The rule in Missouri
The rule is set out in Missouri DOLIR FAQ: unused vacation if I lose my job or quit.
Use-it-or-lose-it. We found no Missouri statute or agency rule on use-it-or-lose-it policies, so the employer’s written policy usually decides.
What to check in your policy
Your handbook or offer letter decides. If it promises payout, that promise can usually be enforced. If it says unused time is forfeited, or says nothing, you may not be owed it. Keep a copy of the policy that was in force when you earned the time.
Tax on a Missouri payout
A payout is taxable wages. Take 80 unused hours at $25.00 an hour, worth $2,000.00. Paid on top of regular wages, it is a supplemental payment, so many employers withhold $440.00 of federal income tax at the flat 22% rate, plus $124.00 of Social Security and $29.00 of Medicare, leaving about $1,407.00.
Missouri income tax is withheld on top of that, under the state’s own rules, so you will receive somewhat less. Withholding is not the final tax; any difference is settled on your return.
Questions people ask
Does Missouri require employers to pay out unused PTO?
Not by law. Missouri does not require vacation pay or its payout. You are owed unused vacation only if your employer agreed to pay it by contract or policy.
Is use-it-or-lose-it vacation legal in Missouri?
Usually, if the written policy says so. We found no Missouri statute or agency rule on use-it-or-lose-it policies, so the employer’s written policy usually decides.
How is a PTO payout taxed in Missouri?
Federally, a payout on top of regular wages is a supplemental payment: many employers withhold 22% for income tax, plus Social Security and Medicare. Missouri income tax is withheld as well, under the state’s own rules.