Under PTO policy, must we pay out unused leave upon employee’s termination?

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in Office Management,Payroll Management

Q. We offer employees a set number of paid time off (PTO) days per year, which they may use for any reason, including vacation and sick days. Must we pay out all earned but unused PTO days upon termination?

A. Yes. Under Illinois law (and that of most other states), you can’t require employees to forfeit their earned but unused vacation; it must be paid out upon termination. 

Unused sick days, on the other hand, need not be paid out upon termination. If an employer maintains separate vacation and sick day policies, it need not pay out unused sick days upon termination. 

However, because PTO is used for vacation and sick days under your policy, you must pay employees all earned but unused PTO days upon termination. 


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samne October 30, 2011 at 2:28 am

Now what happens if an employee who is supposed to terminate – after certain discussions – doesn’t get terminated but is retained? But the PTO payout already got processed and the employee got paid out for the pto but the employee got retained back.

can the company ask the employee to pay back the pto? or just reset the PTOs to 0?


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