Despite your company’s best intentions to offer employees enough paid time off (PTO), they don’t always end up taking all that’s available to them. This is where PTO rollover comes into play.
This situation is more common than you’d expect. According to a Pew Research Center survey, more than half of US employees don’t take all the PTO available to them. Whatever the reason, your employees will want to know what happens to their PTO, if not taken within the year.
Here’s how PTO rollover works, and how your business should handle it.
What Does PTO Rollover Mean?
PTO rollover is when unused paid time off days carry over to the following year.
For example, let’s say Sarah has 15 PTO days she can use this year. Yet she only uses 10. That leaves 5 days of unused PTO. With a PTO rollover policy, these carry over to the next year, giving her 20 days of PTO next year (instead of 15).
It doesn’t always work this way. Some companies don’t do PTO rollovers. Some do, albeit with conditions.
We’ll dive deeper into this next.
Does PTO Roll Over at the End of the Year?
This is generally up to the company’s discretion. However, depending on the company’s location, they may need to follow certain laws related to PTO rollovers.
Some laws state that PTO, once earned, cannot be taken away. In Montana, for example, the law states that “once an employee earns vacation leave, it cannot be forfeited for any reason.”
New Zealand is another example where the law states that employees have the right to carry over unused leave to the following year.
If the law doesn’t give any clear guidance on the matter, then the company can choose how to handle this. They should make it clear to employees whether unused PTO days will roll over to the next year, and how exactly it should work.
This information should be easy to find in the company’s leave policy and/or employee handbook.
If not, what happens to unused PTO?
If PTO rollovers are not required by law, and the company chooses not to carry over unused PTO into the next year, it generally expires.
Any unused PTO days just disappear. At the start of each year, each employee begins with a fresh slate, no matter how many days off they took in the previous year.
Some companies may do it a little differently, though. They may allow a certain number of days to be carried over, or allow rollovers with conditions.
Different Types of PTO Rollover Policies
Before anything, we should just state again that you’ll need to comply with any relevant laws regarding PTO rollovers, before anything else.
If you’re unsure, contact an employment lawyer and make sure you’re covered. This post does not constitute legal advice.
Now, if you’re not required to do anything specific by law, there are a few different ways your PTO rollover policy can work. Here are a few examples.
- Full rollover
- Use it or lose it
- Limited rollover
- Unlimited PTO
Full rollover
The first option is to fully carry over any unused leave. Just like in our example earlier – if a person has 5 days remaining at the end of the year, these 5 days are added to their regular leave allowance for the following year.
Use it or lose it
On the opposite end of the spectrum is a “use it or lose it” leave policy. Any unused leave disappears at the end of the year, and each employee starts from scratch from January 1 (or whenever your company’s administrative year begins).
Limited rollover
Another option is to allow a limited number of days to carry over to the next year. For example, you might allow a maximum of 5 days to roll over.
In this case, if an employee has 8 unused PTO days at the end of the year, they’ll be able to take 5 to add to the following year’s allowance.
If another employee has 3 days unused, they’ll be able to take all 3 of those days to the next year.
Another way a limited rollover policy might work is to let employees carry over unused PTO, but just for a limited time. For example, the deadline to use leave before it expires extends to the end of March.
Unlimited PTO
Unlimited PTO is another way to deal with PTO rollover. Or more accurately, not deal with it.
Since there’s no limit or allowance on PTO with this type of leave policy, there’s nothing to carry over to the next year. There’s no unused PTO in the first place.
Should Your Company Roll Over PTO or Not?
There are several options open to you (depending on what your local labor laws allow). But is it a good idea to have PTO roll over to the next year or not?
There are pros and cons to each way of doing it. So it’s really up to you as to how you want to approach it.
Here’s a quick summary of the advantages and disadvantages.
PTO rollover pros
- It might make employees happier, since they’re not going to lose any of their earned benefits.
- You don’t have a mad rush at the end of the year, with employees scrambling to take leave before it expires.
- You can be safe knowing that you’re not going to break any labor laws related to leave rollovers.
PTO rollover cons
- The aforementioned rush often comes, which can leave you understaffed at key times.
- You can end up with large amounts of unused leave. This constitutes a big expense on your company’s books, as you need to account for paying unused PTO out if the employee leaves their job.
- There’s no urgency for employees to take time off, which can leave them going too long without a vacation, and burning out.
To carry over PTO or not
As we mentioned, it’s really up to the company how they want to approach this. You’ll want to take into account the pros and cons above. However, make careful consideration as to the effect on your company culture and overall satisfaction of your employees.
There are a lot of benefits, on paper, to making the decision not to carry over unused leave. But the long-term damage to your company’s image may be worse than any financial benefit.
That being said, it’s a very real issue when employees bank up a large amount of leave. It can hurt the company’s balance sheet, as well as the health of your employees.
It may be a good idea to allow PTO to roll over, but be active in pushing employees to take their PTO and not letting it stack up.
You could think about instituting a mandatory PTO policy, where employees need to take a certain number of days off each year. Or, you manually follow up with any staff who haven’t taken time off in a while, and make a plan with them to use their outstanding PTO.
“There are a lot of benefits, on paper, to making the decision not to carry over unused leave. But the long-term damage to your company’s image may be worse than any financial benefit.”
PTO Rollovers in Leave Balance When you use Leave Balance’s leave tracker to manage leave in your business, PTO rollovers are easy.
When setting up your leave policy in the app, you’ll have the option to roll over unused leave for each leave type.
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