The rule in Virginia
The rule is set out in Virginia DOLI: Payment of Wage.
- The state labor department investigates unpaid wages but not fringe benefits such as vacation.
Use-it-or-lose-it. We found no Virginia 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 Virginia 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.
Virginia 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 Virginia require employers to pay out unused PTO?
Not by law. Virginia does not require payout of unused vacation. The state labor department treats vacation as a fringe benefit it does not enforce, so a claim under your employer's policy would have to be brought in court.
Is use-it-or-lose-it vacation legal in Virginia?
Usually, if the written policy says so. We found no Virginia 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 Virginia?
Federally, a payout on top of regular wages is a supplemental payment: many employers withhold 22% for income tax, plus Social Security and Medicare. Virginia income tax is withheld as well, under the state’s own rules.