A PTO policy sets the rules for how paid time off works at your company. It defines who qualifies, how time is earned, how requests get approved, and what happens to days nobody uses. Without one written down, every manager makes their own call, and employees get different answers depending on who they ask.
Writing one from scratch takes longer than it should. That is why I put together a PTO policy template you can download and adapt, along with five example policies built for different company sizes and models.
In this guide, I’ll explain what a paid time off policy should include, a full template you can copy section by section, five sample PTO policies, and the mistakes that cause the most disputes later.
| Free PTO Policy Template 5-page customizable PDF covering eligibility, accrual, requests, carryover, payouts, compliance, and more. Download the PTO Policy Template |
A PTO policy is the written document that explains how paid time off works at your company: who is eligible, how much time employees earn, how they request it, and what happens to unused days. It sits in your employee handbook and it is what managers point to when someone asks whether a request can be approved.
Paid time off policy and PTO plan usually refer to the same set of rules. A broader time off or leave policy may also cover unpaid and legally protected leave, so the two are worth keeping distinct. Some companies bundle vacation, sick days, and personal time into a single PTO bank. Others keep them separate, usually because state or local sick leave rules require it.
It is worth separating two words that get mixed up. The policy is your company’s actual rules, with your numbers in it. A PTO policy template is the empty structure you fill in to create that policy. You need the template first and the policy second.
If you want the wider view of how PTO fits alongside other kinds of leave, our time off policy guide covers the full picture.
A PTO policy template covers seven core sections: eligibility, accrual, usage, requests, carryover, payout, and compliance. Each one answers a question an employee will eventually ask, and leaving any of them out is where most disputes start.
Here is what each section decides. The full template further down gives you the wording.
Eligibility defines which employees qualify and when they can start using their time. Most companies give full benefits to full-time staff and prorate for part-time or hourly employees, while excluding contractors, temps, interns, and seasonal workers unless their agreement says otherwise.
The accrual section explains how employees earn their time, either gradually through each pay period or as a lump sum at the start of the year. This is the section employees read most often, so vague wording here generates the most questions.
If you accrue, the rate is based on hours worked or length of service, and many policies raise it at service milestones. If you are working out what your rate should be, our PTO accrual calculator walks through the maths for hourly and salaried staff.
Usage rules explain what employees can take paid time off for and in what increments. Decide whether you are running one combined bank or separate vacation and sick leave before you write anything else, because that choice changes almost every other section.
The request section defines how employees submit time off, how much notice they owe, and how managers approve or decline. Without it, approvals happen over chat, and nobody can prove what was agreed.
Carryover rules explain what happens to unused PTO at the end of the year. You have three levers: allow rollover, set an expiry date, or cap the total balance. Some states restrict use-it-or-lose-it, so check your local rules before committing to it.
The payout section states whether employees get paid for unused PTO when they leave. Leaving this out is one of the most expensive omissions you can make. Several states require payout of accrued time on separation, and where your policy says nothing, a departing employee may reasonably assume one is coming.
Your policy has to comply with the labour laws that apply where your employees work, not where your head office sits. For a distributed team, that can mean several sets of rules in one document, covering sick leave accrual, parental leave, and how unused time is handled.
Below is a full PTO policy template you can copy and adapt. Replace the placeholders in brackets with your own company name, accrual numbers, and notice periods.
This is the same structure as the downloadable PDF, so you can work from whichever format suits you.
The purpose of this policy is to establish clear guidelines for how employees take paid time away from work. It ensures time off is managed consistently and fairly while supporting both employee wellbeing and business operations.
The policy explains how employees earn paid time off, how to use it, and the process for requesting leave. It also defines how unused time is handled and how [Company Name] manages compliance with applicable regulations.
All regular full-time employees are eligible to earn paid time off under this policy. Part-time employees are eligible for prorated benefits based on their scheduled work hours.
Independent contractors, temporary staff, interns, and seasonal workers are not eligible for paid time off unless their employment agreement specifies otherwise.
New employees must complete a [30/60/90] day probationary period before using accrued time off.
Employees earn paid time off gradually. Accrual begins on the employee’s first day of employment.
Paid time off is earned during each pay period based on the employee’s work schedule. Full-time employees accrue [X] hours per pay period, equal to [Y] days per year. The exact accrual rate depends on employment status and length of service.
Accrual rates increase at the following service milestones: [after 2 years: X hours per pay period. After 5 years: X hours per pay period].
Employees can use paid time off for vacation, personal matters, illness, medical appointments, or other approved reasons.
Time off may be used in [full-day / half-day / hourly] increments. Employees cannot use time off before it has been earned unless management approves it in advance.
Employees are expected to schedule time off so that team responsibilities and business operations continue uninterrupted.
Employees must submit time-off requests through [system name] or directly to their supervisor.
Planned absences require at least [two weeks] notice. Absences longer than [five days] require at least [one month] notice.
Managers review requests based on workload, staffing needs, and the timing of other approved absences. [Company Name] may decline or reschedule a request where necessary to maintain operations.
Emergencies, including sudden illness, should be reported to a supervisor as soon as possible and no later than [start of the working day].
Employees may carry over up to [X] hours of unused paid time off into the following year.
Time in excess of the carryover limit expires on [31 December / the employment anniversary date].
[Company Name] also sets a maximum balance of [X] hours. Once an employee reaches this limit, further accrual pauses until some time off is used.
Upon separation from employment, employees [will / will not] receive payment for accrued but unused paid time off, subject to applicable law.
Where a payout applies, it is calculated using the employee’s rate of pay at the time of separation.
[Company Name] may set conditions relating to notice requirements or termination circumstances that affect eligibility for payout.
This policy complies with all applicable employment laws and regulations governing paid leave and employee benefits.
If legal requirements change, [Company Name] will update this policy accordingly. Employees will be notified through official company communication channels or updates to the employee handbook.
The five sample PTO policies below show how the same template plays out across different company sizes and models. Each one uses real numbers so you can see how the pieces fit together, then adjust them to match your own business.
A template gives you the structure. Seeing a finished policy tells you what the numbers should look like. I have written these five to cover the models I see most often, so pick the one closest to your situation and work from there.
This is the most common PTO policy example for mid-sized companies, where employees earn time gradually, and the balance grows through the year. It gives you predictable costs and prevents anyone from taking a full year of leave in January.
Full-time employees accrue 5.23 hours per pay period on a biweekly schedule, which works out to 17 days a year across 26 pay periods. Accrual increases to 6.15 hours after two years of service, or 20 days, and to 7.69 hours after five years, or 25 days.
Part-time employees accrue at the same rate prorated to scheduled hours. Accrual starts on day one, and employees can begin using time after a 60-day probationary period.
The policy covers vacation, sick days, and personal time in a single bank. Requests need two weeks’ notice, or a month for absences longer than five days. Employees can carry up to 40 hours into the following year, and anything above that expires on 31 December. Accrual pauses at a balance of 240 hours.
On separation, accrued unused time is paid out at the current rate of pay where state law requires it. Where it does not, say plainly which way you have decided.
This model works well when you have enough headcount that coverage matters and enough tenure variation that rewarding service makes sense.
A lump-sum policy grants the full year of PTO on a single date instead of accruing it, which is simpler to administer and easier for employees to understand. The trade-off is that someone can take all of it in the first quarter and then leave.
Full-time employees receive 20 days of paid time off on 1 January each year. New hires receive a prorated amount based on their start date, calculated as 1.67 days for each remaining full month.
There is no probationary period. Employees can use their allocation from the first day, which makes this an attractive policy in competitive hiring markets.
Sick leave sits outside this allocation at 5 separate days per year, because several states require paid sick leave to be tracked on its own. Requests follow the same two-week notice rule.
Unused days do not carry over and expire on 31 December. Employees who leave mid-year and have used more than their prorated share may have the excess deducted from final pay where law permits.
That last clause is the one I would check with a lawyer before publishing, because deduction rules vary considerably by state.
An unlimited PTO policy removes the fixed allocation and replaces it with an approval process plus a stated minimum. Without the minimum, employees usually take less time off than they did under a fixed policy.
Employees may request time off as needed, subject to manager approval and coverage requirements. There is no annual allocation and no accrual to track.
The policy sets a minimum expectation of 15 days per year and asks managers to follow up with anyone who has taken fewer than 10 days by 1 October. I think this is the part most unlimited policies leave out, and leaving it out is why the model gets a bad reputation.
Requests still need two weeks’ notice, and the same blackout dates apply as under any other model. Managers decline requests based on coverage rather than on a balance, so approval criteria need to be written down or the policy feels arbitrary.
A properly structured unlimited policy generally does not create a defined accrued balance, though payout treatment can depend on state law and on how the policy operates in practice. Reducing that liability is one reason companies move to this model, and I think it is worth being honest about that internally.
Our guide to unlimited PTO covers what usually goes wrong with this model and how to avoid it.
A small business PTO policy should fit on one page and avoid rules you have no way to enforce. At this size, complexity costs you more than it protects you.
All employees working 30 hours or more per week receive 15 days of paid time off per year, granted in full on their employment anniversary. Employees working fewer hours receive a prorated amount.
One combined bank covers vacation, illness, and personal time. There is no probationary period and no service-based increase, because at this size tenure tiers create admin work without much benefit.
Requests go to the owner or manager with at least one week’s notice, or as soon as possible for illness. Up to 5 days carry over into the next year and the rest expires.
The policy states plainly whether unused time is paid out on departure. For a small team, that single sentence prevents most of the disagreements that come up when someone leaves.
If you are writing your first PTO policy, this is the version I would start from. You can add tiers, blackout dates, and separate sick leave later, once you have the headcount to need them.
A hybrid policy keeps vacation and sick leave in separate buckets, which is often the simpler route to compliance for companies operating across multiple states. A combined bank can satisfy sick leave requirements in some jurisdictions where it meets their conditions, so this is a judgment call rather than a rule. It is more work to administer and it removes a common source of risk.
Full-time employees receive 15 days of vacation per year, accrued at 4.62 hours per biweekly pay period. Sick leave accrues separately at 1 hour for every 30 hours worked, capped at 40 hours per year, which matches the accrual standard used in several state sick leave laws.
Vacation requires two weeks’ notice. Sick leave may be taken without advance notice, and where state or local law protects it, your ability to deny a request is limited. Documentation may be requested for absences longer than three consecutive days, depending on applicable law.
Vacation carries over up to 40 hours. Sick leave carries over in full where state law requires it, with an annual usage cap of 40 hours.
On separation, accrued vacation is paid out where required by law. Accrued sick leave is generally not paid out, though this varies and you should check the rules for each state where you employ people.
If you employ people in more than two states, I would lean towards this structure even though a single combined bank looks simpler on paper.
These sections are not required in every policy, and they clarify situations that come up as a company grows. Add them when the situation applies rather than including all of them by default.
A probation period lets new hires accrue time off before they can use it. Typical lengths are 30, 60, or 90 days.
The policy should be explicit about two separate dates: when accrual starts and when usage becomes available. Conflating them is a common source of confusion for new starters.
Blackout dates are periods when time off cannot be scheduled because the business expects peak workload. They are common in retail, hospitality, and finance.
List the dates explicitly rather than describing them, so employees can plan around them. A retail policy might block the four weeks before Christmas. An accounting firm might block the two weeks around each quarterly close.
Minimum increments set the smallest amount of time an employee can book at once. Common options are full days, half days, or hourly blocks.
Hourly increments give employees flexibility for appointments. Full-day increments are simpler to track. Pick one and apply it consistently, because mixed practice across teams causes more friction than either option on its own.
Under an unlimited model, employees request time as needed rather than drawing down an allocation. Approval and coverage expectations still apply.
Most companies that adopt this also set a minimum expectation, because usage tends to fall without one. Example 3 above shows how that looks in practice.
This section explains how paid time off interacts with parental, medical, and family care leave. The key question is whether employees must exhaust PTO before other leave begins.
Say clearly whether PTO runs concurrently with statutory leave or sequentially after it, and whether accrual continues during an extended absence. Both questions come up every single time someone goes on parental leave.
A template gives you the structure, and five decisions turn it into your policy: accrual rate, rollover rules, state law requirements, company size, and industry expectations. Work through them in that order.
Decide how much time employees get and how it accumulates. Some companies grant a fixed number of days each year. Others let employees earn time gradually each pay period. Many increase the rate as employees stay longer, which rewards tenure and helps retention.
Your accrual structure should reflect your compensation strategy and what your workforce expects. If you are unsure where to land, benchmark against similar companies in your industry before you commit.
Decide what happens to unused time at year-end. Clear rollover rules stop large balances from building up and encourage people to actually take time off. Whatever you choose, put a number on it, because “reasonable carryover” is not a rule.
Some locations require a separate sick leave policy, mandate payout of unused time when employment ends, restrict use-it-or-lose-it, or set minimum accrual standards. If you have staff in multiple states, you usually need to accommodate several sets of rules in one document, and legal review is worth the cost before you publish.
Smaller companies can run simpler policies with fewer rules, while larger organisations need more detail to stay consistent across teams and locations. What works for ten people rarely works unchanged for two hundred.
Industry standards also shape what employees expect. Professional services and technology roles often come with more generous vacation or flexible leave models, while sectors with shift coverage need more structured scheduling.
A clear time off request policy defines how employees submit requests, how much notice they owe, who approves, and what happens when two people want the same week. The last one is where most policies go quiet, and most conflict starts.
Here is what I would make sure a complete request process covers.
If you want a ready-made form for employees to submit, our employee time off request form template is a good starting point.
Writing the policy is the first step, and enforcing it consistently is the harder one. When the process relies on manual tracking, mistakes appear quickly, and the policy turns into a suggestion.
These are the operational problems I see most often:
Our breakdown of the most common PTO tracking mistakes covers how each of these develops and what to do about it. If you are comparing systems, we also review the best PTO tracking software. If you are still running this from a spreadsheet, a PTO tracker template is a reasonable interim step before moving to dedicated software.
Thrivea puts requests, approvals, balances, and policy rules in one place, so the policy you wrote is the policy that actually runs. Instead of tracking time off across emails and spreadsheets, the whole workflow lives in one system.
You can create custom PTO policies that reflect different leave rules and employee needs, rather than working around a fixed model.
Employees submit time-off requests through the platform. Managers get a notification and approve or decline in one place, which gives you the approval record that chat-based approvals never produce.
Employees can check their current balance, upcoming leave, and request status at any time without asking HR. In my experience, that removes a large share of the questions that land in an HR inbox every month.
The PTO dashboard and calendar view show upcoming absences and team availability, so managers can spot overlapping requests before approving them rather than after.
See how PTO tracking works in Thrivea or book a demo to walk through it with our team.
Run through these six checks before you publish. Each one corresponds to a question employees will ask, and a gap in any of them is where disputes begin.
Most PTO problems trace back to unclear rules or inconsistent tracking. When the policy is vague or applied differently by each manager, people interpret it differently and disputes follow.
A policy saying employees “earn PTO regularly” is not a rule. Define the exact structure: how much is earned per pay period, or how many days are granted per year. Without a clear formula, HR fields the same balance questions repeatedly, and different employees end up calculated differently, which produces inconsistent records and arguments about earned time.
If the policy never mentions payout, a departing employee may reasonably expect payment for unused time and challenge the decision when it does not arrive. In some locations, the law requires payment regardless of what your policy says.
Clear payout language prevents that misunderstanding and protects you in disputes about final pay.
When each manager handles requests differently, employees notice. One team approves easily while another declines similar requests, and the policy starts to feel unfair. This happens when approval standards are not defined, so managers need guidance on how to review requests, what notice is expected, and how to handle overlapping dates.
Many regions require paid sick leave with specific accrual rules. A policy that does not reflect them can put you in breach without anyone realising.
Some jurisdictions require sick leave to accrue at a set rate. Others require unused sick leave to carry over. Employers operating across multiple locations need to review these carefully.
Spreadsheets do not get updated when time off is approved, formulas break, and different managers keep separate records. The consequences land on employees: paid incorrectly, denied time they earned, or allowed to take time they do not have.
A clear PTO policy removes ambiguity for employees, gives managers a consistent basis for decisions, and prevents most disputes about balances and unused time. Writing it is the first step, and enforcing it consistently is what makes it real.
I would start with the template above or the downloadable PDF, then pick the example closest to your company size and model. Fill in your own numbers, check the payout and sick leave rules for every state where you employ people, and put the final version in your handbook.
Then decide how you will track it. A policy that lives only in a document depends on memory, and memory is where most PTO problems start.
Seven sections: eligibility, accrual, usage rules, the request and approval process, carryover and expiration, payout on separation, and a compliance statement. Optional additions include probation rules, blackout dates, minimum increments, and how PTO coordinates with parental leave.
Start from a template so you do not miss a section. Decide your model first, whether that is accrual, lump sum, unlimited, or hybrid, because it affects everything else. Fill in your own numbers, check state requirements for each location where you employ people, and have it reviewed before publishing.
Federal law in the United States does not require a PTO policy. Many states do require certain types of leave, most commonly paid sick leave. If you choose to offer paid time off, you have to follow your own written policy and comply with the employment laws that apply to your employees.
Both work. Accrual reduces the risk of someone taking a full year of leave in January and leaving in February. An annual grant is simpler to administer and more attractive to candidates. Accrual suits companies where coverage is tight. Lump sum suits companies competing hard on benefits.
Yes, where the absence would disrupt operations or several employees have requested the same dates. Most policies require manager approval to maintain staffing. Legally protected leave, including mandated sick leave in some states, carries additional protections and generally cannot be denied.
It depends on your policy and local regulations. Some companies allow carryover into the next year, others require use before a deadline, and in several states employers must pay out unused time when someone leaves. Whatever you decide, put it in writing before the question comes up.
Not without changes. A template gives you the structure and the section headings. The numbers, notice periods, and payout rules have to reflect your business and the law where your employees work. Treat it as a starting point and get the final version reviewed.
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