PTO (Paid Time Off)
Also known as: Paid Time Off, PTO, paid leave
PTO (Paid Time Off) is a category of paid leave an employee can use for any reason — vacation, personal time, or short illness — without specifying the purpose. It contrasts with separate-bucket models that split vacation, sick, and personal leave into distinct allotments.
PTO bundles what used to be three or four separate leave buckets (vacation days, sick days, personal days, mental health days) into one. The argument for bundling: employees don't have to justify why they're taking time off, which removes a small but real friction point and lowers the rate of "sick" days that aren't. The argument against: bundling means people who get sick a lot use up their vacation faster than peers who don't, which can feel unfair. Both models are common; the right choice depends on local norms and what payroll systems support.
PTO accrual vs grant
Two ways to deliver the same annual allowance. Accrual: the balance grows each pay period (e.g., 1.67 days per month for a 20-day annual policy). Grant: the full allowance lands at the start of the year. Accrual ties leave to tenure (someone who joins mid-year has earned ~half the annual allowance by year-end); grant gives the full allowance up front. Accrual is the default in most modern HRIS systems because it handles partial-year employees cleanly.
Carry-over and forfeiture
Most PTO policies cap how much unused leave employees can carry into the next year. Common patterns: (a) unlimited carry, (b) carry up to N days, (c) carry plus a deadline to use by (e.g., March of the next year), (d) no carry / use-it-or-lose-it. Local labor law often overrides company policy here — many EU jurisdictions prohibit forfeiture entirely, requiring payout instead.
Unlimited PTO
Increasingly popular at US tech companies, controversial in practice. Research consistently shows employees with unlimited PTO take fewer days off than peers with capped policies, because the absence of a defined balance removes the "I've earned this" anchor. If you're considering it, pair with a published expectation ("we expect everyone to take at least 20 days a year") to avoid the under-use trap.