Definition: Paid time off (PTO) is time an employee is paid for but does not work. It can be offered as separate buckets (vacation, sick, personal) or as a single combined PTO bank that employees use for any reason, subject to policy.
With EZTime time-off requests, employees ask for PTO from their phone and managers approve it in one place.
PTO is one of the most visible benefits for hourly employees and one of the most common sources of payroll questions. A clear policy explains how PTO is earned, when it can be used, how requests are approved, and what happens to unused time. Getting the details right protects employees' trust and keeps payroll records accurate.
Employers generally choose one of these models:
Policies also set caps on balances, carryover rules, request and approval procedures, and minimum increments of use.
Suppose a policy accrues PTO at 0.0385 hours for each hour worked, with an annual cap of 80 hours.
| Employee | Hours worked in year | Calculation | PTO accrued |
|---|---|---|---|
| Full-time | 2,080 | 2,080 x 0.0385 | 80.08 hours, capped at 80 |
| Part-time | 1,040 | 1,040 x 0.0385 | 40.04 hours |
| Seasonal | 520 | 520 x 0.0385 | 20.02 hours |
If the full-time employee earns $18.00 per hour and takes 16 hours of PTO, that is $288.00 of PTO pay. Under the Department of Labor's regular rate fact sheet, paid vacation, holiday, and sick pay can be excluded from the regular rate, and PTO hours are not hours worked for overtime purposes. Use the PTO accrual calculator to model your own rates.
Many states and cities require employers to provide paid sick leave, with rules on accrual rates, caps, permitted uses, and notice. States also differ on whether unused vacation or PTO must be paid out when employment ends and whether "use it or lose it" policies are allowed. Because these rules vary widely and change often, confirm the requirements in each state and city where you have employees before finalizing your policy.
Answering each question in writing, and reviewing the answers whenever you expand into a new state or city, keeps the policy consistent and easy for managers to apply. It also helps employees plan their time off, which makes scheduling easier for everyone.
Finally, revisit the policy at least once a year. Changes in staffing, new locations, and new state or local leave laws can all make an older policy out of date, and a quick annual review is much easier than fixing balances after the fact.
EZTime includes PTO and absence management, so employees can request time off from the EZTime mobile app and managers can approve it with the schedule in view. Approved PTO appears alongside AI shift scheduling and shift templates, so gaps are visible early, and shift swaps with approval help fill them. Worked hours from the GPS mobile time clock with geofencing, NFC tags, tablet kiosk, or biometric clocks stay separate from PTO hours, and timecard corrections are tracked with an audit trail. Payroll-ready Excel and PDF exports work with any payroll software; EZTime does not run payroll. Plans start at $2 per employee per month with a 14-day trial. See scheduling software and pricing.
This is general information, not legal advice.
No. The Department of Labor says the FLSA does not require payment for time not worked, such as vacations, sick leave, or holidays. These benefits are generally a matter of agreement between employer and employee. Some state and local laws require paid sick leave.
The FMLA provides up to 12 weeks of unpaid leave for certain medical and family situations for eligible employees. The Department of Labor notes that paid leave may often be substituted for unpaid FMLA leave.
Under federal rules, overtime is based on hours actually worked. PTO hours are time not worked, so they generally do not count toward the 40-hour threshold, and the Department of Labor lists paid vacation, holiday, and sick pay among payments excluded from the regular rate.
Federal law does not address this. Payout rules are set by state law and company policy, and they vary. Check your state’s rules and state your policy in writing.