Sick leave, vacation time, and pto: what's the difference and what are your obligations?

Paula Fleming, CMSO, discusses being grateful for your customers. January 2, 2025)

As a small business owner or HR professional, you're likely juggling a million things at once. Understanding the nuances of sick leave, vacation time, and PTO can feel like just another task on your overflowing to-do list. But getting this right is crucial for compliance and employee satisfaction. Let's break down these often-confused terms:

Sick leave: This is time off specifically designated for illness. Some employers might require a doctor's note for extended absences.

Vacation time: This is paid time off for employees to rest and recharge, with no need for justification.

PTO (Paid time off): A more flexible option that combines sick and vacation time into a single bank. Employees can use it for any reason.

What are your obligations?

• Sick leave: Several states have mandatory paid sick leave laws. These currently include: Arizona, California, Colorado, Connecticut, Illinois, Maine, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Washington, and Washington, D.C. Always check your specific state's regulations to ensure compliance.

• Vacation time: No federal or state laws require employers to offer paid vacation time. It's considered a benefit to attract and retain employees.

The benefits of a PTO policy

Combining time off into a single PTO policy offers several advantages:

• Flexibility: Employees have greater control over their time off.

• Simplicity: Easier to track and administer for your HR team.

• Increased morale: Employees may feel more valued and trusted.

PTO payout at termination

State laws vary on whether accrued PTO must be paid out when an employee leaves. Resources like Paycor.com provide helpful charts summarizing state regulations.

Key takeaway

Whether you opt for separate sick leave and vacation policies or a combined PTO plan, understanding your state's laws is essential. Ensure you're meeting your legal obligations and providing clear, consistent communication to your employees about their time-off benefits.

Note: 
BBB does not provide legal advice, please check with an attorney for legal advice.