Do companies have to pay PTO?

With 45% of private sector workers having access to paid general time off (PTO) in 2021 and 77% having access to paid sick leave, you might be considering updating the PTO policy of your own small business. But do companies have to pay the PTO if an employee leaves or is terminated?

While the PTO offer is great for employee satisfaction, you may be worried that having to pay for it will add extra expense to your budget, employee schedules, and limited HR resources of small businesses.

Whether or not your company has to pay the PTO depends on both your state and company policies. So let's talk about when small businesses are required to pay PTO, types of PTO compensation, and how PTO payment laws vary from state to state.

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When should small businesses pay the PTO?

Depending on your state and small business policies, you may have to pay PTO when an employee leaves your business. So even if your employee resigns, you may have to pay the PTOs he has accrued as salary.

You could also face hefty fines or legal penalties if you withhold PTO pay from an employee when they resign.

PTO types

Many companies are moving away from the traditional time off model (with separate vacation days, sick days, and personal days in an employee's PTO plan) and establishing a general paid time off policy which gives people the freedom to choose how they use their paid time off.

However, some companies want more control over how their employees use the PTO. So let's take a look at the different types of PTO policies you could offer your small business employees.

Vacation days

Even if an employer offers employees a certain number of vacation days, they may be allowed to withhold vacation days or create policies dictating how to request vacation days. For example, a company can ask an employee to submit a formal request a month in advance to request specific days off.

Depending on how you set up your small business vacation policies, you can choose:

Separating vacation days from sick days Combine vacation days with sick days in one PTO plan Let employees accumulate paid time off by adding a certain number of days off for each pay period Offer a certain number of vacation days in advance each year as part of a "bank" of paid vacations Sick days

While leave policies are often stricter, employees can take sick leave when they need it and with little or no notice. However, some companies may require a doctor's note to approve a sick leave absence.

And, while the Family and Medical Leave Act (FMLA) does not currently require employers to pay employees during FMLA sick leave, your state's paid vacation laws might. For example, New York State family leave laws currently allow employees to earn 67% of the state's average weekly wage while on leave.

Grief

An employer may choose to make bereavement leave an initial part of a proposed PTO plan alongside sick leave and vacation days. Some employers may not offer it as an upfront benefit, but choose to offer it in the unfortunate event that an employee loses a loved one.

Legal Department

Most states do not allow an employer to punish or terminate an employee for time off from jury duty, but not all states require employers to provide compensation during jury duty.

For example, state laws only allow Colorado employees a regular salary of up to $50 a day for...