Illinois PTO Rollover Law: Chicago, Cook County, and Payouts

Illinois PTO rollover law gives most workers the right to carry unused paid leave into the next benefit year with no cap on the hours that transfer, though your employer never has to let you use more than 40 hours in any 12-month period. That statewide rule comes from the Paid Leave for All Workers Act. Chicago and Cook County set their own carryover limits, and traditional vacation time follows a separate statute with different rollover and payout rules.

How Rollover Works Under the State Paid Leave Act

The Paid Leave for All Workers Act, effective January 2024, gives nearly every Illinois employee one hour of paid leave for every 40 hours worked, up to at least 40 hours in a 12-month period. You can use the time for any reason, and your employer cannot ask why or require documentation.

Section 15(i) is where the rollover lives. Unused hours carry into the next benefit year with no ceiling on the transfer. The practical limit is on the usage side: your employer is never required to let you take more than 40 hours in a single 12-month cycle, even if your bank sits higher. Use only 20 hours this year and the other 20 roll forward, but the most you can draw in the new year is still 40 hours total.¹

The Front-Loading Exception

Employers who front-load the full 40 hours on the first day of the benefit year (or on your hire date) can skip the rollover requirement. Under that approach, the company may require you to use all 40 hours before the year ends or forfeit what remains. This is the one situation where a use-it-or-lose-it rule applies to leave earned under the state Act.¹

Chicago’s Two-Bank Rollover

If you work inside Chicago, the city’s Paid Leave and Paid Sick and Safe Leave Ordinance (Municipal Code Chapter 6-130) applies instead of the state law when the employer meets its coverage requirements. Chicago splits your time off into two separate banks, and the accrual rate is more generous than the state’s: one hour of paid leave and one hour of paid sick leave for every 35 hours worked.²

General paid leave rolls over up to 16 hours from one benefit period to the next. Paid sick leave rolls over up to 80 hours. Chicago employers must track the two balances separately; combining them into a single bucket creates compliance problems and can trigger grievances filed with the city’s Office of Labor Standards.³

Cook County Rollover

Unincorporated Cook County, along with municipalities that have not opted out or adopted their own equivalent ordinance, follows the Cook County Paid Leave Ordinance. Employees using the accrual method may carry over up to 40 hours of unused paid leave from one year to the next. Front-loading employers can avoid the rollover requirement, as under the state rules.⁴

If you work in suburban Cook County, check whether your municipality follows the state law or the county ordinance. The differences affect how much leave carries over and which agency handles complaints.

Vacation Time Follows Different Rules

This is where people get tripped up. The paid leave required by the state Act and the vacation time your employer offers voluntarily are governed by separate statutes. The Paid Leave for All Workers Act controls the mandatory 40 hours. Any vacation on top of that falls under the Illinois Wage Payment and Collection Act (820 ILCS 115) and the administrative code at 56 Ill. Adm. Code 300.520.

Illinois allows use-it-or-lose-it vacation policies, but only when two conditions are met. The employer must give you a reasonable opportunity to actually take the time. If your supervisor denied every request, the company cannot then claim you forfeited the hours. The employer must also prove you had clear notice of the policy; a rule buried in a handbook nobody receives does not count.⁵

What an employer can never do is retroactively change a vacation policy to erase time you already earned. If you accrued 80 hours under a rollover policy, the company cannot switch to use-it-or-lose-it and wipe the balance. Already-earned vacation is protected.⁵

Payout When You Quit or Get Fired

The payout rules depend entirely on what kind of leave you have, and this distinction catches people off guard.

Paid leave accrued under the Paid Leave for All Workers Act does not have to be paid out at separation. Section 15(j) says explicitly that nothing in the law requires a payment for unused paid leave upon termination, resignation, or retirement.¹

Vacation time is the opposite. Under the Illinois Wage Payment and Collection Act, when your contract or company policy provides for paid vacation and you leave with unused hours, the employer must pay the monetary equivalent at your final rate of pay. No policy or contract can require forfeiture of earned vacation at separation. This applies whether you quit or are fired, unless a collective bargaining agreement says otherwise.⁶

Watch how the employer labels the time. If a company lumps its mandatory paid leave into a general PTO or vacation bank, the entire balance may become payable at separation because it has been commingled with vacation. Employers who want to avoid that obligation track paid leave in its own bank. Check your pay stub or HR portal to see how your hours are categorized, because the label determines whether you walk away with a check.

Final compensation, including any vacation payout, must be paid at the time of separation if possible, and no later than the next regularly scheduled payday.⁶

How a PTO Payout Is Taxed

A lump-sum payout for unused vacation or PTO is treated as supplemental wages by the IRS. For 2026, the federal income tax withholding rate on supplemental wages is 22 percent, as long as your total supplemental wages for the year stay under $1 million.⁷

Social Security tax (6.2 percent) applies up to the 2026 wage base of $184,500 in combined earnings, and Medicare tax (1.45 percent) applies with no cap.⁸ If a large payout pushes you over the Social Security wage base when combined with your regular earnings, the portion above $184,500 is exempt from the 6.2 percent Social Security withholding.

One trap worth knowing. If your employer lets you either cash out unused PTO or roll it over, the IRS may treat the cash-out amount as taxable income in the current year even if you choose to keep the hours. That is the constructive-receipt doctrine: you had access to the money, so it counts as income. Employers who want to avoid the problem for their workers either prohibit cash-outs or require the election to be made a year in advance.

What to Do if Your Employer Violates the Rollover Rules

If your employer zeroes out your leave balance at the end of a benefit year without legal justification, file a complaint with the Illinois Department of Labor. The agency investigates violations of both the Paid Leave for All Workers Act and the Wage Payment and Collection Act. There is no fee to file.

Vacation pay disputes carry real teeth under the Wage Payment and Collection Act. An employer who fails to pay earned vacation at separation can face penalties and interest on top of the original amount owed. Keep your own records of accrued hours, leave requests, and any denials; that documentation strengthens your case. Federal recordkeeping rules require employers to preserve payroll records for at least three years, so the paper trail should also exist on their end.⁹

1
Illinois General Assembly. Illinois Code 820 ILCS 192/15 – Provision of Paid Leave
2
City of Chicago. Paid Leave and Paid Sick Leave
3
American Legal Publishing. Municipal Code of Chicago – Chapter 6-130 Chicago Paid Leave and Paid Sick and Safe Leave Ordinance
4
City of Chicago. Paid Leave Jurisdiction Comparison Chart
5
Illinois Department of Labor. Vacation FAQ
6
Illinois General Assembly. Illinois Code 820 ILCS 115/5 – Final Compensation; Vacation Pay; Time for Payment
7
Internal Revenue Service. Publication 15, (Circular E), Employer’s Tax Guide
8
Social Security Administration. Contribution and Benefit Base
9
U.S. Department of Labor. Fact Sheet #21: Recordkeeping Requirements Under the Fair Labor Standards Act (FLSA)