PTO Payout
Summary Definition: A lump-sum payment for accrued but unused Paid Time Off (PTO) given to employees when they leave a job.
What is PTO Payout?
A PTO payout is the lump-sum payment made by an employer to an employee for any accrued but unused paid time off (PTO). Typically, this payout occurs when an employee leaves the company (e.g., termination, resignation, or retirement). The calculation involves multiplying the employee's hourly rate by the number of unused PTO hours after applying payroll deductions.
Whether an employer must provide a payout depends on state laws and the company’s internal policies. For example, some states require employers to pay a payout within a specific timeframe. Others have a “use-it-or-lose-it” policy, meaning employees forfeit any unused time off.
Furthermore, some states allow companies to alter internal policies based on how the employee leaves (i.e., a PTO payout when quitting vs. being fired).