California PTO Payout Laws and Payout Calculator
Blasko Sarcevic
Published
Find out whether California requires employers to pay out unused PTO at separation, and estimate what your payout is worth. (Payout required - use-it-or-lose-it prohibited.)
Topic
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California PTO payout rule: Payout required. Diagram of unused hours times hourly rate equals payout.
Hourly rate $25.00 · 40 unused hours.
Payout required: Accrued vacation is earned wages: payout is required and use-it-or-lose-it is prohibited. CA supplemental rate is 6.6% (10.23% for bonuses/stock options). Use-it-or-lose-it prohibited.
Estimates only — not legal or tax advice. 2026 rates and state rules can change; confirm them before relying on them.
Does California require PTO payout at termination?
In California, accrued vacation is generally treated as earned wages, so employers must pay out your unused balance when you leave, regardless of company policy. Accrued vacation is earned wages: payout is required and use-it-or-lose-it is prohibited. CA supplemental rate is 6.6% (10.23% for bonuses/stock options). [VERIFY: confirm current California statute and case law before publishing.]
How PTO payout is calculated in California
Multiply your unused PTO hours by your hourly rate. Salaried employees divide annual salary by 2,080 to get the hourly rate first.
Example: $52,000 / 2,080 = $25/hour; 40 unused hours = a $1,000 gross payout. Use the calculator above for your exact figures.
Is a PTO payout taxed in California?
A PTO payout is taxable supplemental income: 22% federal withholding, Social Security (6.2%), and Medicare (1.45%), plus California state income tax.
General information only, not legal or tax advice. State rules change; confirm with your state labor agency or counsel.
Frequently asked questions
- Does California require employers to pay out unused vacation?
- In California, accrued vacation is generally treated as earned wages, so employers must pay out your unused balance when you leave, regardless of company policy. Accrued vacation is earned wages: payout is required and use-it-or-lose-it is prohibited. CA supplemental rate is 6.6% (10.23% for bonuses/stock options).
- Is "use-it-or-lose-it" legal in California?
- California restricts use-it-or-lose-it: accrued vacation generally cannot be forfeited.
- How is my California PTO payout taxed?
- At the federal supplemental rate (22%) plus Social Security and Medicare, and California income tax.
About the author
Blasko Sarcevic
Founder, Time-Out Zone
Connect on LinkedIn
Connect on LinkedInBlasko writes about leave management, policy design, and running time-off operations at scale.
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