What is PTO (Paid Time Off)?
PTO stands for paid time off. It is a pool of paid days an employer allows an employee to use for vacation, illness or personal reasons instead of separate vacation and sick banks. Under federal law, paid vacation is generally not required, so PTO is set by the employer's policy or agreement.
What federal law says
The Department of Labor states that the Fair Labor Standards Act does not require payment for time not worked, such as vacations, sick leave or holidays. Vacation benefits are a matter of agreement between employer and employee. Some federal contract rules are exceptions. Some states and cities have their own paid leave laws, so check where you work.
What to ask in an offer
Ask how many days you earn, whether PTO accrues over time or is granted up front, whether unused days carry over, and whether they are paid out when you leave. Payout rules vary by state and by company policy.
Example
An offer letter states an annual PTO allowance that accrues each pay period. The candidate asks whether unused days carry over and whether they are paid out at separation.
Related terms and guides
Sources
- US Department of Labor, Vacation leave, https://www.dol.gov/general/topic/workhours/vacation_leave, accessed 31 October 2026
This is general information, not legal, tax or immigration advice. Rules change and your situation may differ. Consult a licensed attorney or qualified adviser.