PTO (Paid Time Off) Policy template
A PTO (paid time off) policy is the written set of rules for the paid vacation, sick, and personal time an employer offers: how much employees get, how it accrues or is granted, how they request it, what carries over, and what happens to the balance when employment ends. In the US, the policy is not paperwork around a legal entitlement — the policy is the entitlement.
That is the part that surprises anyone used to other countries' systems: there is no US federal minimum vacation entitlement. None. Federal law does not require employers to provide paid vacation at all — what {{org.name}} offers is whatever this policy says it offers, which is exactly why the policy needs to be precise. The moment PTO is promised, state law starts to care how the promise is kept, and the two clauses employers most often copy from another state's template — use-it-or-lose-it forfeiture and no payout at termination — are unlawful in some states.
This template gives you a complete PTO policy: the earning method (accrual or frontload) as placeholders, carryover and caps, the request and approval routine, unplanned-absence rules, and the termination-payout clause written to be checked against your state's law rather than assumed.
Full text, ready to adapt.
Highlighted fields are placeholders — replace them with your organisation's specifics. A starting point, not legal advice.
PTO (Paid Time Off) Policy
Policy · HR & People
1. Purpose and scope
This policy sets out the paid time off {{org.name}} provides, how it is earned, how it is requested and approved, and what happens to unused balances. It applies to [all employees / eligible employee groups], with amounts prorated for part-time employees as described below.
PTO exists so people actually rest, recover, and handle life without losing pay — a benefit that only works if requesting it is straightforward and approval is predictable. Nothing in this policy changes the at-will nature of employment at {{org.name}}.
2. How PTO is earned
{{org.name}} provides PTO on the following basis — complete one option and delete the other:
- Accrual: employees accrue [X hours] of PTO per [pay period / hours worked], beginning [on hire / after the waiting period below], up to the accrual cap in this policy.
- Frontload: employees receive [X days/hours] of PTO on [January 1 / their hire anniversary], prorated in the first year based on start date.
- Eligibility: PTO may be used after [waiting period, if any — check that any waiting period is consistent with state and local sick leave laws for the sick portion of the bank].
- Part-time employees: [prorated amount / accrual on the same per-hour basis].
- PTO balances are visible in [payroll system], and questions about a balance go to [name/role].
3. Carryover and caps
Employees may carry over up to [X hours/days] of unused PTO into the next [calendar year / anniversary year]. Once an employee's balance reaches [cap — e.g. 1.5x the annual grant], accrual pauses until the balance drops below the cap.
[If using forfeiture: PTO above the carryover limit is forfeited on [date].] Before adopting any forfeiture language, check your state's law — some states prohibit use-it-or-lose-it policies entirely, and in those states an accrual cap that slows earning is the compliant alternative to a rule that takes away time already earned.
4. Requesting and scheduling PTO
- Request PTO through [system/form] at least [X days/weeks] in advance for planned time off — longer for requests of [a week or more].
- [Name/role] approves or declines within [X business days], based on staffing needs and the order requests were received [or the tie-break rule {{org.name}} uses — applied the same way for everyone].
- Busy-period limits: [blackout dates or restricted periods, if any], published by [date] each year.
- A declined request gets a reason and, where possible, alternative dates — repeated declines of the same person's requests should be escalated to [name/role] to fix the staffing problem behind them.
- PTO is recorded in [system] so balances, payroll, and coverage planning all work from the same numbers.
5. Unplanned absences and sick use
PTO covers sickness and emergencies as well as vacations. For an unplanned absence, notify [name/role] by [time] on the day of absence via [phone/channel] — the earlier the call, the easier the cover.
For sick-related use, {{org.name}} requests documentation only where consistent with applicable state and local sick leave laws, which often limit when documentation can be demanded. Absences covered by this policy and taken properly are not counted against employees under the attendance policy.
6. PTO when employment ends
On termination of employment, accrued unused PTO is [paid out in the final paycheck / paid out as required by state law / forfeited, where and only where state law permits]. This clause should be completed against the law of each state where {{org.name}} employs people — in some states accrued PTO is treated as earned wages and payout is not optional, whatever the policy says.
PTO may not be used to extend a final employment date without approval from [name/role], and negative PTO balances at termination are handled [per state law — deductions from final pay are restricted in many states].
7. Interaction with other leave
- Company holidays at [list/reference] are separate from PTO; a holiday falling within approved PTO is not charged against the PTO balance.
- Leave protected by law — including FMLA leave where {{org.name}} is covered, jury duty, and voting leave where state law provides it — runs under its own rules; accrued PTO [may / is required to] be substituted during unpaid protected leave as described in the FMLA & family leave policy.
- Bereavement leave is provided under the bereavement leave policy and is not charged against PTO [unless extended time is agreed].
8. Records and review
PTO balances, requests, approvals, and payout calculations are kept in [system] for [period]. This policy is reviewed [frequency, e.g. annually], whenever {{org.name}} starts employing in a new state, and whenever state or local leave law changes. Owner: [name/role]. Next review due: [date].
How to adapt this template.
Choose accrual or frontload, fill in the amounts, and delete the option you are not using — a policy showing both reads as a draft.
Check your state's rules on termination payout and use-it-or-lose-it before completing those clauses — they are the two most commonly unlawful lines in copied PTO policies.
If your state or city requires paid sick leave, map its accrual, usage, and documentation rules onto your PTO bank and adjust wherever the bank falls short.
Set the request notice period and the tie-break rule to your real staffing pattern, then apply them the same way for everyone.
Audit a quarter of PTO decisions once a year: approval rates and balances by team tell you whether the policy works or people are quietly not taking time off.
Turn this template into trained, proven behaviour
A policy in a drawer proves nothing. In TrainedTeam this template becomes assigned training with knowledge checks, e-signature acknowledgments, version history, and an audit-ready record of who completed what, when.
PTO (Paid Time Off) Policy template FAQs
Is paid vacation required by US federal law?
No. Per the Department of Labor, the Fair Labor Standards Act does not require payment for time not worked, such as vacations — paid vacation is a matter of agreement between employer and employee. That is a sharp difference from countries with statutory minimums (the UK, for example), and it means your written policy is the entire entitlement. Some states and cities do require paid sick leave specifically — check your state and local authority.
Do we have to pay out unused PTO when someone leaves?
It depends on your state. Some states treat accrued, unused PTO as earned wages that must be paid at termination regardless of policy language; others enforce whatever a clear written policy says. Check your state labor department, write the termination clause to match, and if you operate in multiple states, apply the rule of the state where each employee works.
Can we have a use-it-or-lose-it rule?
Only in some states. Several states prohibit or restrict forfeiting PTO an employee has already earned, and in those states the compliant alternative is an accrual cap — once the balance hits the cap, no more accrues until some is used. Nobody loses earned time, but balances cannot grow forever. Check your state before adopting either version.
Should we combine vacation and sick time into one PTO bank?
One bank is simpler to run and more flexible for employees, but where a state or local sick-leave law applies, the combined bank has to satisfy that law's rules on accrual, permitted uses, carryover, and documentation for the sick portion. Multi-state employers sometimes keep separate banks precisely to keep sick-leave compliance clean — decide with your state requirements in front of you.
Can we deny a PTO request?
Generally yes for planned vacation — approval can depend on staffing and notice, applied consistently. Be careful where the time off is legally protected: absences under state or local sick leave laws, FMLA leave where it applies, and jury duty follow their own rules, and denying or punishing those is where PTO decisions turn into legal problems.
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