Can I combine sick and vacation time into one PTO policy?
- Claire Baker
- Jun 25
- 6 min read
Short answer: Yes, you can combine sick and vacation time in one policy, even in states with required sick time laws.
You just have to make sure that your combined policy meets all requirements for sick time accrual, carryover, and expiration in every state where the employee works. It's simpler than it sounds. Read more about how to do it here.
So why do so many companies have separate sick time policies in states where sick time is required? A few reasons.
To satisfy all requirements - Some state sick time laws conflict with the requirements in other states/locations. It may be easier to have one vacation policy for everyone and create separate standalone sick policies that meet the requirements for each location.
To demonstrate compliance - While combined sick and vacation policies can satisfy all of the requirements, it's harder to demonstrate compliance when you have to explain why it works. Some companies prefer to just have a policy that shows up exactly as the law prescribes on a pay stub.
To avoid payouts at termination - Some states require unused vacation to be paid out at termination. Sick time is usually exempt from the payout requirements, unless it's combined with vacation time. Having a separate sick time policy can help a company follow all of the accrual and carryover requirements without risking exceptionally large payouts for unused time.
Getting it wrong doesn't just expose the company to legal risk. Badly implemented PTO policies can lead to confusion and resentment among your team.
How to Combine Sick and Vacation Time (Correctly)
When you combine PTO, it means that you have one balance and one set of rules for how to use it. Having one policy means that an employee can use the time under that policy for more than just protected reasons.
If your company a 15-day vacation policy and a 5-day sick
time policy into a 20-day combined policy, the employee can use all 20 days for vacation if they want (as long as the request meets the other approval conditions set out in the policy).
In other words, if they decide to spend all of their paid time on a beach in July, they might not have paid time available when they get the flu in November. The company is within its rights to make them take unpaid time off if they've used up their paid time, even if even if they're sick—as long as the company treats all similar requests the same way.
The hardest part of combining sick and vacation time is making sure that you meet all of the state sick time requirements, especially if you have employees in multiple states.
For example:
👉 In Washington, earned sick time hours can be capped, but they can't expire.
👉 In California, unused earned vacation time must be paid out at termination.
If you have a combined policy covering both Washington and California, Washington will prevent unused time from expiring, letting some one rack up a megabalance over several years.
If they leave the company, California requires that they get paid for the unused time. Sweet deal for Californians, maybe not for the company.
Why You Might Want to Keep Sick and Vacation Separate
Combined policies aren't for everyone. Here are some very good reasons why a company may want to count sick and vacation time separately:
You have hourly workers. If you have a team with variable schedules, it may not always be appropriate to offer them vacation time on the same structure as your full-time salaried workers. Keeping sick and vacation time separate for your hourly team allows you to meet legal sick time requirements while letting you tailor the vacation policy to your team's schedules and culture.
You want to be strategic about approving vacation time. It's not always realistic to approve every vacation request. For example, if your company has staffing challenges over the holidays or in the summertime, you may need flexibility to deny some vacation requests. By drawing clear boundaries between protected time off (sick time) and discretionary time off (vacation), your managers have more latitude to deny some vacation requests and make sure that sick and safe time is being granted appropriately during peak times.
They have employees in PTO payout states. Don't get me wrong, as a proud California resident, I am a huge supporter of PTO payouts. But in practice, it can get out of hand. Companies that are lax about tracking PTO might want to create limits that prevent the unused balances from going too high. But if sick and vacation are combined, sick time laws can prevent employers from putting limits on accrual. Since sick time isn't subject to PTO payout laws when it's counted under a separate policy, some companies choose to maintain a separate sick time balance to meet state requirements without risking big payouts.
They have employees in several states. The language in some states' sick time laws conflict with the language in others. For example: both Missouri and Minnesota allow for an 80-hour balance cap per year, but in Minnesota accrual stops at 80 hours. In Missouri, employees can keep accruing beyond 80 hours, even if only 80 hours is available in a given year. Example: Minnie in Minnesota and Missie in Missouri have both been with the company for 3 years and have never taken a sick day. On December 17, they each catch a nasty bug and need to take 3 weeks off of work. Both Minnie and Missie would have 80 hours available on December 17 and could take the next 2 weeks off of work. Because Minnie's accrual stopped at 80 hours (in the second year), she wouldn't have any remaining sick time on January 1. Minnie would have to take the third week unpaid. Because Missouri lets workers keep accruing sick time beyond the 80-hour annual cap, Missie would have built up a total balance of 120 hours over 3 years. She would be subject to the same 80-hour usage limit from December 17–December 31, but she would still have an extra 40 hours available when the new year began.
If it hurt your head to follow that logic, that's why some companies decide to have separate sick and vacation policies—so they can tailor their sick time policy to each state's requirements.
When It Makes Sense to Combine
Maintaining separate sick and vacation policies in each state isn't right for everyone, though. "Policy averaging" (having a one-size-fits-all policy for all locations) has its place and may be appropriate in the following situations:
Single-location in-person teams - If everyone on your team works in the same place, they will all be subject to the same requirements. Having fewer variables makes it easier to create a single policy that covers everything.
Time off is already generous - If your time off policy is generous enough to meet the requirements in all of the states where you have employees, you may not need to complicate things. As long as you don't mind overpaying in a few edge cases (e.g. long leaves for long-term employees or big PTO payouts at termination), then the hassle of managing multiple policies may not be worth it.
When consistency matters more than control - There are benefits to simplicity. If the "micro-managey" feel of strict oversight and complicated accrual and carryover schedules is the wrong vibe, it may be worth creating one simple policy to cover everything.
Unlimited or flexible PTO - Unlimited or flexible PTO has an uneasy truce with sick time requirements. As long as people aren't denied time off for protected reasons and you have a carefully-worded handbook policy, combined unlimited or flexible PTO can get the job done with little administrative burden.
Final Takeaway
Combining time off is about simplicity, not shortcuts. If you're going to merge policies, your combined policy must satisfy the strictest and most generous requirements of all locations where your employees work.
The biggest risks of combined policies aren't legal, but the culture of control or autonomy that they create. Giving employees more discretion around their time off is easier to administer, but it gives the company less leverage if an employee's time off is disruptive. Highly prescriptive time off makes it clear what's in- and out-of-bounds, but it can contribute to a low-trust environment and might not be worth the cultural tradeoffs.
If you want a second opinion on how your policy stacks up, we'd love to hear from you.
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