PTO Carryover Rules by Country and US State (+ Template)

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The question the policy has to answer

Every leave policy eventually meets the same December problem: someone has ten days left and no time to take them. What happens next is not a matter of taste. In Europe and Australia the law decides; in the United States a written policy decides in most states, and the law overrides it in a few. A policy that gets this wrong is not just unfair — it is the most common reason leave policies turn out to be unenforceable when someone leaves and asks for the money.

European Union: the floor is protected, the rest is national

The Working Time Directive gives every employee at least four weeks of paid annual leave and says it may not be replaced by a payment except when employment ends. The Court of Justice has filled in what that means for carryover:

• Leave prevented by sickness or parental leave carries over. An employee who could not take leave because they were ill does not lose it at year end. National law may cap how long it survives — the Court accepted a 15-month carryover period after the end of the leave year in KHS v Schulte. What counts as protected sickness or family leave is national law: see sick leave by country and parental leave by country.
• Leave the employee simply did not take can lapse — but only if the employer did its part. In Max-Planck v Shimizu the Court held that leave lapses only where the employer can show it actually enabled the employee to take it and told them, clearly and in time, that it would otherwise be lost. Silence at year end is not enough.
• Untaken leave is paid at exit, whatever the reason for leaving — see the country pages for each jurisdiction’s rules.

National rules then vary in the detail. In Germany leave carries to 31 March only for urgent operational or personal reasons, and the employer’s duty to inform is now explicit in case law. In the Netherlands the statutory days expire six months after the year ends, extra contractual days after five years. In Sweden employees may save up to five days a year for five years. A single company-wide rule will be wrong somewhere; encode carryover per country.

United Kingdom: 1.6 weeks by agreement

UK workers get 5.6 weeks. The first four weeks (the EU-derived part) must normally be taken in the leave year; the additional 1.6 weeks may be carried forward by written agreement (regulation 13A). Since the 2024 amendments, carry-forward where the worker could not take leave because of sickness (up to 18 months) or family leave is written into the Regulations rather than left to case law. Employers may count public holidays within the 5.6 weeks — the one country where that is allowed.

Australia: it never expires

Under the National Employment Standards, annual leave accumulates from year to year and is paid out at the end of employment. There is no statutory expiry. Modern awards typically let an employer direct an employee with an excessive balance — usually more than eight weeks — to take some of it, and let employees cash out a portion by agreement while keeping at least four weeks. The practical consequence for employers is a growing liability at each person’s current pay rate, which is why the Australia page recommends a monthly liability report.

United States: your policy decides — except where it can’t

No federal law requires paid vacation, so no federal law regulates carryover. State law splits three ways, the same way it does for payout at termination:

1. Earned time is wages and cannot be forfeited — California, Montana, Nebraska and Colorado. A “use it or lose it” rule is unlawful; the only permitted control is a cap on further accrual once a balance is reached. Anything already earned must be carried or paid.
2. Payout at exit is required unless a written policy says otherwise — a handful of states, where a carryover limit is allowed if it is clearly written and communicated before the time is earned.
3. Policy governs — the majority, where carryover, caps and expiry are enforceable if they are in a written policy the employee has received.

Whichever group a state falls into, the rule has to be in writing before the leave accrues. Announcing a cap in November for time earned in March does not work anywhere. Our use-it-or-lose-it guide lists the states where forfeiture is prohibited, straight from the state data.

Designing the rule: four decisions

1. How much can be carried? Common choices: the full statutory portion (safe everywhere), a fixed number of days (five is typical), or a fraction of the annual entitlement. Never less than the law protects.
2. How long does it survive? Set a use-by date in the new year — 31 March is common in Europe, 30 June in the Netherlands’ statutory rule, and the EU’s protected-leave cases need at least 15 months. In Australia, don’t set one.
3. What happens to the excess? In Europe: cannot be taken away if the employee was prevented from taking it; otherwise lapses only after the employer has enabled and warned. In the US no-forfeiture states: it stays on the books or is paid. Elsewhere in the US: it may expire if the policy says so.
4. Which days are used first? Oldest first, always. Say it explicitly.

A carryover clause you can adapt

Carryover of unused leave. Employees may carry forward up to [five] days of unused annual leave into the following leave year. Carried-over days must be used by [31 March] and are deducted first when leave is taken. Leave that could not be taken because of sickness, maternity, paternity or parental leave is carried forward in full and may be taken within [15 months] of the end of the leave year in which it accrued. Where local law provides greater protection, local law applies. Untaken leave is paid at the end of employment where required by law [and otherwise in accordance with the local schedule].

Adjust the bracketed values per location. In Australia delete the expiry sentence; in California, Montana, Nebraska and Colorado replace the carryover limit with an accrual cap (“no further leave accrues while the balance is at or above [1.5 times] the annual entitlement”).

Making it hold up

A carryover rule is only as good as the record behind it. If someone challenges a lapsed balance, the questions are: what was the balance on the cut-off date, when was the employee told, and was the leave genuinely available to take? Those need timestamps, not recollection — which is why the tracking tool matters more than the wording. The payout calculation guide covers what happens to whatever is left when someone leaves.

Related guides

Sources

• Directive 2003/88/EC (Working Time Directive), Article 7
• Court of Justice of the EU, Case C-214/10, KHS AG v Schulte (2011) — 15-month carryover period
• Court of Justice of the EU, Case C-684/16, Max-Planck-Gesellschaft v Shimizu (2018) — duty to enable leave
• Working Time Regulations 1998 (UK), regulation 13A — additional leave and carry-forward
• Fair Work Ombudsman (Australia) — Annual leave
• California Labor Code §227.3 — vested vacation is paid on termination
• Bundesurlaubsgesetz (Germany) §7 — carryover to 31 March

General information, not legal advice. Rules change and national implementations differ — confirm against the current text or a local employment lawyer before acting. See our methodology.