Help / Time-off policies

PTO and vacation policy: what it is, why offer it, and how to set it up

What a PTO or vacation policy is, why companies offer paid vacation, what federal law says, and how to set one up in StartEase block by block, with a worked example and screenshots.

EmployersPTO or vacation7 min

What is a PTO and vacation policy?

A PTO or vacation policy gives employees paid days off that they choose, for rest, travel or family. PTO means "paid time off". Most policies give a set number of hours a year, for example 80 hours (two weeks).

Why companies offer it

People who rest come back focused, and fewer quit.
A clear written rule avoids arguments about who gets what.
Candidates compare vacation when they choose a job.

What the law says, in short

Federal law does not require paid vacation. The U.S. Department of Labor says the Fair Labor Standards Act (FLSA) does not require payment for time not worked, such as vacations, and that these benefits are a matter of agreement between employer and employee. Some states require unused vacation to be paid when an employee leaves: StartEase pays it in the states its rules table marks, whatever the policy says.

How to set up a pto or vacation policy in StartEase

Open Time › Time off and scroll to Policies.
Under Add a policy, choose PTO or vacation, then select Add policy.
Fill in each block below. The example is a sample "Vacation" policy: your company chooses its own numbers.
In Review and turn on, read the summary sentence and select Turn on this policy.

Basics

The name, the kind of leave, whether it is paid, and what employees read about it. More on this block.

Box	What it means	In this example
Policy name	The name employees see when they ask for time off and on their balances. Required.	"Vacation"
Kind of leave	What the leave is for. It picks the help link and the extra checks. It does not change how the balance is counted. Required. PTO or vacation: Rest and holidays the employee chooses. Sick: Illness or care. Needs a payroll admin to confirm it before anyone can use it. Floating holiday: A holiday the employee picks. Personal day: A day for anything personal, no reason needed. Bereavement: Time after a family member dies. Jury duty: Time on jury service. Learning and development: Time for a course, exam or training. Parental: Time after a birth, adoption or foster placement. Volunteer: Time to help a charity or the community. Weather or emergency: When the workplace closes. Custom: Anything else, with your own name.	PTO or vacation
Pay	Whether the hours are paid. Required. Paid: The employee is paid for the hours, at their usual rate. Unpaid: The hours are recorded but not paid. Unpaid leave reduces pay only where the pay rules allow it, so it does not cut an exempt salary when the rules forbid that.	Paid
Description for employees	Up to 600 characters on My time off: who qualifies and what the leave covers. Keep medical details out.	"Paid vacation. Ask at least 3 days ahead."

Earning

How the balance grows. Nothing is earned until a payroll is approved. More on this block.

Box	What it means	In this example
How it is earned	How the balance grows. Required. By hours worked: The employee earns leave as they work, for example 1 hour for every 30 hours worked. Part-time staff earn less, full-time staff more. A fixed amount each year: Everyone covered gets the same number of hours a year, for example 80. Unlimited (no balance kept): No balance is kept. Each request is still approved and recorded. Use it when the need decides the time, as with jury duty.	A fixed amount each year
Hours a year	Only for "A fixed amount each year". For example 80 for two weeks.	80 80 hours is two weeks of 8-hour days.
When it is added	Only for "A fixed amount each year". Spread over each paycheck: A share is added with every approved payroll: 80 hours on a biweekly schedule adds about 3.08 hours a payroll (80 ÷ 26). All at once on the reset date: The whole year is added on the first day of the policy year.	Spread over each paycheck
More hours with years of service	Only for "A fixed amount each year". Select Add a step, then type the years and the new hours a year, for example 3 years: 120 hours a year. Remove deletes a step.	3 years: 120 hours a year Rewards people who stay.
Policy year starts	When caps and carryover are counted again. Not shown for unlimited policies. On the same date for everyone: Every employee's policy year starts on the Month and Day you choose, for example January 1. On each employee's hire date: Each employee's policy year starts on the anniversary of their hire date.	On the same date for everyone
Month	Only for "On the same date for everyone". January to December.	January
Day	Only for "On the same date for everyone". 1 to 31. A day past the end of the month uses the last day.	1

Rules

Waiting periods, negative balances, a yearly use limit and payout at exit. More on this block.

Box	What it means	In this example
Waiting periods are counted in	The unit for the two waiting periods below. Days from the hire date: For example 90 means 90 calendar days after the hire date. Hours worked: For example 80 means after 80 hours worked in approved payrolls.	Days from the hire date
Before earning starts	Not shown for unlimited policies. Nothing is earned before this. Blank for none.	Blank
Before it can be used	Leave can be earned but not taken before this. Blank for none.	90 New hires earn from day one but use it after 90 days.
Allow a negative balance	Not shown for unlimited policies. Ticked: an employee may borrow ahead of what they have earned.	Unticked
Most hours that can be used in a policy year	A yearly limit on hours taken. Blank for no limit.	Blank
Pay unused hours in the final paycheck	Not shown for unlimited policies. Ticked: unused hours are paid when someone leaves. Where the work state's rule requires payout, payroll pays it whatever you choose.	Unticked

Caps

Limits on the balance. Not shown for unlimited policies. More on this block.

Box	What it means	In this example
Most hours earned in a policy year	Earning stops for the year at this number. Blank for no cap.	Blank
Most hours the balance can hold	Earning pauses while the balance is at the cap and starts again when leave is used. Blank for no cap.	120 Stops very large balances building up.
Most hours carried into the next policy year	Hours above this are dropped when a new policy year starts. 0 means nothing carries over. Blank carries everything.	40 Up to 40 hours roll over; the rest is dropped on January 1.

Requests

How employee requests are handled. More on this block.

Box	What it means	In this example
Approve employee requests automatically	Ticked: a request that follows the rules is approved at once. Unticked: the Employer or payroll team approves each one.	Unticked
Most calendar days in one request	For example 10. Blank for no limit.	10 Two working weeks at most in one go.
Days of notice an employee must give	For example 3 means the first day must be at least 3 days away. Leave you record yourself is not checked. Blank for none.	3 Gives the team time to plan cover.

Employees

Who the policy covers and where each balance starts. More on this block.

Box	What it means	In this example
All employees, including people added later	Ticked: everyone is covered, now and later. Unticked: tick each employee in the table.	Ticked
Starting balance (hours)	Hours the employee already has, for example from your old system. Blank starts at 0.	Sample balances
As of	The date that starting balance is correct. Earning counts from this date, or from the policy's start date if blank.	Blank

Review and turn on

The last check before employees can use the policy. More on this block.

Box	What it means	In this example
Ready, or "N to finish"	Ready means every required box is filled. "2 to finish" means two boxes marked Required are empty.
The summary sentence	The policy in one line, for example "Paid. 80 hours a year, spread over each paycheck". Read it before you turn the policy on.
Turn on this policy / Turn off	Turns the policy on for the employees covered, or off. A new policy starts turned off.
Delete this policy	Only while no leave has been recorded on it. After that you can turn it off but not delete it.

Common questions

Is PTO the same as vacation?

Often, yes. Some companies keep one PTO bank for vacation, sick and personal time; others keep separate policies. In StartEase each policy has its own balance, so choose the one that matches your written policy.

Do we have to pay unused vacation when someone leaves?

It depends on the state. StartEase pays it at exit in the states its rules table marks, and otherwise only if you tick Pay unused hours in the final paycheck. See Company PTO and paid sick leave.

Can PTO cover a state's paid sick leave rule?

Sometimes, if the PTO policy meets every part of that rule. Ask your payroll team before relying on it, so employees are not given the same hours twice. See State and city paid sick leave laws.

What the law says

Sources (government sites):

Note. This article explains how StartEase Payroll works and what the federal pages linked below say. It is not legal advice. State and city laws can add rules. Check them for each place your employees work.

Next: Paid sick leave policy: what it is, state rules, and how to set it up