Illinois PTO payout rules when an employee leaves

“If an employment policy states that an employer does not have to pay at the time of separation all unused vacation, the employment policy is not allowed to provide for a forfeiture of earned time upon separation. The employer is required to pay the monetary equivalent of all earned vacation to an employee who resigns or is terminated without having taken all vacation time earned in accordance with such individual employment contract or policy.”

PTO policy template

What it means for Illinois employers

Illinois law does not make anyone offer vacation, severance, sick pay or holiday pay. The Illinois Department of Labor (IDOL) says the obligation comes from the employer's own policy or agreement: once vacation is promised, the earned part is final compensation. (Illinois Dept. of Labor, Vacation FAQ (820 ILCS 115/5; 56 Ill. Adm. Code 300.520))

The key word is earned, and IDOL reads it pro rata. Even under a policy that grants vacation on a service date or on January 1, an employee who leaves mid-year is owed the share earned in the months since then. IDOL's worked examples all turn on this proration, as the scenarios below show with the same arithmetic. (Illinois Department of Labor, Paid Leave for All Workers Act FAQ)

Illinois is unusual in that it allows use-it-or-lose-it during employment while forbidding forfeiture at separation. Under 300.520, a policy may make vacation expire at a set date if employees get a reasonable opportunity to take it and the employer can show they had notice of the expiration rule. But no written policy or practice can make earned vacation disappear because the person quits or is fired. (Illinois Dept. of Labor, Vacation FAQ (820 ILCS 115/5; 56 Ill. Adm. Code 300.520))

PTO banks sit between two laws. The Paid Leave for All Workers Act does not by itself require payout of its leave, but IDOL says hours kept in a vacation or general PTO bank are likely owed at separation under the Wage Payment and Collection Act. (Illinois Department of Labor, Paid Leave for All Workers Act FAQ)

Exceptions and special cases

• Policies without a set number of days: if a policy lets employees take a reasonable amount of vacation during the year without a defined entitlement, IDOL still expects payment of the value of vacation for the current year that the employee would have been allowed to take and did not, but not for a future year. (Illinois Dept. of Labor, Vacation FAQ (820 ILCS 115/5; 56 Ill. Adm. Code 300.520))
• Changing the policy mid-year: an employer that drops its use-it-or-lose-it rule on July 1 still owes the vacation earned from January 1 to June 30 under the old rule; IDOL's figure is 5 days on a 10-day policy. (Illinois Dept. of Labor, Vacation FAQ (820 ILCS 115/5; 56 Ill. Adm. Code 300.520))
• Chicago and Cook County have their own paid leave ordinances; this page covers state vacation law only. (Illinois Department of Labor, Paid Leave for All Workers Act FAQ)

Worked examples

Five days after one year, forfeiture clause in the handbook

An employee reaches one year of service on July 1, 2026, earning 5 days, and leaves on October 1, 2026 without taking any. The employer owes the 5 days plus 3/12 of the next year's 5 days (1.25 days) for July to September, despite the handbook's forfeiture clause. (Illinois Dept. of Labor, Vacation FAQ (820 ILCS 115/5; 56 Ill. Adm. Code 300.520))

A January 1 grant and a July 1 departure

Under a policy granting 10 days each January 1 to employees with a year of service, an employee who took no vacation leaves on July 1, 2026. The employer owes the 10 days granted in January plus 6/12 of the 10 days that would have been granted on January 1, 2027, which is 5 more days. (Illinois Dept. of Labor, Vacation FAQ (820 ILCS 115/5; 56 Ill. Adm. Code 300.520))

One day per month worked

An employee who earns 1 vacation day per month leaves after three months. If she already took 3 days, nothing is owed; if she took none, 3 days are owed, paid by the next regularly scheduled payday. (Illinois Department of Labor, Vacation FAQ; Illinois Department of Labor, Wage Payment and Collection Act FAQ)

How to act on it

PTO payout: Illinois and neighboring states

Each state links to its rulebook. Only rules we verified are shown.

Questions about Illinois PTO payout rules

The verified rules behind this page (3)

• In Illinois, an employer that provides vacation under an employment contract or policy must pay the monetary equivalent of all earned, unused vacation to an employee who resigns or is fired. A policy cannot forfeit earned vacation at separation. Vacation pay is part of final compensation, which is due by the next regularly scheduled payday. (Illinois Dept. of Labor, Vacation FAQ (820 ILCS 115/5; 56 Ill. Adm. Code 300.520); verified Sep 24, 2026)
• A separated employee must be paid final compensation in full at separation if possible, and no later than the next regularly scheduled payday. (Illinois Wage Payment and Collection Act, 820 ILCS 115/5 (Illinois Department of Labor FAQ); verified Sep 27, 2026)
• An employee who quits must be paid final compensation in full at separation if possible, and no later than the next regularly scheduled payday. (Illinois Wage Payment and Collection Act, 820 ILCS 115/5 (Illinois Department of Labor FAQ); verified Sep 27, 2026)

Sources (4)

• Illinois Department of Labor, Vacation FAQ
• Illinois Department of Labor, Wage Payment and Collection Act FAQ
• Illinois Department of Labor, Paid Leave for All Workers Act FAQ
• Illinois Department of Labor, Your Rights Under Illinois Employment Laws poster (2023)

Checked Sep 27, 2026 · How we verify every rule · Report an error

Where this goes next

StateIllinois employer rulebookAll 51 statesPTO payout laws by stateAlso in IllinoisIllinois final paycheck rulesStep by stepAn employee resigned: what to do next