The rule in Vermont
The rule is set out in Vermont DOL: A Summary of Vermont Wage and Hour Laws.
- Final pay is due within 72 hours of a discharge, or by the next regular payday after you quit.
Use-it-or-lose-it. We found no Vermont 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 Vermont 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.
Vermont 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 Vermont require employers to pay out unused PTO?
Not by law. Vermont does not require paid vacation, but an employer that provides vacation through a handbook, memo or other written communication is liable to employees for those benefits as described.
Is use-it-or-lose-it vacation legal in Vermont?
Usually, if the written policy says so. We found no Vermont 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 Vermont?
Federally, a payout on top of regular wages is a supplemental payment: many employers withhold 22% for income tax, plus Social Security and Medicare. Vermont income tax is withheld as well, under the state’s own rules.