What is a PTO policy?

A paid time off (PTO) policy is an employee benefit that combines all paid time away from work (vacation and sick leave) into one "bank" of paid time off.

Before adopting a paid time off policy, an employer should consider the following issues:

• California vacation pay regulations treat the entire PTO bank as vacation for purposes of final pay. An employer is required to pay an employee all accrued, unused PTO at termination. In contrast, employers are not required to pay out sick leave, and if an employer keeps that bank of time separate, the employee is not entitled by law to that unused time at termination.