Manage time off policies

You can set up a variety of time off policies in Gusto depending on your Gusto plan. If you're on the Gusto Simple plan and would like to offer the additional policy types, upgrade your plan at any time.

Once set up, employees will be able to request time off both on a computer, and through our Gusto Wallet mobile app if time off requests are enabled.

Types of time off policies

Each policy can either be a limited time off or an unlimited time off policy. You can also set up more than one policy per policy type (i.e. more than one sick policy for your company). For most policies, each employee can only be assigned to one policy within that category. For "unpaid time off" and “custom” policies, employees can be assigned to more than one policy at a time.

Example: You offer two sick time policies and two parental leave policies. Your employee can be enrolled in one sick time policy and one parental leave policy, but not in both sick time or both parental leave policies.

If you're required to have an emergency paid sick leave policy in your state, and you have a regular sick pay policy already, you’ll need to create a Custom policy for the emergency paid sick leave policy.

If you re-assign employees to another policy within the same category, they'll be automatically removed from their previous policy.

Types of policies

Bereavement (Plus and Premium plans only)
Floating holiday (Plus and Premium plans only)
Holiday pay (Simple, Plus, and Premium plans)
- Employees will be paid for all holidays included if they're enrolled in the policy.
- Holidays can't be removed once they've passed.
- You can only set up one holiday pay policy.
- Custom holidays are available on Plus and Premium plans only.
Jury duty (Plus and Premium plans only)
Learning and development (Plus and Premium plans only)
Paid time off (Simple, Plus, and Premium plans)
Parental leave (Plus and Premium plans only)
Personal day (Plus and Premium plans only)
Sick (Simple, Plus, and Premium plans)
- Some cities and states have mandatory sick time and/or emergency sick time regulations—be sure to check your state’s mandatory sick leave policies.
Unpaid (Plus and Premium plans only)
- No other policies can be set to unpaid.
Volunteer (Plus and Premium plans only)
Weather (Plus and Premium plans only)
Custom policy (Plus and Premium plans only)

Time off basics—accruals, negative balances, carryover/rollover rules, and more

There are a few important things to keep in mind when setting up a time off policy. Use the dropdowns below to learn more.

Accrual time off, negative balances, and anniversary accruals

Accruing time off and negative balances

To apply accrued hours off to a payroll, you must first create a corresponding policy. If you're an employee looking to view your balance, click here.

Keep in mind: A time off balance will go negative automatically if an employee uses time off they do not have. A payroll admin can also save a negative balance in the employee's details screen under the time off tracking section.

Time off only accrues on regular payrolls.
- For off-cycle and bonus payrolls, you'll need to manually update the time off balance for that employee if time off should have accrued.
Employees can borrow time off before it’s accrued.
- If an employee uses more time off than they’ve accrued, the time off balance will go into the negative.
- The employee can work toward a positive balance by accruing time off on future payrolls based on hours worked. Or, you can manually edit their balance as needed.
Time off does not accrue for new hires mid pay period.
- If you hire an employee in the middle of a pay period, our system will not accrue time off. You'll need to manually add in the appropriate accrual amount. PTO will start accruing on the first full pay period.

Anniversary accrual

Time off will accrue for an anniversary date only if the anniversary date is the first day of the pay period. If the anniversary date falls in between a pay period, the accrual will take place on the following payroll.

Anniversary date: Dec 1, pay period Nov 27 - Dec 8 - PTO will accrue on following payroll.
Anniversary date: Dec 1, pay period Dec 1 - Dec 15 - PTO will accrue on this payroll.

However, if the payroll includes time from the previous year, the employee won't see the accrual until the next payroll fully in the new year.

Anniversary Date: January 1, pay period Dec 26 - Jan 10 - PTO will accrue on the Jan 11 - Jan 25 payroll.

Carryover balances and rollovers

A carry-over limit is the amount of accrued (or unused) time off that can be carried over from one calendar year to the next. Some employees earn more time off on the anniversary of their hire date, while others earn it on January 1.

When you create a time off policy, you can choose how to handle carryover limits at the end of the calendar year. Choose from two options:

Yes, there’s a limit

If you don’t want hours to rollover, enter 0 for the “Max carryover” amount.

No, all hours can be carried over
Reductions due to a carryover max will be accounted for in the Time off balances report

Keep in mind: Some state sick time mandates do not allow for time off balance resets, so balances will not automatically zero out at year's end unless a payroll admin manually zeroes out the balance on an account.

Enter hourly and salaried paid time off in payroll

Hourly

Enter the actual hours worked in step one of the payroll run, then enter the actual PTO hours taken in step two of the payroll run where PTO is entered.

Example: If an hourly employee should be paid for a total of 71 hours worked, but 12 of those hours were PTO, you'd enter 59 hours in step one of the payroll run, and 12 hours in step two (PTO page).

Salaried

Leave the standard hours worked as-is on step one of the payroll run, then enter the PTO hours taken in step two (PTO page) of the payroll run—the PTO hours entered will automatically reduce the regular hours worked/reported.

Example: If your salaried employee usually works 80 hours a week but took 6 hours of PTO during the pay period, leave their standard 80 hours as-is on step one of payroll, then enter 6 hours of PTO in step two of the payroll run—their paystub will automatically adjust to reflect 74 regular hours works and 6 PTO hours paid.

Dismiss and rehire employees with time off

Dismissing an employee

Gusto will default to paying out time off upon dismissal based on how you created your time off policy. Remaining Sick time hours will not automatically pay out.

Only limited time off policies can be paid out (except unpaid time off).
If you want to manually pay out time off for any reason, you'll have the option to pay out any remaining time off during the dismissal payroll.

Learn more about dismissal paycheck requirements by state.

Rehiring an employee

Employees will automatically regain any time off balance that they had at their dismissal.

Limited time off or sick leave policies

Use the dropdowns below to set up and make changes to limited time off policy.

Set up a limited time off or sick leave policy

Limited time off polices mean you can set a limit to how much time an employee can take off in a given year.

Click the Time tools section and select Time off.
Click Add Policy.
From the dropdown, select the policy type you’d like to create.
Name the time off policy.
- Some cities and states have mandatory sick time regulations—be sure to check your state’s mandatory sick leave policies. If applicable, you can set up and name a sick policy that applies to your employees in that given state or city.
Select Yes, there is a limit to the amount of time off your team can take.
- When an employee is dismissed, time off in a limited policy will automatically be paid out on their dismissal paycheck.
Select the way you’d like your team to accrue hours.
- For fixed: Enter the total time off per year and how it’s earned.
- For hourly: Enter the amount of time off hours that employees will accrue based on the actual number of hours worked.
Click Save & continue.
Choose if you want employees to go through a waiting period before they can start accruing hours and requesting time off. If so, enter how long it is.
- Waiting period: The allotted period of time an employee must wait before they can begin accruing time off. For example, an employee must have a 30 day waiting period before they can accrue time at their company.
Choose if you want your employees to have a max balance per year. If so, enter that amount.
- Maximum balance: The maximum amount of time off hours that an employee can have at any given time. If an employee has reached their max balance but uses some time off during a given pay period, they may still accrue back up to their max balance. For example, an employee earns 10 hours of time off every month, but they have a max balance of 20 hours total.
Choose if you want your plan to have a carryover limit.
- Carry-over limit: The amount of accrued (or unused) time off that can be carried over from one calendar year to the next. Some employees earn more time off on the anniversary of their hire date, while others earn it on January 1.
Select the dismissal payroll settings by choosing if you would like employees to be paid out their remaining unused time off balances.
Click Save & Continue.
Choose if you’d like your employees to earn by tenure. If so, enter the anniversary when they’ll begin to earn additional hours and the total they’ll receive. Then, click Add Milestone.
- Earn by tenure: Sometimes used to determine when an employee will get an increase in time off. For example, an employee receives an additional 24 hours of time after 2 years of tenure with their company.
Click Save & Continue.
Click the + icon next to the employees you want to enroll.
Click Save & Continue.
Add any existing balances for employees.
- If your employees have an existing balance, enter those hours.
- Employees moving to this policy from another will carry over their accrued hours.
Click Create Policy.

You can view and update your policy by clicking Time tools and selecting Time off.

For Plus and Premium customers, we recommend you also set up time off requests for your team. This enables your employees to request time off in Gusto and automatically records the hours in payroll once they’ve been approved.

Edit a limited time off or sick leave policy

Once you’ve completed setting up time off, you can edit or cancel your policy at any time.

Information you can change at any time

Policy name
Policy description
The accrual method
Waiting period
Max balance and carryover limit

Edit a time off policy

Click the Time tools section and select Time off.
Click the Policies tab.
For the policy you want to change, click the three dots on the right and click Edit.

Any changes you make to your policy will affect all enrolled employees.

Delete a limited time off or sick leave policy

Click the Time tools section and select Time off.
Click the Policies tab.
For the policy you want to delete, click the three dots on the right and click View.
Click Delete Policy in red on the right-hand side.

If you're unable to delete the policy, it means there are still pending time off requests. These requests will need to be deleted before you can delete the policy.

Once a policy is deleted, employees will no longer accrue or be able to request time off, but their balances will remain on file if you should want to re-add the policy at a later time.

Unlimited time off or sick leave policies

Use the dropdowns below to set up and make changes to an unlimited time off policy.

Set up an unlimited time off or sick leave policy

Unlimited time off polices mean employees can take off as much time as they would like in a given year.

Click the Time tools section and select Time off.
Click Add Policy.
From the dropdown, select the policy type you’d like to create.
Name the time off policy.
Select No, it's unlimited.
- When an employee is dismissed, time off in an unlimited policy will not pay out on their dismissal paycheck.
Click Save & continue.
Click the + icon next to the employees you want to enroll.
Click Create Policy.

You can view and update your policy by clicking Time tools and selecting Time off.

Edit an unlimited time off or sick leave policy

Once you’ve completed setting up time off, you can edit or cancel your policy at any time.

Information you can change at any time

Policy name
Policy description
The accrual method
Waiting period
Max balance and carryover limit

Edit a time off policy

Click the Time tools section and select Time off.
Click the Policies tab.
For the policy you want to change, click the three dots on the right and click Edit.

Any changes you make to your policy will affect all enrolled employees.

Delete an unlimited time off or sick leave policy

Click the Time tools section and select Time off.
Click the Policies tab.
For the policy you want to delete, click the three dots on the right and click View.
Click Delete Policy in red on the right-hand side.

If you're unable to delete the policy, it means there are still pending time off requests. These requests will need to be deleted before you can delete the policy.

Once a policy is deleted, employees will no longer accrue or be able to request time off, but their balances will remain on file if you should want to re-add the policy at a later time.

Holiday pay policies

Use the dropdowns below to set up and make changes to a holiday pay policy.

Set up a company holiday pay policy

You can keep track of paid holidays for when your employees do not work but receive regular wages and Gusto will automatically pay your team for those holiday hours when you run payroll.

Just like a sick policy, this type of policy should be added if employees are not working but being paid for their time away.

Reminders

Employees will be paid for the full 8 hour holiday day.
Federal holidays will be observed on Friday or Monday, if the holiday falls on a Saturday or Sunday respectively.
Federal holidays selected will automatically apply to all future years.
Custom paid holidays will need to be created individually for each year and you can create holidays up to three years in advance.
- Custom holidays cannot be created if the date is in the past.
- Custom holidays are available to Plus and Premium customers - upgrade your plan at any time.
Holidays cannot be removed once the holiday has passed.

Create a holiday pay policy

Click the Time tools section and select Time off.
Click the Polices tab.
Click the Holiday Pay tile.
Select your company's paid federal holidays.
- We'll automatically count them as paid time off when you run payroll.
[Plus and Premium customers only] Click Add Custom Holiday if you'd like to add your own company holidays here (i.e. day after Thanksgiving).
- Name your holiday.
- Enter a date range for the holiday and click Save.
- If a custom holiday date range overlaps with a preexisting Federal holiday, Gusto will not double-count the holiday hours for that day.
- The Custom Holiday PTO feature is available to Plus and Premium customers - upgrade your plan at any time.
Review all holidays and click Continue.
Add employees you'd like to enroll in the Paid Holiday policy.
Click Create Policy.

You can now sync the holiday pay schedule to your personal calendar if you would like. Employees will also be able to see the holiday schedule in their Gusto dashboards.

Edit your company holiday pay policy

Once you've set up a holiday pay policy, you can make the changes below as needed.

Remove a paid Federal holiday

Click the Time tools section and select Time off.
Click the Policies tab.
Scroll to the Paid Holidays policy and click the three dots on the right-hand side.
Click view.
Click edit under Federal Holidays on the right-hand side to change the current settings.
- Changes made to Federal Holidays will only affect future dates.
Uncheck or check the desired Holiday name.
Click Save.

Change or delete a custom holiday [Plus and Premium plans]

Custom holidays are available to Plus and Premium customers - upgrade your plan at any time.

Click the Time tools section and select Time off.
Click the Policies tab.
Scroll to the Paid Holidays policy and click the three dots on the right-hand side.
Click view.
Click edit next to the custom holiday.
You can edit the custom holiday title and date.
Click Update holiday to save changes or exit.
If you need to delete the custom holiday entirely, click Remove Custom Holiday.

Delete your company holiday pay policy

Click the Time tools section and select Time off.
Click the Policies tab at the top of the page.
Click the three dots next to the "Paid Holidays Policy" and select view.
Click the red Delete Policy button to remove the policy entirely.
- You will no longer be able to access the policy if you proceed.
Click Yes, delete policy.

Add or remove employees from a time off policy

If you need to add or remove employees to/from a time off policy that's already been set up, you can do so in your admin Gusto account.

Add an employee to a time off policy

Click the Time tools section and select Time off.
From the "Policies" tab at the top, scroll to applicable policy.
Click the 3-dot menu icon.
Click View.
Click Add or remove employees at the bottom of the page.
Add the new employee.
Click Save policy.

Remove an employee from a time off policy

Click the Time tools section and select Time off.
From the "Policies" tab at the top, scroll to applicable policy.
Click the 3-dot menu icon.
Click View.
Click Add or remove employees at the bottom of the page.
Click the X next to the employee you would like to remove.
Click Save policy.

Edit an employee's time off balance

You can edit an employee's time off balance at any time in your admin Gusto account. If you're not seeing the policy you need to edit, first check the employee has been added to the policy.

Update an employee's time off balance

Click the People section and select Team members.
Select the employee's profile.
Click the Time Off tab.
On the right-hand side of the screen under the Policies headline, click edit under the policy or balance you’d like to modify.

Once you edit the balance, the employee will be able to see the new hours available to them. If your company's time off policy is set up to accrue hours, the employee will continue to accrue hours as normal.

Note: The employee view of their balance might differ from the admin's view. An employee's current balance is the total amount of hours an employee has. The available balance is the remaining hours an employee has available–hours that have not yet been requested to be used.

How to use the Time Off Tracker

Once you've created a time off policy and added employees, you can track changes to balances at the individual employee level by viewing the Time Off Tracker.

View the Time Off Tracker

Click the People section and select Team members.
Select an employee.
Click the Time Off tab.
If you have more than one policy, select which one to review from the drop-down.
View the Time Off Tracker to see all changes to your employee's balance.

Balances will only reflect for limited time off policies.

Available Hours: Remaining time off hours you're available to use
Requested Hours: Your total Pending Requests + Approved Requests time off hours
Earning Policy: The rate at which you earn time off
Maximum Hours: If this is part of your company's time off policy, the maximum number of hours you can earn per year
Pending Requests: Your requested time off that has not yet been approved or declined
Approved Requests: Your approved time off that has not yet been paid in payroll (payroll has not yet processed for all requested dates)
Declined: Your requested time off that has been declined
Past Vacation/Sick Time: Your approved time off that has been paid in payroll (payroll has already processed for all requested dates)

Activity types

Activity	Description
Accrual	Hours earned in accordance with a time off policy
Added to policy	Date an employee was added to a policy
Admin adjustment	Balance adjusted from the employee profile
Admin recorded request	Admin manually added a time off request
Carryover limit reached	Hours capped in accordance with your time off policy
Employee request	Hours requested by employee
Historical Accrual adjustment	A historical time off request adjusts a prior accrual
Payroll cancelled due to termination	Employee termination caused payroll cancellation
Payroll reversed	Payroll reversal causing accrued hours to be removed
Max balance reached/Max accrued hours	Hours capped in accordance with your time off policy
Removed from policy	Employee is no longer associated with a policy
Payout of unused hours	Paying out unused hours during dismissal payroll

Time off balances report

You can run a Paid Time Off Summary report to view employee time off hours taken for the year, or run a Time Off balances report.

This report is available to Plus and Premium customers only—you can change your Gusto plan at any time.

The time off balances report provides information on your employees’ time off accrual, usage, and ending balances for a specific date range.

Important: Some states, like California, require employers to give their employees updated reports of their unused time off. You can meet this requirement by following the steps below then providing the time off balances to your employee(s) when you pay them. You can also give your employees access to Gusto and then provide these instructions for how they can locate this information in Gusto themselves.

Because certain states require time off balances to be paid when an employee leaves a company, Gusto also calculates a PTO liability based on an employee’s PTO balance and their current primary rate of pay.

Gusto will automatically pay out unused PTO upon dismissal, if you do not wish to pay out unused PTO and you are located in a state where that is acceptable per state law, you must zero out the employee’s PTO balance and remove them from the PTO policy before dismissing them.

To view, download, and/or print the Time off Balances Report:

Go to the Reports section from the left-menu.
Search for "Time off balances" or scroll the report under the "All reports" header.
Select the Time off balances report.
The report will automatically include:
- Employee name
- Accrued time (will account for any time that was reduced at the beginning of the year due to max carryover rules)
- Hours used
- Ending balance
Check the box Paid Time Off Liability total to view the liability associated with PTO if it was to be paid out when the employee leaves the company
Select the time period for the report.
- Annual, Quarterly, Monthly, or a Custom date range.
  - Important: If you select a time period before January 1, 2019, Gusto will default to a basic version of the Time off Report. For this reason, you cannot enter a custom date range that spans back to 2018.
Select the employees to include in the report.
- All or specific employees
Select how you would like to Group the report.
- By employee or department
Click Generate Report.

Check out this article for the other types of reports you can download.

FAQs

Q: When will a request show up in the report?

A: Time Off Requests report - A request will populate as soon as it is submitted. Time Off Balances report - A request will populate once the payroll it’s tied to has been paid out (ie. on or after the check date). Manual adjustments will be displayed in the Time Off Balances report immediately.

Q: If the report is run with custom dates that overlap a policy rollover rule, how will accruals reflect?

A: Rollover accruals happen once payroll is run after the rollover day. If the report date range includes the day payroll is run, rollover balances will be displayed.

Q: How does the report treat employees who were unenrolled from a time off policy?

A: Since the liability is no longer paid if an employee is removed from a policy the unenrolled employee will only show up in the report if the date range is for a period where the employee was on the policy. This same logic applies to dismissed employees

Q: If I disable my policies, will I still be able to run historical reports?

A: Yes, as long as the policy was active during the date range you run it for historical data will populate.

Q: If an admin is given permissions for just PTO - will they be able to run the reports for time off that we're rolling out?

A: If an admin is given the permission “Manage Time Tracking and PTO” they will be given access to run both the time off balances & time off requests report. Note: They cannot populate outstanding liability (because this shows an employee’s pay rate information).