How PTO Accrual Works
Most employers use one of two accrual methods:
| Method | How It Works | Example (10 days/yr) |
|---|---|---|
| Lump-sum (front-loaded) | Full year's PTO granted at start of year or anniversary | 80 hours on Jan 1 |
| Accrual per hour worked | Earn a fraction of PTO per hour worked | 0.0385 hrs/hr worked (80 hrs ÷ 2,080) |
| Accrual per pay period | Fixed amount each paycheck | 3.08 hrs/biweekly (26 periods) |
| Tiered accrual | Rate increases with tenure | Year 1–3: 10 days; Year 4–7: 15 days; 8+: 20 days |
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Rollover Caps and Use-It-or-Lose-It
Many employers cap how much PTO rolls over to the next year (e.g., max 40 or 80 hours). Some have use-it-or-lose-it policies. However, several states prohibit forfeiture of earned PTO:
| State | Rule |
|---|---|
| California | Accrued PTO = earned wages; use-it-or-lose-it policies are illegal; must pay out on separation |
| Colorado | Accrued vacation is earned wages; must be paid out; use-it-or-lose-it prohibited (since 2020) |
| Illinois | Accrued vacation must be paid out on separation; forfeiture clauses not enforceable |
| Montana | Earned vacation must be paid out; no use-it-or-lose-it |
| Nebraska | Accrued vacation is wages; must pay out on termination |
| North Dakota | Accrued vacation must be paid upon separation |
| Most other states | Follow employer policy; no state-mandated payout requirement |
The Truth About Unlimited PTO
"Unlimited PTO" sounds like a dream benefit, but research shows workers with unlimited PTO often take fewer days off than those with traditional accrual:
- No benchmark — without a set number, employees feel unsure how much is "okay" to take
- No payout on exit — because there's no accrual, there's nothing to pay out when you leave (a financial benefit to the employer)
- Social pressure — peer culture often overrides the written policy
- Best practice — look for companies with unlimited PTO and a stated minimum (e.g., "take at least 15 days")
Check your offer letter carefully
If you're in a state that requires PTO payout (like CA), an unlimited PTO policy means $0 payout when you leave vs. potentially thousands under a traditional accrual plan. Factor this into your total compensation comparison.