It’s hardly a secret: Americans are notoriously bad at using all of their vacation days. Thanks to the typically American always-on can-do attitude, more than half of all employees in the US have not taken a single day off in the last 12 months. Even among those who agree that vacation is important, over 40% haven’t been on vacation at all for at least a year.
According to the most recent State of American Vacation report by Project: Time Off, around 705 million vacation days were accumulated and left on the table, while about 212 million days were forfeited entirely, which amounts to around $62.2 billion in lost benefits.
This trend is further exacerbated by the fact that there is no federal law that requires employers to grant their workers paid vacation time. The vast majority of companies do provide PTO to their employees, but thanks to the absent legislation, they have a lot of legal leeway in setting the rules on who is eligible, how PTO is accrued, and when it can be used.
Guide to PTO: Who Gets It, When and How Much
Since there’s no law that obligates businesses to provide paid vacation time to their employees, they have a lot of freedom in terms of how much PTO to offer and to which employees.
When it comes to the amount of vacation time provided, the decision is usually based on general industry standards and employee expectations. Deciding who receives the benefit of paid time off is also at the employer’s discretion – most companies only reserve it for their full-time employees.
What employers aren’t allowed to do is discriminate in establishing their PTO policy on who gets vacation time based on gender, race, religion, or disability. Outside of that, companies are free to establish their PTO rules however they see fit.
They are also free to set up schedules for vacation accrual. Some companies allow employees to earn a specific number of hours or days per a specific period (usually a month), or offer them a flat number of days to use at the start of each year. They may also implement a waiting period for new workers before they can start accumulating vacation time. Another popular practice is to allow senior staff or employees with more tenure at the company to accrue more vacation time to reward them for their loyalty and service.
What happens when an employee accrues a lot of vacation time depends on company policy as well as state legislation in that area:
- “Use it or lose it” | Some companies have a strict PTO accrual policy where vacation time is reset if not used by a certain time. However, this practice is illegal in 24 states (and the District of Columbia), where PTO is considered earned wages, and taking it away by resetting it would be seen as wage theft.
- Accrual cap | It is perfectly legal for employers to cap the amount of vacation time earned by employees. This is a great way to encourage people to use their vacation time, since they won’t be able to accrue any more once it reaches a certain limit.
- Accrual rollover | In more advanced innovative industries like tech and IT, companies tend to have more relaxed and flexible policies on vacation accruals. Employees are allowed to have their vacation balance rolled over into the next period, so they don’t need to worry about losing it.
Unused PTO Compensation
When an employee quits their job or is fired, they may be entitled to have their unused vacation time cashed out, depending on the labor laws of their state and the terms of their employment contract.
Around half of the US states have laws regarding payment of accrued vacation time. If an employee lives in one of those states, they are guaranteed the right to challenge their employer in court should one refuse to pay out their unused vacation time.
In the remaining states, there is no law that requires companies to pay out any unused vacation time, although they may do so voluntarily or if it’s stipulated in their policy.
If you’re not certain which PTO rules apply in your case, it may be a good idea to check with your state labor department to make sure.
Best Ways to Spend Unused PTO
Depending on your company’s stance on unused vacation time, it’s highly likely that you’re either sitting on a stockpile of unused paid time off accumulated over the years or scrambling to spend it before it expires at the end of the year. Either way, you may have more options to deal with your extra PTO than you think.
1. Donate your PTO
Not all employees in the US have access to paid sick time, and even those who do may not have enough when faced with major health issues. Should one of your colleagues find themselves dealing with a serious illness or a family emergency, you may be able to help them out by donating your unused PTO.
Almost a third of American employers allow this practice, according to the 2018 survey conducted by International Foundation of Employee Benefit Plans, so we would suggest asking your HR whether your company has a donation policy.
2. Trade it in for other perks
Unused PTO is a financial liability, so more and more companies adopt new and creative ways to encourage employees to spend their accrued vacation time.
Some companies have started offering their workers the option to exchange their unused paid time off for payments against their student loans, or to finance their education expenses. Some provide the option to cover travel and accommodation costs. Others allow their staff to convert their unused PTO into donation to a charity or a nonprofit organization.
Programs like PTO Exchange allow participating employers to convert their workers’ unused paid time off into credits they can spend on a number of different benefits.
3. Request a carry-over
Even if your company policy does not allow employees to carry over their vacation days into the next year, there’s a chance your manager could make an exception under some circumstances.
If you couldn’t spend any of your accumulated vacation time because you were swamped with work on important projects the entire year, it’s only fair to expect some degree of leniency in return when you ask to have your unused PTO to be at least partially rolled over.
Due to the lacking federal legislation and often confusing rules on the state level, navigating the topic of PTO and specifically your options when it comes to unused paid vacation time can be quite tricky. In this post we’ve only covered the most basic aspects. To learn more, we would encourage you to contact your local labor department office and ask your HR about your company’s specific policies on PTO and unused vacation time.
