PTO and Leave Policies: A Complete Comparison
Use our free PTO and leave policy guide to compare accrual, unlimited, and leave types before you write or rewrite your policy, since PTO policy is one of those decisions that quietly shapes retention, payroll cost, and how prepared a business is for someone being out unexpectedly. An accrual-based policy protects your budget but adds tracking overhead. An unlimited policy sounds generous but often results in employees taking less time off, not more. Sick leave, bereavement, and volunteer time off each carry their own rules and expectations, and mixing them up in a written policy is a common source of confusion for both employers and employees.
This page compares the common PTO and leave policy types side by side, then links to a full guide and template for each. If you are deciding what to offer or rewriting an existing policy, start with the table.
Quick Answer
The main PTO and leave policy types are accrual-based PTO, where time off builds up gradually per pay period; unlimited PTO, which removes a fixed balance entirely; floating holidays, a flexible day an employee schedules on their own; and separate categories like sick leave, bereavement leave, and volunteer time off (VTO), each governed by its own norms and, in some cases, state law. Which mix makes sense depends on company size, state requirements, and how much administrative tracking you want to take on.
Key Takeaways
- Accrual-based PTO gives employees a predictable, growing balance and is the most common model for small businesses.
- Unlimited PTO removes the balance but does not reliably increase time actually taken.
- Floating holidays are typically separate from a standard PTO balance and let employees choose the date.
- Sick leave is often protected separately by state or local law, even where a broader PTO policy exists.
- Vacation payout at termination is determined by state law, not company preference, in many states.
Table of Contents
PTO and Leave Policy Types Compared
How each policy type works, and what it is typically used for. Click any policy name for the full guide.
| Policy Type | How It Works | Common Use Case | Key Consideration |
|---|---|---|---|
| Accrual-Based PTO | Time off builds gradually per pay period, based on hours or tenure | Most common model for small and mid-size businesses | Requires ongoing tracking of balances and carryover rules |
| Unlimited PTO | No fixed balance; employees request time off as needed, subject to approval | Common at tech and knowledge-work companies | Often results in similar or less time taken without a visible balance |
| Floating Holiday | A set number of flexible days an employee can schedule on their own | Covering religious or cultural holidays not on the company calendar | Usually separate from the standard PTO balance |
| Sick Leave | Time off for illness, sometimes accrued separately from general PTO | Required in many states and cities regardless of broader PTO policy | Denial rights vary significantly by jurisdiction |
| Bereavement Leave | Paid or unpaid time off following the death of a family member | Not federally required, but expected in most benefits packages | Duration and eligibility are usually set entirely by company policy |
| Volunteer Time Off (VTO) | Paid hours set aside specifically for community or charitable work | Growing benefit tied to company culture and retention | Usually capped annually and tracked separately from PTO |
| Vacation Payout | Payment of unused accrued vacation when employment ends | Applies at resignation, termination, or layoff | Required by law in some states, optional in others |
Accrual-Based PTO
Accrual-based PTO is the model most small businesses default to. Instead of granting a full year's balance up front, employees earn a portion of their annual allotment with each pay period, usually calculated from hours worked. It gives employers predictable, gradual cost exposure and gives employees a visible, growing balance they can plan around.
The tradeoff is administrative: someone has to track accrual rates, carryover limits, and caps, which is where a lot of small businesses end up managing PTO in a spreadsheet before eventually needing something more automated. Accrual rates typically differ by tenure, with longer-tenured employees earning PTO faster, which adds another layer of tracking complexity as a team grows.
How the math actually works
A common structure grants roughly 0.0385 hours of PTO per hour worked, which works out to about 10 days a year for a full-time employee on a 2,080-hour schedule. A business offering 15 days would use a rate closer to 0.0577 hours per hour worked. These rates are usually tiered: an employee might accrue at the 10-day rate for years one through three, then step up to 15 days starting year four, which means the accrual formula itself has to change on an employee's work anniversary, not just their hire date.
Carryover and caps
Most accrual policies cap how much PTO can roll over into the next year, commonly somewhere between one and two weeks, to prevent balances from growing indefinitely and creating a large payout liability. A small number of states restrict or prohibit "use it or lose it" policies entirely, requiring either unlimited carryover or a payout of anything forfeited, so the cap structure needs to be checked against state law before it is finalized, not assumed to be universally allowed.
Unlimited PTO
Unlimited PTO removes the balance entirely and relies on employees to request time off as needed, with manager approval. It is popular in industries competing for talent on flexibility, but the data on it is consistent: without a visible number counting down, most employees do not actually take more time off, and some take less out of uncertainty about what is "too much."
Companies considering unlimited PTO should think about how they will set informal norms and expectations, since the policy alone does not do that work. Some businesses pair an unlimited policy with a minimum time off requirement, explicitly encouraging a floor rather than leaving usage entirely to individual judgment.
The accounting angle most businesses miss
Unlimited PTO has a real financial side effect beyond employee behavior: because there is no accrued balance, there is no PTO liability sitting on the books. Under accrual-based PTO, unused balances are typically recorded as a liability, since the business technically owes that time or its cash equivalent. Removing the balance removes that liability entirely, which is part of why some finance teams push for unlimited PTO independent of any talent or culture argument.
Setting a real floor
A minimum time off requirement, commonly something like 15 or 20 days a year, tends to work better than a purely aspirational "take what you need" framing. Managers modeling the behavior themselves, actually taking visible time off rather than working through it, has more influence on actual usage than the written policy language does.
Sick Leave, Bereavement, and Volunteer Time Off
Not every kind of leave belongs in a general PTO bucket. Sick leave is treated differently from vacation time in a growing number of states and cities, which means a broader PTO policy does not automatically satisfy a jurisdiction's sick leave requirements.
Bereavement leave and volunteer time off are less commonly regulated but are increasingly expected as part of a competitive benefits package, and both are usually easier to manage as their own separate, capped allotments rather than folded into general PTO.
Where sick leave is separately mandated
A growing list of states and cities, including California, New York, and Arizona among others, require paid sick leave with specific accrual rates and usage rules that exist independent of any general PTO policy a business offers. A common structural approach in mandated jurisdictions is 1 hour of sick leave accrued per 30 hours worked, though exact rates and annual caps vary by location. A business operating across multiple states cannot use one national sick leave policy and assume it satisfies every local requirement.
What bereavement leave typically covers
Since federal law does not require bereavement leave, company policies vary widely, but a common structure offers 3 to 5 paid days for the death of an immediate family member and a shorter, sometimes unpaid, allotment for extended family. Defining "immediate family" explicitly in the written policy avoids ambiguity and inconsistent application when the situation actually arises.
PTO and Termination
Whether unused vacation has to be paid out when someone leaves is one of the more commonly misunderstood parts of PTO policy, because it is governed by state law rather than company preference in a number of states.
Some states treat accrued vacation as earned wages that must be paid out; others leave it entirely up to the employer's written policy. This is not an area to guess on. Check your state's specific requirement, such as those published by the Department of Labor, before finalizing a departing employee's last paycheck.
Two different legal approaches
States generally fall into one of two camps. In states like California, Illinois, and Massachusetts, courts and regulators treat earned, accrued vacation as wages already earned, which means it must be paid out regardless of what a company policy says, and a "use it or lose it" clause attempting to forfeit it is generally unenforceable. In states without that protection, the employer's written policy controls, and a policy stating unused PTO is forfeited at termination is typically enforceable as long as it was communicated in advance.
Why the written policy still matters everywhere
Even in states where payout is not legally required, having no written policy at all creates ambiguity that tends to get resolved against the employer in a dispute. A clear, consistently applied written policy, whether it promises payout or explicitly states forfeiture, is easier to defend than an informal, inconsistent practice.
Full Guides and Templates
Detailed breakdowns of each PTO and leave policy type, with templates you can fill in.
Tracking and Scheduling Tools
Templates and comparisons for actually tracking balances and scheduling time off.
Tracking PTO without the spreadsheet
Most small businesses start PTO tracking in a spreadsheet and outgrow it the first time two people accrue at different rates or a balance needs correcting mid-year. Updoot tracks PTO accrual automatically alongside time tracking and payroll, so balances update as hours are logged, requests route to the right manager, and accrued and payout amounts stay accurate without manual recalculation.
Frequently Asked Questions
Vacation time is leave set aside specifically for rest or travel. PTO, or paid time off, is a broader bucket that typically combines vacation, sick time, and personal days into one pool employees can use however they choose, without labeling the reason.
Accrual-based PTO adds a small amount of time to an employee's balance each pay period, usually based on hours worked, rather than granting the full annual amount up front. Balances grow steadily over the year and often carry over or cap according to company policy.
Not usually. Studies and employer reporting consistently show employees on unlimited PTO policies take similar or slightly less time off than employees with a fixed, accrued balance, in part because there is no visible number motivating them to use it.
A floating holiday is a paid day off an employee can schedule on a date of their choosing, rather than a fixed date the company sets, such as a religious or cultural holiday not on the standard company calendar. It is typically granted separately from an employee's regular PTO balance.
It depends on the jurisdiction and the type of leave involved. Many states and cities have paid sick leave laws that limit an employer's ability to deny qualifying requests. Employers should check state and local requirements, such as those published by the Department of Labor, before denying a request.
This varies significantly by state. Some states treat accrued vacation as earned wages that must be paid out at termination, while others leave it to company policy. Employers should confirm the rule in their specific state before finalizing a final paycheck.