Illinois PTO Payout Law
✓ Verified against official sources · September 1, 2026 820 ILCS 115/5, 115/14
The short answer: Illinois requires the monetary equivalent of all earned, unused vacation to be paid as part of final compensation at the employee's final rate of pay — no employment policy can force its forfeiture.
Payout at separation
Required — earned vacation is final compensation
Use-it-or-lose-it
Cannot forfeit earned vacation — prospective caps allowed
What's payable
Monetary equivalent of earned vacation and holidays at the final rate
Penalty for non-compliance: Unpaid final compensation accrues damages of 5% of the amount per month until paid, plus the underlying wages (820 ILCS 115/14).
Under the Illinois Wage Payment and Collection Act, 820 ILCS 115/5, whenever an employment contract or policy provides paid vacation and the employee resigns or is terminated without using it all, the monetary equivalent of all earned vacation must be paid as part of final compensation at the final rate of pay — and "no employment contract or employment policy shall provide for forfeiture of earned vacation time upon separation." Only a collective bargaining agreement can provide different terms.
Because vacation is final compensation, the Act's remedies apply in full: 5% of the underpayment per month, every month it remains unpaid, recoverable through an IDOL claim or civil action (§ 115/14). Employers may design accrual schedules and prospective caps — they just can't claw back what has been earned.
For employersThe IWPCA's 5%-per-month damages compound on unpaid vacation exactly as on unpaid salary — and "unless the CBA says otherwise" is the only carve-out the statute offers.
For employeesYour earned vacation — valued at your final rate of pay — belongs in your final compensation, due no later than the next regular payday. Late payment accrues 5% damages per month.
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Illinois FAQ
Is use-it-or-lose-it legal in Illinois?
A policy can require vacation to be taken by a date as it accrues, but it cannot forfeit vacation already earned at separation — 820 ILCS 115/5 bars forfeiture outright, outside a CBA.
What rate applies to the payout?
The employee's final rate of pay — vacation earned years ago at a lower salary is paid out at the rate in effect at separation.
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Official sources
Illinois General Assembly — IWPCA full text (820 ILCS 115)
Primary source for this page
Illinois Department of Labor — Wage Payment and Collection Act
Supporting official source
Illinois Department of Labor
Illinois labor agency
Educational content, not legal advice. Rules change — every fact above was checked against the linked official sources on the date shown.
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How other states compare
| State | Payout at separation | Use-it-or-lose-it | What's payable |
|---|---|---|---|
| California | Required — accrued vacation/PTO is wages | Not enforceable — reasonable accrual caps are allowed | Accrued, unused vacation and general PTO at the final rate of pay |
| Colorado | Required — earned vacation cannot be forfeited | Void as to earned vacation — accrual caps are allowed | Earned vacation pay under the policy or agreement |
| Illinois | Required — earned vacation is final compensation | Cannot forfeit earned vacation — prospective caps allowed | Monetary equivalent of earned vacation and holidays at the final rate |
| Louisiana | Required when eligible + accrued + untaken under the stated policy | Policy design controls eligibility and accrual — but accrued time is due | Accrued vacation, with the final wages (next payday or 15 days) |
| Maine | Required for employers with 11+ employees (accruals since 2023) | Cannot defeat the statutory payout for covered employers | All unused paid vacation accrued under the policy on or after Jan 1, 2023 |
| Maryland | Required by default — unless a written, noticed policy limits it | Enforceable only if in writing and noticed at hire (§ 3-504) | Accrued leave, on or before the normal payday for the final period |
| Massachusetts | Required — accrued vacation is wages under the Wage Act | Cannot strip earned vacation — prospective accrual limits allowed | Accrued, unused vacation — included in the day-of-discharge payment |
| Nebraska | Required — earned, unused vacation is wages by statute | Cannot forfeit earned vacation at separation | Earned, unused vacation; other paid leave only if agreed |
| North Carolina | Per policy — promised vacation must be given as time or pay | Works only with written notice of the policy (§ 95-25.13) | Vacation due under the policy or practice, with the final wages |
| Rhode Island | Required after 1 year of service — accrued vacation becomes wages | Cannot defeat the payout once the year is served | Vacation accrued by CBA, written or verbal policy, or any agreement |
| Texas | Only if a written policy or agreement provides for it | Enforceable — the written policy's terms control | Vacation, sick leave or severance the written policy promises |
| Washington | Per written policy — vacation is a voluntary benefit | Enforceable if the policy says so | Whatever the policy promises; statutory sick leave need not be cashed out |
| West Virginia | Per the agreement or policy's own terms | Enforceable if the written terms provide it | Fringe benefits due under the agreement, with the final wages |
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