What Your Unused Vacation Is Worth and Whether You Are Owed It
Last updated July 2, 2026
Last reviewed July 8, 2026
Whether unused paid time off gets paid out when you leave a job depends on state law, employer policy, and the specific kind of leave involved. Some states treat accrued vacation as earned wages, while many others leave payout to the employer's written policy. Use-it-or-lose-it limits and separation payout rules can also differ by state and by policy language, so the employee handbook and state labor agency guidance matter.
The calculation itself is straightforward once you know the rules apply. Your hourly rate multiplied by your unused hours gives you the gross payout. The IRS treats many PTO payouts as supplemental wages. Employers may use the optional flat federal withholding method, often 22 percent for amounts under $1 million, or may use an aggregate payroll method depending on how the payment is processed. A $3,000 gross PTO payout can therefore have meaningfully different net results once federal withholding, FICA, and any state withholding are applied. For employees in California, any employer who fails to pay accrued vacation at termination is potentially liable for waiting time penalties of an additional day's wages for each day of delay, up to 30 days.
State PTO payout law and the employer's written policy determine whether unused PTO has cash value at resignation or layoff. If payout is required or promised, calculate your gross amount and set aside roughly 30 percent for taxes. Do not leave that money on the table because you assumed the rules were the same everywhere.