PTO Policy Setup Checklist
A step-by-step checklist of the decisions a small or growing US business needs to write down before it can track leave balances accurately.
Reviewed for 2026, updated September 8, 2026.
Most PTO problems trace back to a decision that was never written down. This checklist walks through every rule a small or growing US business needs to settle before it can track leave balances with confidence, from the accrual model to what happens when someone leaves. Work through it in order, because the early choices, such as whether to run one combined bank or separate vacation and sick balances, change the answers further down the list.
Tick a line only when the rule is written in the policy and your tracking method actually applies it. A decision that lives in a founder's head does not count. Where a line mentions state law, check the rules for every state and city where you have employees, and treat this checklist as a planning aid rather than legal advice. Our PTO Accrual Rate Calculator can handle the arithmetic in the accrual section, and the full guide on this site explains the reasoning behind each item.
- Decide whether you run one combined PTO bank or separate vacation and sick balances, and write the choice into the policy.
- Set the annual allotment for full-time staff and state how it is prorated for part-time and hourly employees.
- Choose the accrual model: front-loaded on a single date, or incremental per pay period, per month, or per hour worked.
- Convert the annual allotment into an accrual amount per pay period and confirm it matches your payroll schedule (weekly, biweekly, semimonthly, or monthly).
- Decide when accrual starts for new hires and whether there is a waiting period before earned time can be used.
- Set a maximum balance cap at which accrual pauses, and confirm a cap is permitted in every state where you have employees.
- Decide whether a balance may go negative, and if so, by how much and who approves it.
- Check the paid sick leave law in every state and city where employees work, and set sick accrual, carryover, and permitted-use rules that meet each one.
- List the non-accruing leave types you will record: bereavement, jury duty, voting time where required, military leave, parental leave, and unpaid leave.
- State how extended unpaid leave affects accrual: paused, continued, or prorated.
- Set the request lead time for ordinary time off and a shorter rule for emergencies and sick days.
- Write the approval rule: who approves, how competing requests for the same dates are resolved, and the coverage minimum for each team or role.
- Define any blackout periods, publish them well in advance, and describe the exceptions process.
- Fix the company holiday list for the year and decide whether floating holidays are offered and whether they carry over.
- Decide how partial days are recorded (hours or half days) and how a request that spans a company holiday is counted.
- Write the year-end rule: carryover cap, grace period, or rolling maximum, and check it against state rules on forfeiture of earned vacation.
- Write the payout-at-separation rule and confirm it matches both state law and the wording of the policy.
- Choose the tracking method (spreadsheet, payroll or HR module, or dedicated tool) and confirm it can hold at least two balances per person with different rules for each.
- Confirm that every approval updates the balance automatically and leaves an audit trail entry showing who changed what and when.
- Give employees a self-service view of their own balances and request history, plus a shared team leave calendar.
- Load opening balances for every employee, reconcile them against the old records, and tell each person their opening figure and how to dispute it.
- Keep the old spreadsheet or records read-only for a few months after switching so disputes can be checked against the source.
- Schedule an annual policy review before year-end with total accrued liability, average unused balance, and the number of people at the cap in front of you.
https://leaveledgr.com/templates/pto-policy-setup-checklist/Use it in your business, share it with your team, or link to it from your own site.
Also from LeaveLedgr
- PTO Balance Reconciliation Worksheet: A per-employee, per-leave-type sheet for proving that opening balance plus accruals minus time taken equals the closing balance, at year-end, before a system migration, or when someone leaves.
- Free calculators