generate reports on employee PTO usage, which can be helpful for managing absences and budgeting for payroll.

HR Management Systems

HR management systems (HRMS) can also be used to track PTO. HRMS typically include a payroll module that can track employee absences and PTO balances. HRMS can also generate reports on employee PTO usage.

Useful Read: Employee Management Software for small business - A Guide

Employee Self-Service Portals

Employee self-service portals allow employees to view their own PTO balances and request PTO time online. This can save employees time and effort, and it can also help to reduce errors in PTO tracking.

Considerations for Choosing a PTO Tracking Method

When choosing a PTO tracking method, employers need to consider the following factors:

  • The size of the company: Larger companies may require more sophisticated PTO tracking methods than smaller companies.
  • The number of employees: The more employees a company has, the more important it will be to have a system in place to track PTO.
  • The company's specific needs: Some companies may need to track PTO more closely than others, depending on their industry or labor laws.
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Tracking paid time off with Shiftbase

Paid time off is an essential benefit for employees, but it can be a challenge to track and manage effectively. ShiftBase, a comprehensive workforce management software, simplifies PTO management with its integrated time tracking, employee scheduling, and absence management features.

By seamlessly integrating PTO tracking into its time tracking module, ShiftBase provides employers with a centralized platform to monitor employee PTO accruals and usage. This eliminates the need for manual tracking and spreadsheets, reducing the risk of errors and ensuring compliance with labor laws.

ShiftBase's scheduling feature further streamlines PTO management by enabling employees to request PTO directly through their online schedule. This feature not only saves time for both managers and employees but also helps prevent scheduling conflicts and overbooking.

Ready to experience the transformative power of ShiftBase? Sign up for a free 14-day trial today and discover how easy it can be to manage PTO effectively.

Absence Management
Topic: Time off
Rinaily Bonifacio

Written by:

Rinaily Bonifacio

Rinaily is a renowned expert in the field of human resources with years of industry experience. With a passion for writing high-quality HR content, Rinaily brings a unique perspective to the challenges and opportunities of the modern workplace. As an experienced HR professional and content writer, She has contributed to leading publications in the field of HR.


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