PTO (Paid Time Off)

The one-sentence answer

PTO is paid leave an employer chooses to offer — California does not require it — and it is not the same thing as paid sick leave, which is required.

What this means for you

You do not have to offer PTO or vacation. California has no law requiring paid or unpaid vacation. This is the opposite of paid sick leave, which every employer owes regardless of size. Families routinely assume these two work the same way. They do not, and the difference runs in both directions:

	Paid sick leave	PTO / vacation
Required in California?	Yes, every employer	No, entirely your choice
Part of employer burden?	Yes — one of the six components	No — not on the DDS list
Can it expire?	Carries over, cap allowed	Never — see below
Paid out when they leave?	No	Yes, always

If you do offer PTO, three rules bind you — and the last one catches people out.

1. Earned vacation is wages. California treats it as pay that vests as your employee works, not as a perk you can withdraw.
2. "Use it or lose it" is illegal. A policy under which unused vacation is forfeited on a set date is unlawful in California. You may cap how much accrues — once someone hits the cap they stop earning more until they use some — but you cannot take away what they already earned.
3. You must pay out every unused hour when employment ends, at their final rate of pay. Not as a courtesy. As wages owed.

That third rule is the one that hurts, and it is worth understanding before you offer PTO. If your caregiver leaves with 60 accrued hours, you owe 60 hours of pay from your spending plan — and because PTO is not employer burden, that money was never built into your burden rate. It has to come out of the hours you had budgeted for care.

So offering PTO is a real decision with a real cost, not a gesture. It can be a genuine advantage in keeping a good caregiver — and keeping a good caregiver is the hardest problem most self-directing families have. But budget for it deliberately, set an accrual cap from day one, and know that the liability follows you until it is paid.

A combined "PTO" policy can satisfy sick leave, but it does not escape either rulebook. If you offer one bucket of time covering both, it must meet every paid sick leave requirement and it is subject to the vacation rules above — so the whole bucket becomes payable at termination. Many small employers find it simpler to keep them separate: required sick leave on its own terms, and PTO, if offered, clearly labeled as PTO.

For the detail-oriented

The governing source is the California DIR/DLSE vacation FAQ: https://www.dir.ca.gov/dlse/faq_vacation.htm. Verbatim on the four key points:

"There is no legal requirement in California that an employer provide its employees with either paid or unpaid vacation time."

"earned vacation time is considered wages, and vacation time is earned, or vests, as labor is performed."

"a policy that provides for the forfeiture of vacation pay that is not used by a specified date ('use it or lose it') is an illegal policy under California law."

"upon termination of employment all earned and unused vacation must be paid to the employee at his or her final rate of pay."

Accrual caps are permitted — "a vacation policy that places a 'cap' or 'ceiling' on vacation pay accruals is permissible" — provided the cap is not a subterfuge for denying the benefit. In practice that means a cap has to be reasonable relative to how much someone earns each year, not set so low it functions as forfeiture.

Why PTO is not employer burden. DDS's Employer Burden and Other Employment-Related Costs directive (25 April 2024) states that burden costs "are limited to" six items: FICA, FUTA, SUTA, Employment Training Tax, workers' compensation insurance, and paid sick leave. PTO is not among them. That list is closed — see employer burden.

The same directive does contemplate elective costs: a participant and their staff "may agree to include other costs related to employing staff," and requires that "all required and elected staff employment costs must be included in the participant's spending plan." So PTO you choose to offer belongs in the plan — just as its own line, not inside the burden percentage.

This entry describes California law as it applies to employers generally. It is information, not legal advice. Termination payouts and accrual disputes are exactly where specifics matter — talk to an employment attorney about a live situation.