Be Clear About PTO
The Importance of Keeping Track of PTO
Vacation Payout Laws
Justworks Can Help
With the new year underway, many small businesses are looking to introduce or revamp their paid time off (PTO) programs to show their commitment to work-life balance and employee retention. However, with some state laws expanding prenatal and maternity leave programs, the increasing popularity of new PTO programs, and the demand for more flexibility, it can feel daunting for small businesses to successfully manage their PTO program.
No need to fear! Here are some tips on how to navigate your PTO offerings in 2025.
In 2025, businesses of all sizes are offering PTO in new ways to offer more flexibility to their employees. Three types of PTO programs are currently popular in the market: limited PTO, unlimited PTO, and flexible PTO.
Limited PTO: Typically refers to a set number of days offered to employees. Usage of this PTO program may be restricted to certain reasons (vacation, sick, personal, bereavement, etc.).
Unlimited PTO: Refers to an unlimited number of days employees can take at any time. Much like limited PTO, unlimited PTO usage may be restricted to certain purposes.
Flexible PTO: A more ambiguous program where employees can take PTO for any reason at any time. Some companies may even recommend a range of days employees can take off to offer some clarity on how much total time can be taken without being too prescriptive.
Businesses have the freedom to choose which program works best for their needs but should be clear on what they’re offering by creating a written policy. Business owners should work with external legal counsel to ensure their PTO policies and procedures comply with local and state laws.
The foundation of a well-maintained PTO program is keeping track of PTO usage across the business. Whether you’re using paper and pencil, a spreadsheet, or Justworks to track when employees use their time off, clear PTO policies can help to reinforce the following:
A healthy work life balance
Employee morale
Compliance with local and state leave laws
Absenteeism
Accurate record keeping
Trust between the company and employees
Keeping track of PTO is not just a job for human resources teams, either. Managers should familiarize themselves with the company’s PTO policies and regularly track their team’s PTO requests and usage, including any rollover PTO. To successfully track time off, managers and HR teams should make note of:
When PTO requests are made (requests should be made and approved in writing via email or HR software. Justworks is great for this!)
PTO date(s) taken
PTO type
Reason for taking the PTO
Whether other employees are already approved for PTO (this is to ensure adequate coverage)
Getting managers involved in the day-to-day administration of a PTO program maintains consistent procedures, improves communication between leaders and employees, and builds a strong understanding of business practices across the organization.
While vacation PTO is a benefit managed by businesses, they must keep state laws in mind, especially when an employee leaves the company. Depending on the state, unused vacation balances may need to be paid out upon separation, regardless of the reason. Other states do not require vacation payouts as long as the company has a written policy stating unused vacation balances are forfeited upon separation. In rare cases, some states have no laws specifically addressing vacation payouts.
Establishing a vacation payout policy may be tricky if you have employees across multiple states, so adhering to the most stringent law and applying it equitably to other locations makes for a compliant, consistent, and convenient policy.
To keep up with state requirements on vacation payouts, small businesses should regularly check their respective state’s labor department website or subscribe to our free newsletter, the Scoop, for the latest employment laws.
In 2025, navigating PTO does not have to be a scary experience. Justworks helps small business owners track time off and learn the PTO policy best practices so PTO administration can be a breeze. Regardless of how you design your PTO policies, establishing clear policies and procedures will make it easy for your team members to follow and encourage them to enjoy the work-life balance they deserve. Learn more about how Justworks can help!
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