The Ultimate Guide To PTO Rollovers

by claudia
7 minutes
December 2, 2024

Last updated on December 2, 2024

The Ultimate Guide To PTO Rollovers

Each year, over 400 million days of paid time off go unused in the US.

The solution to this problem, you ask?

PTO Rollovers.

But are they right for your team? Let’s find out.

Regardless of whether you’re a total newbie when it comes to PTO rollovers or if you need a refresher, we’ve got you covered with everything you need to know about them right here. Keep reading to learn more!

What are PTO rollovers?

PTO rollovers are unused vacation days that employees carry forward from one year to be used in the next. This means that if you didn’t manage to take all your time off this year, rather than losing your accrued time, you’ll be able to use those days next year.

Just like regular PTO, employees can decide what to do with these days, either taking them all in one week or spreading them out throughout the entire year for an added long weekend here and there.

How do I choose the right PTO rollover policy for my company?

It’s important to select the best PTO rollover policy based on your company’s culture, regional leave laws, and employee needs. Here are three common options:

Use it or lose it time off policy

A use-it-or-lose-it vacation policy is exactly what it sounds like: Unused PTO expires at the end of the year. This means if you have eight vacation days accrued, you must use them before your PTO balance resets in the new year.

Some employers believe this policy incentivizes teams to take their PTO more regularly rather than saving it up or cashing it out. However, this policy is not allowed in several states and provinces.

In states like California and Montana, PTO is treated as earned wages and cannot be taken away. Instead, many employers opt for a PTO buyback or payout policy, where unused vacation time is paid out at the end of the year instead of being rolled over.

Limited rollover policy

The most common type of PTO policy is a limited rollover policy, which sets a limit on the amount of PTO employees can carry over. PTO accrual caps create a happy medium between encouraging regular PTO usage and providing employees with flexibility as to how and when they use their vacation days. This approach also helps prevent PTO hoarding, a term used to describe employees who accumulate large amounts of unused vacation days.

Unlimited rollover policy

An unlimited PTO rollover policy is exactly what it sounds like. Employers do not cap the amount of time off each employee can carry over. Employees can accumulate several years' worth of PTO if they like.

This is different than an unlimited PTO policy, where employees do not accrue vacation time at all, eliminating the need for rollover policies.

Expiration Dates

A rollover policy with expiration dates allows employees to carry over unused PTO, but they must use it within a specific timeframe. For example, rollover days might only be available to use during the first quarter of the new year. Similar to the limited rollover policy, this approach is slightly less flexible but still allows their team an opportunity to use up unused days, helps avoid the end-of-year PTO rush, and also prevents PTO hoarding.

Pros and Cons of a PTO Rollover Policy

To roll over or to not roll over? That is the question.

Let’s review the pros and cons to see if rollovers are right for your organization.

The Pros

Boosts employee retention: A PTO rollover policy shows employees that you’re flexible and understand the importance of taking time off. Employees will ultimately be happier working at a place that allows them to have the freedom to use their PTO as they see fit, making them more likely to stay at the company for longer.

Improves flexibility: Employees can organize their time off as needed. Planning a dream vacation abroad next year? Save unused days from this year and carry them over to make it happen.

Avoid end-of-year PTO rush: A rollover policy avoids the panic in December when all of your staff decide they need to use up weeks of remaining PTO. It helps to evenly distribute employee leave throughout the year without an unnecessary rush before the holidays.

The Cons

PTO hoarding: Without proper limits in place, your most loyal and dedicated employee could accrue months and months of time off. Are you prepared to respond to a 6-month-long leave request? Review your leave policy to ensure you have limits in place for the length of time employees can take off at once.

Scheduling conflicts: Allowing employees to bank loads of PTO can get messy, especially without accrual caps. Anticipate potential conflicts in scheduling time off for certain employees who have banked a lot of accrued days. This may lead to staff missing before an important deadline or even needing to hire temporary workers to fill in gaps.

Additional work for your HR team: Rollovers inevitably add some work for HR staff, as they need to calculate and track this information. With paper forms, emails, and spreadsheets for requesting, approving, and tracking employee time off, the amount of manual work required to keep all the numbers accurate and up to date can be overwhelming.

How to Manage PTO Rollovers

If you think a PTO rollover policy is the right fit for your organization, now you’ll need to decide how you will implement, track, and manage it. As stated above, PTO rollovers do require some additional work to ensure employee balances are accurate. We’ll run through two popular ways to track rollovers and offer you some free resources to help out.

Manage PTO Rollovers in Excel

Spreadsheets are often how most companies start leave tracking before seeking out a more streamlined PTO management solution. Knowing this, we created a free leave-tracking template to help small teams keep track of their employees’ time off.

Here’s how you can customize it to incorporate your PTO rollover policy:

1. Set Up Rollover Columns

To set the sheet up to track rollovers, users can create a dedicated column in the Yearly Totals tab in the leave tracking spreadsheet for rollover days. This allows you to input the number of days carried forward from the previous year. Edit the formula in the Total Vacation Days tab to be your employees’ yearly allowances plus their rollover days.

2. Align with Your Policy

This template is not a one-size-fits-all type of document. Customize it so it makes sense for your organization.

Here are some examples of ways to make it work for you:

For a limited rollover policy, use a formula to cap the maximum number of days carried over where the cap reflects your policy limit.
For unlimited rollovers, simply add unused PTO days to the next year’s quota.
For a use-it-or-lose-it policy, clear unused days by resetting the column to zero at year-end.

3. Monitor Leave Balances

While Excel is highly customizable, managing PTO rollovers manually can get complicated as your team grows. There are loads of opportunities for manual errors that can cause compliance issues and frustration amongst your team.

Regularly review your spreadsheet to update the days taken and monitor balances. This helps avoid discrepancies and ensures compliance with your policy. Double-check your math and limit the number of people who can edit the document to avoid confusion.

If this sounds too complex or open to inaccuracies, we recommend automation!

Manage PTO Rollovers with a Leave Management System

Vacation Tracker is perfect for teams looking to track their time off with a single click. Our brought forward feature automatically updates employees' leave quotas with their remaining PTO balances when your leave policy calls for it.

vt pto brought forward.png

Admins can pick between:

Disabled Rollover – for when your organization does not roll over any days to the following year.
Rolling Over All Days – for when you allow users to transfer all unused days from the current year to the next.
Limited Number of Days – for when you allow users to transfer a limited number of unused days from the current year to the next.

Our software also allows Admins to set expiry dates on brought-forward PTO and calculates these balances automatically. This includes the option to activate negative leave balances, where employees carry negative balances into the new year and deduct them from the base quota.

But that’s just the start.

With robust customization capabilities, Vacation Tracker is built to adapt seamlessly to your organization’s unique needs and policies.

Our leave management solution automates the entire PTO tracking process. Eliminate the stress that comes with manual tracking, and watch as Vacation Tracker does it all for you!

Ready to see it in action? Try it free for 7 days!