How to use this calculator
Whether unused PTO is paid out at separation depends almost entirely on state law and your written policy. Where payout is required, it usually has to be included in the final paycheck, on the state's final pay deadline. Getting this wrong can trigger waiting time penalties that are much larger than the payout itself.
Enter the unused hours and the employee's pay. The calculator estimates the gross payout and the federal income tax withheld at the supplemental rate. Explain the result to the employee with our resignation acceptance template or termination follow-up template.
- Enter the unused, earned PTO balance in hours from payroll.
- Choose hourly or salaried and enter the pay.
- Pick the type of state rule that applies.
- Include the payout in the final paycheck if it's required.
How it's calculated
Hourly rate for salaried employees = annual salary / 2,080
Gross payout = unused hours x hourly rate
Payouts are generally treated as supplemental wages. Employers may withhold federal income tax at a flat 22 percent, plus Social Security, Medicare, and state taxes.
Worked example
A salaried project manager in Colorado earns $72,000 and leaves with 64 hours of unused vacation. Her hourly equivalent is $34.62, so the payout is $2,215.38 before taxes. Colorado treats earned vacation as wages, so it must be paid with final pay even if the handbook says otherwise.
The same employee in a state that follows written policy could receive nothing if the handbook clearly says unused PTO isn't paid at separation and that rule was applied consistently.
Rules to know
States that generally require payout of earned, unused vacation include California, Colorado, Illinois, Louisiana, Massachusetts, Montana, and Nebraska, and Rhode Island after one year of service. Several others require payout only if the employer's policy or practice promises it. Rules change, and some states treat PTO and sick leave differently, so confirm with the state labor department.
Final pay deadlines vary as well. California requires payment immediately at termination, while many states allow until the next regular payday. Our PTO policy guide covers how to write a payout rule that holds up.
This is general information for US employers, not legal or tax advice. Rates and rules change and vary by state and city, so confirm current figures with the agency or a qualified advisor.
Common mistakes
- Leaving the payout out of the final paycheck in a state that requires it.
- Applying a forfeiture rule that the state doesn't allow.
- Using the wrong rate, such as a rate from before a recent raise.
- Paying out sick leave when the policy and state law don't require it, then doing it inconsistently.
Email templates that go with this
Once you have the number, these templates help you explain it to employees, candidates, or managers.
Where to go from here
A calculator answers one question. The right process and software keep the numbers right every pay period.
State rules behind this calculation
- Final paycheck laws by stateFinal pay deadlines for terminations and resignations in every state, plus where unused vacation must be paid out.
- California labor lawsMinimum wage $16.90. Final pay if fired: Immediately, on the last day of work.
- Illinois labor lawsMinimum wage $15.00. Final pay if fired: Immediately if possible, and no later than the next regular payday.
Frequently asked questions
Do employers have to pay out unused PTO?
How is PTO payout taxed?
Does sick leave have to be paid out?
When is the PTO payout due?
Written by the HRTally Research Team
Our guides are written and reviewed by people with hands-on US HR, payroll, and HR technology experience. Legal and tax facts are checked against primary sources, such as the Department of Labor, IRS, EEOC, and USCIS, and linked at the end of each guide. Vendors never review or pay for our editorial content.