PTO meaning: what paid time off is and how it works

By the HRPricing editorial teamReviewed October 18, 2026How we research and score

PTO stands for paid time off: hours or days your employer pays you for when you are not working, such as vacation, sick days, holidays and personal days. No federal law requires it: the Fair Labor Standards Act "does not require payment for time not worked," so PTO comes from your employer's policy, a contract or state and local law (U.S. Department of Labor, checked October 18, 2026).

PTO (paid time off) is time away from work that the employer pays for, such as vacation, sick days, holidays and personal days.

On this page
  1. What PTO covers in practice
  2. Example: paying out unused PTO
  3. State paid leave programs are not PTO
  4. PTO for staff abroad

What PTO covers in practice

Employers set PTO up in one of three ways: one pooled bank for any reason, separate vacation and sick balances, or an unlimited policy with no balance at all. Many banks accrue a little each pay period. The DOL calls these benefits "matters of agreement between an employer and an employee." The exceptions are federal service and Davis-Bacon contracts, where the wage determination can require holiday or vacation pay, and state or city paid sick leave laws. FMLA leave is unpaid.

Example: paying out unused PTO

Payout of 8 unused PTO days on a $62,400 salary
LineAmount
Daily rate ($62,400 / 260 workdays)$240
Payout for 8 days$1,920
Federal withholding at the 22% supplemental rate$422.40
Employee Social Security and Medicare at 7.65%$146.88

Rates: IRS Publication 15 (2026), checked Oct 16, 2026. State income tax not included.

Whether you get the payout at all depends on the state and the policy. California requires final pay to include accrued vacation (Labor Code 201 and 202); many states leave it to the written policy. Look up your state on California payroll rules or the payroll compliance guide, and see how the line appears on a pay stub.

State paid leave programs are not PTO

Some states run paid family and medical leave insurance funded by payroll contributions. Colorado FAMLI is 0.88% of wages in 2026, split between employer and employee; Massachusetts PFML is 0.88% in total; New York Paid Family Leave is 0.432% of employee wages, capped at $411.91 a year. These pay benefits during qualifying leave. They do not replace an employer's PTO policy. See Colorado, Massachusetts and New York.

PTO for staff abroad

Outside the U.S. paid leave is set by law. The UK requires 28 days for a 5-day week (bank holidays may count), France 30 working days (5 weeks), and Mexico 12 working days after the first year, rising 2 days a year to 20 by year 5. Unpaid leave balances are a common fight at termination: a Trustpilot review of Oyster from July 28, 2025 (more than a year old) says final pay left out accrued PTO. Check the rules in UK, France and Mexico, and compare providers in our EOR rankings.

Frequently asked questions

What does PTO stand for?
PTO stands for paid time off: days or hours your employer pays you for while you are not working, such as vacation, sick days, holidays and personal days.
Is PTO required by law in the U.S.?
Not by federal law. The DOL says the FLSA does not require payment for time not worked, such as vacations or holidays. Some states and cities require paid sick leave, and federal service and Davis-Bacon contracts can require vacation or holiday pay.
Do you get paid for unused PTO when you quit?
It depends on the state and your employer's policy. California requires accrued vacation in the final paycheck under Labor Code 201 and 202. A payout is taxed as wages; with the 22% federal supplemental rate, 8 days on a $62,400 salary ($1,920) has $422.40 withheld.
What is the difference between PTO and vacation?
Vacation is one kind of PTO. A PTO bank usually pools vacation, sick and personal days into one balance you can use for any reason, while a vacation policy covers only planned time off.
What is paid time off in other countries?
Most countries set a legal minimum: 28 days in the UK for a 5-day week, 30 working days in France and 12 working days after one year in Mexico (GOV.UK, service-public.fr and the Mexican Ley Federal del Trabajo, checked October 2026).
Sources (10)
  1. U.S. Department of Labor: Vacation Leave (checked Oct 18, 2026)
  2. IRS: Publication 15 (2026), Employer's Tax Guide (checked Oct 16, 2026)
  3. California DIR: Paydays, pay periods and the final wages (FAQ) (checked Oct 16, 2026)
  4. Colorado FAMLI: Premium and benefits calculator (checked Oct 16, 2026)
  5. Massachusetts DFML: PFML employer contribution rates and calculator (checked Oct 16, 2026)
  6. New York DFS: Paid Family Leave 2026 rate decision (checked Oct 16, 2026)
  7. GOV.UK: Holiday entitlement (checked Oct 16, 2026)
  8. Service-public.fr: Conges payes du salarie (checked Oct 16, 2026)
  9. Camara de Diputados (Mexico): Ley Federal del Trabajo (checked Oct 16, 2026)
  10. Trustpilot: Oyster reviews (read Oct 16, 2026)

This page is general information, not tax, legal or accounting advice. Rules and rates change, so check the official source linked above before you file or sign a contract. Read our disclaimer.