Wisconsin employers must pay out unused PTO if their PTO policy does not include a forfeiture clause.
In other words, if you added a clause to your PTO policy that says you won’t pay out the PTO, you don’t have to pay it.
But if your policy doesn’t say anything, you have to pay out any PTO that’s accrued.
The Wisconsin PTO Payout Law in Detail
Wisconsin employers aren’t required to provide PTO. Once you do decide to implement a PTO policy, the paid time off counts as wages under Wisconsin law. Unless your PTO policy explicitly states that unused PTO is forfeited, you’ll be required to pay it out when an employee leaves the company.Here’s exactly what Wisconsin says about how to handle paying out unused PTO:
So you can do whatever you want as long as it’s in writing. And if you don’t have anything in writing about how unused PTO gets handled when employees leave, you need to pay it out.
When Does Unused PTO Need to Be Paid?
In Wisconsin, final wages must be paid on the next regular pay date after an employee separates from the company. So if you’re paying out unused PTO, it needs to go out at the same time.
My Recommendation: Always Pay Out Unused PTO Regardless of the Laws in Wisconsin
Can you avoid paying out unused PTO in Wisconsin if your policy says that you won’t? Yes.
Should you? I don’t think so. In fact, I strongly recommend that every company pays out unused PTO when employees leave the company.
A lot of states, like Colorado, are cracking down on companies not paying out PTO. They’re even going so far as to outright ban any “use it or lose it” PTO policy.
And I think that’s the right thing to do. Accrued PTO is effectively earned wages, regardless of what the law says. Employees earned that time. If they didn’t use it, you owe them one way or the other.
The laws differ state by state but the HR industry is aligned. There’s no disagreement about always paying out unused PTO.
I’ve built companies that hired people across the US and we always made it a standard practice to pay out unused PTO. Regardless of the state that folks happened to live in.
So I strongly recommend that you pay out the PTO. But in Wisconsin, you can add a PTO policy that says you won’t.
What if My Written PTO Policy Says It Will Be Paid But I Want to Do Something Else?
I’m going to assume an employee just left your company, you looked up this law, realized you have to pay out unused PTO, and want a way to avoid it.
If the employee already put in notice or has officially left, you still need to pay out the unused PTO. Don’t mess around with this, not paying out the PTO could get a wage complaint filed against you. Then you’ll be dealing with the state. The headache is not worth it, pay out the PTO.
But is there a way to change things for the future? Yes.
Like many HR policies, you can do what you want as long as you’re consistent and you follow your official policies. So you need to change your policy and do it in a way that clearly impacts your entire company at once. You can do this with a few simple steps:
- Make sure there aren’t any employees currently being offboarded. If there are, either wait, default to your old policy, or get advice from an employment attorney. I’m not an attorney so don’t look for legal advice from me.
- In writing, announce the change of policy to your entire company. Specify exactly when the new policy goes into effect.
- Update all internal PTO documentation so that it’s current. Make sure you don’t miss anything.
Then you start adhering to the new PTO policy. In this case, that means not paying out unused PTO.
Other Wisconsin PTO Laws
Wisconsin has very few PTO or sick leave laws. You’re not required to provide PTO or sick leave.
The only related regulation you should be aware of is the Wisconsin Family and Medical Leave Act (FMLA). Yes, this is VERY similar to the federal FMLA.
Wisconsin’s FMLA guarantees unpaid time off when an employee experiences:
- The birth or adoption of a child.
- A “serious health condition” which Wisconsin law defines as “a disabling physical or mental illness, injury, impairment, or condition involving inpatient care or outpatient care that requires continuing treatment or supervision by a health care provider.”
- The need to care for a parent, spouse, or child with a serious health condition.
Any employer with 50 or more permanent employees for 6 of the last 12 months is covered by Wisconsin’s FMLA. And employees who have worked for you for at least 52 consecutive weeks and 1,000 hours are eligible.
All covered employers have to allow employees to take up to two weeks of leave for a personal serious health condition or one week for a family member. Employers must also grant six weeks of unpaid leave for the adoption or birth of a child. Your employees can choose to take the leave all at once or intermittently.
So how does this work with the federal FMLA? Follow these two guidelines when figuring out what to do:
- Whichever regulation offers the most, go with that.
- If an employee qualifies for both types of leave, they’re used concurrently. They don’t get added on top of eachother. The employee is only entitled to whichever leave is the longest.
But federal FMLA requirements might be different than Wisconsin FMLA. This means that in any certain situation, an employee might meet the requirements for Wisconsin FMLA but not federal FMLA. Or vice versa.
Is Wisconsin PTO Payout Law Good Enough?
No, not one bit.
I believe the Wisconsin PTO payout law is terrible.
Allowing employers to set their own PTO policy that allows them to skimp on PTO payouts is ridiculous. Paying out PTO is standard practice across the human resources industry at this point. Forcing companies to pay out PTO is not a controversial take or government overreach.
Allowing companies to avoid paying out PTO is employee exploitation. Full stop.
Employees earned the time, they should get paid for it.
I’m also appalled that Wisconsin doesn’t have a basic sick time law. But let’s take this a step at a time. Wisconsin already forces companies to pay out PTO if they don’t have a forfeiture policy, let’s start by closing that loophole. PTO should always get paid out.
Then we can work on a real sick time law.
Reliable Resources for Wisconsin PTO Payout Laws
When you’re digging into all this for your own policies, trust these resources:
- Wisconsin Wage Payment and Collection Law: A solid resource that explains the wage requirements in plain english.
- Wisconsin Labor Standards Complaint Form: This is the form that someone will use if they have a wage complaint when unused PTO wasn’t paid out properly.
- Wisconsin Family And Medical Leave Act: A good overview on what’s required under the Wisconsin FMLA.
