Human Resource Blog

PTO Pay Out in Severance Packages

In North Carolina, is it legal for a company to pay out PTO at 20% in a severance package? The CEO made a policy to only pay PTO at 20% of salary.

My understanding per readings is that any “vacation” time must be paid out in full. One employee had over 300 PTO hours or 7.5 wks…if we were still on standard vacation she would have 5 weeks since she was with the company for 8 years.

Yes, this is probably legal. Companies are under no obligation to offer severance packages to employees. Often, a severance package includes any payments for benefits that the employee would be due, if he or she did not receive a severance package. The package usually includes other benefits. The employee must weigh whether or not the severance package, as a whole, is worth it to him or her.

PTO is not the same as vacation. PTO is a combination of personal time, sick leave and holiday pay, as well as vacation time. North Carolina requires only that employers pay the portion of the PTO that the company deems is comparable to vacation. That could well be two weeks or less of the total PTO.

The company is not still on a traditional vacation plan, so what the employee would have had is irrelevant.

We have noticed that much dissatisfaction comes when employees regard PTO or vacation as money in the bank. It is not. It is an employers promise of paid time off at a future date, and in many cases that promise can be revoked at any time. The only way for an employee to be sure that they get all their vacation or PTO, is to use it.