The 3 Ways to Handle Negative PTO

Lars Lofgren Avatar
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Unless you have unlimited PTO, you will need to decide how you want to handle negative PTO requests.

I wish I could tell you that every employee will manage their PTO and won’t try to take more than they’ve earned.

But that has not been my experience.

Most of the requests to go negative have been for good reasons. Either emergencies or new employees that won’t be able to earn enough PTO to cover trips that were already planned before they started. And there is the occasional employee that pushes boundaries.

So how does all this work? And what should you do?

Let’s dive in.

What’s negative PTO?

For both lump-sum and accrual PTO systems, employees have a balance of PTO. It’s usually a number of hours that they can take off of work and still get paid. When employees have hours saved, that’s a positive PTO balance. Like having 40 hours of banked PTO that they can use how they want in the future.

Negative PTO is when the employee takes more paid time off than they’ve earned. Their overall PTO balance has gone “negative.”

A simple example:

  • An employee has earned 40 hours of PTO.
  • They take six days off for a total PTO request of 48 hours.
  • If the request is approved, they earned 40 hours of PTO but have taken 48 hours of paid time off.
  • Now they have a negative PTO balance of -8 hours.

Your 3 Options for Dealing With Negative PTO

Even with a team of 15-20 people, we see negative PTO requests a few times per year. I recommend that you figure out your stance before the first request comes in.

The Hardliner: No Negative PTO

Tell your employees that negative PTO will not get approved under any circumstances. If they need to take more time off that counts under FMLA leave, they can take that time unpaid.

I personally think this stance is pretty harsh. But it is clear.

The main benefit is how easy this policy is to manage. Every manager and person on your HR team has a really clear rule. Positive PTO balance? Approved. PTO going negative? Denied.

But I believe there’s some pretty serious burnout and morale costs with this policy.

As an employee, to get told you’re on your own when you’re going through one of the worst periods of your life… is not great. Especially if you’ve gone above and beyond for that same company.

Any top performer going through that experience will now look at the working relationship as transactional. Then they start putting real effort into their side gig or looking for a more exciting role.

People already have low expectations of getting any help from their workplace. Refusing to show even a small bit of humanity will turn folks away.

If you want a super transactional workplace, then go for it. Just be deliberate about the kind of workplace you’re building.

Case-by-Case: Consider Exceptions for Emergencies

The middle option is to deny PTO requests that go negative as a default. And then when horrible life events or edge cases pop up, consider one-time approvals on a case by case basis.

This tends to be a good option for smaller teams that want to be compassionate. You’ll have a consistent policy while also being able to support folks when they go through something horrible.

The biggest downside here is that it opens you to the risk of not applying benefits consistently for everyone. This risk is more manageable as a small company with the decisions to make an exception are going through the same few people. Once you have an entire HR department and a fragmented company, this risk can get a lot larger. Something to be aware of.

Going Official: Approving All Negative PTO Requests Up to a Limit

Some companies will go as far as approving all PTO requests up to a specific threshold. Like being able to go to -10 hours for any reason.

The main benefit here is clarity. Every manager and employee knows the limit. And when folks try to push past it, you’re already holding the line at a very compassionate place. “We already let folks go into negative PTO as a regular policy, going any further is out of the question.” This allows you to stick to your limit in all but the craziest of emergencies.

This works better for larger companies that still want to be compassionate. The scale is too large to handle every crazy life event case-by-case with your HR team. So you’re forced to set a hardline at zero or go negative up to a certain amount.

You’ll still need to decide if you’re willing to consider any exceptions. The larger you get, the more intense those crazy events will become just because you’re dealing with a larger group of people. The odds of something terrible happening to someone will go up.

Remember that you’ll need a plan for how to deal with negative PTO balances when folks leave. Do you claw it back or wipe the negative balance? If people can go negative as a default, having a negative balance on the final payroll will happen regularly. So sort this out with your state and employment attorney.

The 4 Situations Where Employees Want to Go Negative

I’ve managed companies and departments with PTO balances for over a decade. In my experience, you’ll have employees push into a negative PTO balance in three situations. Here’s each and how to deal with them:

  • Younger employees still learning how to use PTO. The one downside of having a PTO bucket that covers vacation, sick time, and life emergencies is that everyone needs to give themselves a cushion. Younger employees haven’t always figured this out. So they’ll schedule a big vacation, empty their PTO balance, and then an emergency comes up or they get sick. Now they have a problem and can’t take the time off that they need. This usually happens only once. When they see the need for always having a cushion, they don’t have any issues with running out of PTO in the future. Allowing folks to go negative once helps them learn how to manage their PTO. Just tell them that going negative is a one-time thing and to not expect it in the future.
  • Previously planned vacations when starting a new role. This one comes up somewhat frequently. Our PTO accrual starts the day someone joins but they do start with a balance of zero hours. If an employee has a vacation already planned as they join us, they won’t have enough vacation accrued by the time the vacation happens. We’ve had a few folks in this situation. I think it would be way too harsh to ask someone to cancel their trip. So in these instances, we tell people to still take the vacation and that their PTO balance will go negative for a while. Once they have a positive balance, they can start putting in new PTO requests. This has always worked out smoothly for us.
  • The PTO drainer. In every department and company that I’ve managed, there’s always one person that uses every scrap of PTO as soon as they get it. These folks can be a headache. Even when you sit them down and explain the limits of PTO, they still won’t plan for contingencies. Then emergencies pop up and they put in another request to go negative. Firm limits on PTO requests are the only way I’ve found to deal with these folks. Tell them that their negative PTO requests will not be approved going forward.
  • Life-altering emergencies. Luckily, this one is rare. But it does happen. Even if you’re managing your PTO well, a major emergency could drain all your PTO immediately. These are usually horrible medical diagnoses or major accidents. Address these on a case-by-case basis. We make sure to tell our employees to come to us if there’s a major crisis in their lives. Then we’ll figure out what makes sense based on the circumstances.

How Negative PTO Gets Paid Back

There’s a standard way and a blunt way to deal with negative PTO.

The standard way is to have the employee continue to accrue PTO as normal. Sooner or later, they’ll accrue enough to have a positive PTO balance again. At that point, they can put in PTO requests again. This is by far the easiest way to handle negative PTO balances.

The blunt method is to deduct the negative PTO from their paycheck. Be extremely careful with this. Some states would allow this, others might not. And you’ll need written permission from the employee to keep yourself in the clear. This is one of those HR moves that you’d want sign-off from an employment attorney before doing it. Personally, I’d avoid this entirely and just wait for the standard PTO accrual to wash away the negative balance. No need to take the risk.

Be Careful with Having Official Negative PTO Policies

If you write anything down, make sure you’re comfortable approving it 100% of the time.

Let’s say you have a section in your employee handbook that folks can occasionally go negative. Whoever reads that section will believe that their situation warrants negative PTO approval. People will assume they can always go negative.

Then when you have to deny that request because it’s not an emergency, that employee will be incredibly upset. They assumed and now you’re to blame.

Whenever writing policies or designing benefits, I always make sure we can exceed expectations. You can always add. It’s taking things away that becomes the problem.

So if you’re going to consider negative requests on a case-by-case basis, I wouldn’t make any promises in your documentation. Tell folks to chat with their manager and HR if they’re in a tough situation, then go from there.

And only add an official negative PTO limit if you’re 100% certain about it. Once you offer it, taking it away will upset a lot of folks.

How We Handle Negative PTO

As a default, we deny PTO requests that go negative.

We do tell employees to talk to us when they have emergencies. Before considering negative PTO, we look at any future PTO that’s already approved. Then we ask them to change their plans and shorten their time off in order to cover the time off that they need now. 

If they don’t have any future PTO that can get shortened, we may approve a negative PTO request if the situation warrants it. In these cases, we also tell employees that:

  • The approval to go into negative PTO is a one-time thing.
  • They shouldn’t expect to have a negative PTO request get approved in the future.
  • They need to get back to a positive PTO balance before they can take any additional PTO.

Then we let their PTO accrue as normal until their PTO balance is positive again.

After running our business for several years, we approved negative PTO in only a few instances. Most of them were for new employees that had vacations planned when they joined us.

Does PTO go negative when the request is made or when the PTO is taken?

PTO isn’t technically negative until the time it’s taken and is processed on your payroll.

A lot of HR software does a poor job at communicating balances correctly, making this a common point of confusion. Gusto does a terrible job at this.

Say I have 8 hours of PTO that I’ve accrued, one day’s worth. And I want to schedule a week-long vacation in 6 months. A pretty common occurrence. The accrual system that I’m on earns me 3 weeks every year. So I’ll easily have enough PTO to cover a full week in 6 months, I just don’t have 40 hours already banked today.

If I put in a PTO request, I’ll be 32 hours short today. The HR software tracking my PTO may even show me as having -32 PTO hours.

But that’s wrong.

PTO requests don’t hit your balance until the payroll for that period goes through.

Can you have a policy that mandates employees bank the PTO before putting in the request? Sure, you could.

I think that’s too strict and we don’t do that ourselves. We have a simple rule: as long as you’ll have enough PTO to cover the time off when that PTO actually takes place, you’re good.

This is one area of PTO management that I wish HR software tools did a better job at clarifying.

Are you required to offer negative PTO?

No, you’re not required to offer negative PTO.

If you wanted, you could deny every single PTO request that goes negative.

To me, a blanket denial in all cases is pretty harsh. Take the most common situation where an employee joins your company with a vacation already scheduled. Are you really going to tell that employee that they need to cancel the whole trip and lose their deposits? Or take the trip unpaid? That sets a horribly negative tone for a new employee.

Or what about a top-tier employee that just received the worst medical diagnosis of their life? Or a spouse that’s facing months of painful medical care? Their lives are coming apart and you’re going to tell them that you have zero flexibility?

Clear policies and boundaries are essential to helping people work together smoothly. But I also believe we should lead with some humanity.

What if an employee leaves with a negative PTO balance?

This is the main headache with allowing negative PTO.

You have two choices:

  • Claw back the negative PTO as wages, deducting the time from their final paycheck.
  • Eat the time and pay out their final paycheck as normal.

Both have their downsides.

If you’re going to clawback PTO from wages, definitely run that by your employment attorney and make sure all your termination paperwork is buttoned up. You’ll need to check with your state to make sure you’re good. And if you’re remote like us, trying to check every state individually for each employee is a major pain. But you need to do it here, don’t mess around with final paychecks.

Eating the PTO balance and paying out the final check in full should avoid any problems with state agencies. But it creates a terrible incentive and looks awful for employees that left with a positive balance. Someone took more vacation that they should have and didn’t even have to pay the time back? That feels terrible if you leave with a positive balance.

I prefer to avoid this choice entirely by really limiting the situations where employees have a negative PTO balance.

Is there negative PTO with unlimited PTO?

No, negative PTO isn’t a thing with unlimited PTO. Unlimited is afterall, unlimited.

But unlimited PTO policies do tend to get some limits put in place over time. Most companies have some crunch periods where most of the team needs to be working. Like major product launches or closing the finances for tax season. Some companies will adopt PTO blackout periods to keep unlimited PTO from negatively impacting a team or the whole company.

So while there isn’t any negative PTO, you’ll need to deal with other types of limitations with unlimited PTO.

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