PTO Donation Program: How to Set Up Leave Sharing
Quick Answer
A PTO donation program lets employees give some of their unused paid time off to a coworker facing a serious situation, such as a medical emergency, after the coworker has used up their own leave. To set one up, decide which situations qualify, who can donate and receive, minimum balances donors must keep, limits on hours, whether donations go directly to a person or into a shared leave bank and how hours are valued when pay rates differ. Keep it voluntary and confidential, and have your accountant review the tax treatment.
When an employee faces a serious illness, a family emergency or a disaster, coworkers often want to help. A PTO donation program, also called leave sharing, gives them a way: they can donate some of their unused paid time off so the employee can stay paid while they're away. For a small business, it can be a meaningful benefit that costs little to run, as long as the rules are clear.
This guide explains how to design a PTO donation program, with a free policy template, donation form and request form. It's general information, not legal or tax advice.
What Is a PTO Donation Program?
A PTO donation program is a written policy that allows employees to transfer some of their accrued PTO to another employee who needs it. The receiving employee usually must have a qualifying situation and have used most or all of their own paid leave.
| Type | How it works | Best for |
|---|---|---|
| Direct donation | Employees donate hours to a specific coworker | Small teams; personal connection |
| Leave bank (pool) | Employees donate into a shared pool; eligible employees request from it | Larger teams; more privacy |
| Hybrid | Pool plus option to direct donations | Flexibility |
Free PTO Donation Policy Template
[Company Name] PTO Donation Policy
1. Purpose. This policy allows employees to voluntarily donate accrued PTO to eligible coworkers facing a qualifying situation.
2. Qualifying situations. [A serious medical condition of the employee or an immediate family member / a declared disaster affecting the employee / the death of an immediate family member].
3. Eligibility to receive. Employees who have completed [number] months of service, have a qualifying situation and have used all but [number] hours of their own PTO may request donations.
4. Eligibility to donate. Employees may donate if they will keep at least [number] hours of PTO after the donation.
5. Limits. Donors may give up to [number] hours per [year]. Recipients may receive up to [number] hours per qualifying situation.
6. How donations work. Donations are made [directly to an eligible employee / into the company leave bank] using the donation form. Donations are voluntary and irrevocable once processed.
7. Valuing hours. Donated hours are [transferred hour for hour / converted based on the donor's and recipient's pay rates].
8. Unused donations. Donated hours not used when the situation ends will be [returned to donors in proportion / kept in the leave bank].
9. Confidentiality. Medical and personal details are kept confidential. Donors and recipients may choose to remain anonymous.
10. No pressure. Employees will not be pressured to donate, and decisions to donate or not have no effect on employment.
11. Administration. [Role] approves requests and processes donations. Donated hours are paid through regular payroll.
12. Changes. The company may change or end this policy with notice, as permitted by law.
Free PTO Donation Form
PTO Donation Form
Donor name: __________ | Department: __________ | Date: ______
Current PTO balance: ______ hours | Hours to donate: ______ | Balance after donation: ______
Donate to: ☐ Leave bank ☐ Specific employee: __________
Remain anonymous? ☐ Yes ☐ No
I understand this donation is voluntary and cannot be reversed once processed.
Donor signature: __________ | Processed by: __________ | Date: ______
Free Leave Donation Request Form
Leave Donation Request
Employee name: __________ | Date: ______
Qualifying situation (general description): __________
Expected leave dates: ______ to ______ | Current PTO balance: ______ hours | Hours requested: ______
Share my name with coworkers? ☐ Yes ☐ No
Employee signature: __________ | Approved by: __________ | Hours approved: ______
Why Offer a PTO Donation Program?
- Support employees in hard times without large company cost.
- Keep pay going when an employee has used up their own leave.
- Build team culture by letting coworkers help each other.
- Retain employees who might otherwise have to quit.
- Reduce large PTO balances in a meaningful way.
Step 1: Define Qualifying Situations
Decide what situations qualify. Common choices are a serious medical condition of the employee or a close family member, a declared disaster that affects the employee or the death of an immediate family member. Narrow definitions are easier to administer consistently; broad ones help more people but require more judgment. Write the definitions down so every request is handled the same way.
Step 2: Set Eligibility
| Rule | Donors | Recipients |
|---|---|---|
| Length of service | Often none | Often a minimum, such as 90 days |
| PTO balance | Must keep a minimum, such as 40 hours | Must have used most of their own leave |
| Employment status | Active employees | Active employees with a qualifying situation |
Step 3: Set Limits
- Minimum donor balance so donors keep time for their own needs.
- Maximum donation per donor per year.
- Maximum received per recipient per situation.
- Minimum donation, such as 4 hours, to keep processing simple.
Step 4: Decide How Hours Are Valued
When donor and recipient earn different rates, an hour of PTO is worth different amounts. You can transfer hour for hour, which is simple but can cost the business more or less than the donor's value, or convert by dollar value.
Dollar conversion example: A donor earning $30 an hour gives 8 hours, worth $240. The recipient earns $20 an hour, so they receive $240 ÷ $20 = 12 hours. In the reverse case, 8 hours from a $20 donor ($160) becomes 5.33 hours for a $30 recipient.
Hour-for-hour is easier for employees to understand; dollar conversion keeps the business's cost neutral. Pick one and write it in the policy.
Step 5: Choose Direct Donation or a Leave Bank
Direct donations feel personal but require the recipient's situation to be known by coworkers. A leave bank protects privacy: employees donate into a pool, and eligible employees draw from it without anyone knowing who received hours. Many small businesses start with direct donations and add a pool as they grow.
Privacy and Confidentiality
Recipients may not want coworkers to know about a medical or family situation. Only collect the information needed to confirm eligibility, keep medical details confidential and separate from regular personnel files and let recipients decide whether their name is shared. Never pressure employees to donate or track who did or didn't. See leave of absence policy.
Taxes and Payroll
Donated hours are paid to the recipient through payroll as wages. The tax treatment for donors can depend on how the program is designed; the IRS has issued guidance on certain leave-sharing plans for medical emergencies and major disasters. Have your accountant or payroll provider review your program before you launch it and set up the payroll steps correctly.
State Law and Other Leave
A PTO donation program is voluntary and doesn't replace leave required by law. Depending on your size and location, employees may have rights to job-protected or paid leave under federal, state or local laws, and state paid sick leave rules may limit whether that leave can be donated. Check the rules that apply before including sick leave in the program, and coordinate donated PTO with any protected leave the employee is taking.
Administering the Program
- Employee submits a request to the program administrator.
- Administrator confirms eligibility and approves hours needed.
- Administrator announces the need (with permission) or opens the leave bank.
- Donors submit donation forms.
- Administrator checks donor balances and processes transfers in the PTO system.
- Recipient uses donated hours as needed, paid through payroll.
- Unused hours are handled under the policy when the situation ends.
Example: A Small Accounting Firm
At a 25-person accounting firm, an employee needed six weeks off to care for a parent after surgery and had only one week of PTO left. Coworkers asked how to help. The firm adopted a donation policy with a 40-hour minimum balance for donors and a 160-hour cap per situation, converting hours by dollar value. Twelve coworkers donated, and the employee stayed paid for the entire leave. The firm kept the policy for future needs.
Common Mistakes
- No written policy, leading to inconsistent decisions.
- Sharing medical details without permission.
- Pressuring employees to donate.
- No minimum donor balance.
- Ignoring pay rate differences.
- Skipping tax review.
- Not tracking transfers accurately in the PTO system.
PTO Donation Checklist
| Step | Done? |
|---|---|
| Define qualifying situations | |
| Set donor and recipient eligibility | |
| Set minimum balances and limits | |
| Choose hour-for-hour or dollar conversion | |
| Choose direct donation or leave bank | |
| Set confidentiality rules | |
| Review tax treatment and state law | |
| Create forms and payroll steps |
Announcing a Donation Need
When an employee qualifies and agrees to share their name, a short, respectful announcement works best: say that a coworker is facing a difficult situation, that donations are voluntary and confidential and how to donate. Don't share medical details, and don't send repeated reminders that could feel like pressure. If the employee wants privacy, use the leave bank instead.
Sample announcement: A member of our team is facing a serious family situation and has used their available PTO. If you would like to help, you may donate PTO hours through [form/system] by [date]. Donations are completely voluntary and confidential, and you must keep at least [number] hours after donating. Thank you for considering it.
Running a Leave Bank
- Open the bank with an initial donation drive, or ask for donations once a year.
- Track donated hours in the pool, not by donor, once processed.
- Approve withdrawals based on the written eligibility rules.
- Set a maximum withdrawal per employee per year.
- Report the pool balance to employees periodically to encourage donations.
When the Situation Ends
Decide in advance what happens to donated hours the recipient doesn't use, for example if they return to work early. Options include returning hours to donors in proportion to what they gave, moving them to the leave bank or letting the recipient keep a small amount. Write the rule down so it isn't decided case by case.
Common Questions From Employees
- "Will anyone know I donated?" Only the administrator, unless you choose to share.
- "Can I get my hours back?" Donations are final once processed, except as the policy allows for unused hours.
- "Can I donate to my spouse who also works here?" Follow the policy; many allow it if the recipient qualifies.
- "Does donating affect my benefits?" It reduces your PTO balance only.
Coordinating With Other Benefits
Donated PTO often fills gaps while an employee waits for, or receives, other benefits, such as short-term disability, state paid leave or workers' compensation. Check how these interact before approving donations, since some benefits are reduced by other pay. Your benefits provider or payroll provider can explain how donated PTO affects them.
PTO Donation Quick Reference
| Item | Common approach |
|---|---|
| Qualifying situations | Serious medical, disaster, family death |
| Donor minimum balance | 40 hours |
| Donor maximum | 40 hours per year |
| Recipient cap | 80 to 160 hours per situation |
| Valuation | Hour for hour or dollar conversion |
| Privacy | Recipient chooses whether to be named |
Example: A Retail Chain
A retail business with four stores set up a leave bank after a wildfire forced several employees to evacuate. Employees donated 300 hours in the first two weeks. Store managers approved withdrawals using the written rules, and the HR lead tracked the pool balance. The bank stayed open afterward, with a yearly donation drive in November, and helped three employees through medical emergencies the following year.
Launching the Program
- Draft the policy and forms using the templates above.
- Have your accountant and, if needed, an attorney review it.
- Set up the PTO system to record transfers.
- Announce the program and explain how it works.
- Train the administrator on confidentiality and approvals.
Review the program after the first year: how many requests, how many hours donated and whether the rules worked as intended.
Measuring the Program
Each year, look at the number of requests, hours donated, hours used and how many employees participated. Ask recipients and donors for feedback. If the program is rarely used, check whether employees know it exists; if donations fall short, consider a company match or a yearly donation drive to build the leave bank.
Small adjustments based on real use keep the program helpful and easy to run as your team grows.
Clear, consistent rules also make it easier for future managers to run the program the same way.
Review the policy whenever your PTO rules change, so both stay aligned.
Final Thoughts
A PTO donation program lets coworkers support each other when it matters most, at little cost to the business. Define qualifying situations, set eligibility and limits, decide how hours are valued, protect privacy and review taxes and state rules before launching. Keep it voluntary, keep it simple and track every transfer accurately.
Track Donated PTO With Updoot
Updoot's PTO tracking keeps every employee's balance current, so you can confirm donor balances, record transfers and show recipients exactly how many donated hours they have, and the payroll report shows the hours to pay.