Paid Time Off Policy Template

Create Document

Paid Time Off Policy Template

Create Document
PDF
Word
ODT

Last updated August 22nd, 2025

Document Preview

A paid time off policy form outlines a company’s procedures for how eligible employees accrue, request, and use paid time away from work. A written paid time off (PTO) policy covers personal, sick leave, and vacation time. It will state what employees are eligible, whether there are any accrual caps, and if unused hours can be carried over.

Downloads: 39
  1. Home »
  2. Employee Forms »
  3. Company Policy »
  4. Paid Time Off Policy

Types of PTO Policies

Organizations must tailor a time off policy depending on their size, industry, and operational needs. Company policy will state how much (if any) paid time off carries over from year to year. Some states have laws dictating the amount and type of PTO that must be permitted to be carried over.
Some common PTO models include:

Traditional

A traditional paid time off policy grants employees a set number of hours, which are generally split into three categories: vacation leave, sick leave, and personal days. The amount of leave granted typically depends on the amount of time the employee has worked for the company.

Accrual

With an accrual PTO policy, employees gradually earn time off as they work based on the number of hours, days, or months they work.

Some companies may opt to provide employees with a set number of sick days per year in addition to earning paid leave throughout the year.

Banked

When a company opts for a banked paid time off policy, the staff receive a set number of paid days off per year to use as they see fit. Generally, they are not split into categories, and employees have the flexibility to take leave for any reason.

Unlimited

Unlimited PTO policies allow employees to take an uncapped number of days off for any reason, provided their work is not impacted. In many cases employees are still required to have manager approval before taking time off with this system.

Use-It-Or-Lose-It Policies

Some employers may choose to implement a use-it-or-lost-it policy, which requires employees. While there are no federal laws mandating this policy, some states have laws prohibiting or limiting its use.

States That Prohibit Use-It-Or-Lose-It PTO Policies
State Details Laws
Arizona
  • Use-it-or-lose-it is legal for vacation days but illegal for sick leave. Alternatively, employees can be paid out for unused sick days. The employer can pay out the employee for unused sick time at the end of the year.
 § 23-372(D)(4)
California
  • Use-it-or-lose-it prohibited.
  • Accrued sick days may be limited to 40 hours or five days per year.
  • Caps on accrued vacation hours are also permitted.
 § 246(d), DLSE Enforcement Manual § 15.1.4
Colorado
  • Use-it-or-lose-it prohibited.
  • Employees can carry over 40 sick leave days from one year to another.
  • Accrued vacation days may be capped.
 § 8-13.3-403(3)(b), § 2.17.2
Connecticut
  • Employee’s can carry over up to 40 sick leave days from one year to another.
  • Employers may implement use-it-or-lose-it policies for vacation time.
 § 31-57s(a)
Illinois
  • Employers using an accrual model may not implement a use-it-or-lose-it policy, though hours can be capped.
 § 300.520(h)
Maryland
  • Employers must allow up to 40 hours of accrued sick leave to be carried over. Employers can prevent carry over by providing the full amount of sick leave at the start of the year.
  • Employers may mandate that vacation time not be carried over.
 §3–1304(g)
Massachusetts
  • Employers must allow up to 40 hours of accrued sick leave to be carried over. This does not apply for accrued vacation time.
 § 148C(d)(7)
Michigan
  • Employers must allow up to 72 unused hours of sick leave to be carried over. Small businesses may cap at 40 hours.
 § 408.963(5)
Minnesota
  • Carry over of unused sick leave up to 80 hours must be permitted.
 § 181.9446(b)(1)
Montana
  • Use-it-or-lose-it is not permitted, however accrual caps may be instituted.
 Montana Dept. of Labor & Industry Wage and Hour FAQ
New Jersey
  • Employers must permit a carry over of up to 40 accrued hours of sick leave.
 § 34:11D-2(a)
New Mexico
  • Accrued sick leave will carry over up to a cap of 64 hours.
 § 50-17-3
New York
  • Accrued sick leave must be allowed to carry over.
  • Employers with fewer than 100 employees may limit the number of sick days an employee can use per year to 40 hours.
  • Employers with over 100 employees may impose a limit of 56 hours of sick leave an employee is entitled to use per year.
 § 196-b(6)
Oregon
  • Employees may carry over up to 40 hours of unused sick time from one year to the next.
  • Employers may limit the accrual to 80 hours of total sick time.
  • Employers may adopt a policy limiting the amount of sick time an employee may use to a maximum of 40 hours per year.
 § 653.606(3)
Rhode Island
  • Paid sick and safe leave can be carried over (up to 24 hours)
  • If the employer provides 40 sick leave hours at the beginning of the year and pays out the unused hours at the end of the year, they can avoid the carryover requirements.
 § 28-57-5(e)
Washington
  • 40 hours of unused accrued sick leave can be carried over.
 § 296-128-620(4)

Sample

Download: PDF, MS Word, ODT

[EMPLOYER NAME]
EMPLOYEE PAID TIME OFF POLICY

1. ELIGIBILITY. (check all that apply)

☐ – Employees who have completed [TIME PERIOD] of continuous full-time employment are eligible for PTO benefits.

☐ – Part-time employees who work at least [#] hours per week and have completed [TIME PERIOD] of continuous employment are eligible for pro-rated PTO benefits.

2. ACCRUAL METHOD AND RATE. Except for legally mandated leave benefits, PTO will accrue (check one):

☐ – Yearly – Eligible employees will receive [#] hours of PTO at the beginning of each year.

☐ – Hourly – Eligible employees accrue [#] hours of PTO for every [#] hours worked.

☐ – Per Pay Period – Eligible employees accrue [#] hours of PTO for each pay period.

3. NEW HIRES. (check one)

☐ – Excluding legally mandated leave, new employees are subject to a probation period of [#] days before becoming eligible to use accrued PTO. During the probation period, PTO will not be available for use but will accrue at the rate of [ACCRUAL RATE]. After the probation period has been successfully completed, the employee is eligible to use PTO normally.

☐ – New employees begin accruing and may use PTO immediately upon their date of hire.

4. USING PTO. To use PTO, employees must submit a request to their supervisor or manager [#] weeks in advance of the requested time off, except in cases of emergencyillness, family leave, or any other state or federally mandated allowances for absence from work.

5. SEASONAL RESTRICTIONS AND BLACKOUT DATES. (check all that apply)

☐ – Seasonal Restrictions – Excluding legally mandated leave, at management’s discretion, based on workload and availability of coverage, PTO requests may not be approved if the request includes a day or days that fall on, or within, the dates of: [DATES].

☐ – Blackout Dates – Excluding legally mandated leave, PTO requests will not be approved if the request includes a day or days that fall on, or within, the dates of: [DATES].

☐ – Unrestricted – PTO is not restricted seasonally or by specific dates.

6. CARRY OVER. (check all that apply)

☐ – Employees may carry over up to [#] hours of unused vacation PTO from one calendar year to the next.

☐ – Employees may carry over up to [#] hours of unused sick leave PTO from one calendar year to the next

☐ – Carry over is not permitted. Employees forfeit any unused PTO at the end of the year, excluding legally mandated leave.

7. MAXIMUM PTO ACCRUED. (check one)

☐ – The maximum PTO that an employee may accrue is [#] hours. PTO benefits will cease to accrue for employees who have reached the maximum permitted number of hours.

☐ – The employee is not limited in the amount of PTO they may accrue.

8. PAYOUT. (check one) 

☐ – Employees will receive a payout for accrued and unused PTO. The payout will be based on the employee’s pay rate, and the number of hours accrued at the time of separation

☐ – Unused PTO will not be paid out at the end of their employment.

9. OTHER TERMS AND CONDITIONS.

[DESCRIBE ANY OTHER TERMS/CONDITIONS]