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Does Your Employer Have to Pay You for
Unused Vacation Time?

Several U.S. states require employers to pay workers for unused vacation time at termination. However, most states have enacted “use-it-or-lose-it” policies that leave current employees uncompensated for unused vacation time.
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C.L. Mike Schmidt Published by C.L. Mike Schmidt

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Vacation Time Laws

There is no legal requirement that an employer provide its employees with either paid or unpaid vacation time. However, if an employer does have a policy, practice, or agreement implemented to offer paid vacation, then certain restrictions are placed on the employer as to how it fulfills its obligation to provide said pay. In most states, earned vacation time is considered wages and vacation time is earned as labor is performed.

What is PTO?

PTO stands for paid time off. Companies may use this term interchangeably with vacation time, sick leave, or personal leave for their policies regarding an employee’s paid time away from work. Certain businesses track time off based on the separate categories listed above, whereas PTO policies combine all types of leave time together, allowing employees to use the time as they need it for sick leave, vacation, or other personal needs.

What's the Difference Between Vacation Time and PTO?

PTO is literally any paid time off. Vacation is a period specifically intended for taking a break from work. Since employees can use PTO however they see fit, this policy offers a high level of flexibility, whereas vacation time is less flexible since employees must use their leave based on their company's vacation policy.

Also Read: Do Part Time Workers Get Holiday Pay

How Can I Cash Out My Vacation Time?

If you have accrued vacation time, you can cash it out while on the job or when you resign. This may be referred to as "PTO cash out." Because vacation time is a form of wage under most state laws, you are entitled to receive unused vacation days if you quit. The payout should be included in your final paycheck.

Related Article: Do You Get Paid for Vacation Days if You Quit?

Should I Use My Vacation Time Before I Quit?

If you have a few unused vacation days, try to use them before giving your notice of resignation. However, if you have more than a week's worth, it's best to attempt to get paid for them instead. Consult your company's employee handbook to determine whether this is possible, so you won't tip off HR to your leaving the company.

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