Carryover Limits, Balance Caps and Maximum Cycle Accrual

Updated August 13, 2026 17:54

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PTO Policy Addons: Carryover Limits, Balance Caps, Maximum Cycle Accrual, and Tenure

Employers may pay out unused, accrued PTO upon an employee’s termination either as a matter of company policy or because it is mandated under state law where the employee works. To help manage the amount of PTO that employees can accrue over time, employers may choose to institute limits on an employee’s PTO balance, also referred to as caps. In Justworks, you can set up three commonly used types of caps: carryover limits, balance caps (also known as accrual caps), and a Maximum Cycle Accrual (only on hourly accrual policies). Employers may also grant additional PTO days based on length of employment.

Carryover limits

Carryover limits cap the amount of PTO that carries over from one year to the next. A carryover limit of zero means that an employee’s entire balance at the end of that PTO cycle will be forfeited. This is sometimes referred to as a ‘use-it-or-lose-it’ policy. A PTO policy with no carryover cap will allow all PTO accrued under that policy to rollover to the next year.

Some states mandate that employers allow vacation to rollover year-to-year, making ‘use-it-or-lose-it’ policies unlawful. In these states, an accrual or balance cap may serve as an alternate tool for managing PTO.

How to: Set a Carryover

Setting up a carryover on the Justworks platform is simple. When creating a PTO policy, you are able to do so in the “Policy add ons” section of the workflow.

The Policy add ons section of the PTO policy workflow, showing unchecked checkboxes for Balance cap, Negative balance, and Carryover limit, with a checked Carryover checkbox and accompanying diagrams illustrating each option. — The 'Policy add ons' section when creating a PTO policy, where you can enable Carryover, Balance cap, Negative balance, and Carryover limit settings.

Allow negative balance: Employees can carry a negative PTO balance into the next cycle.
Unlimited carryover (default): All unused PTO carries over into the next cycle with no limit.
Limited carryover: Unused PTO carries over up to a set number of days. Any amount above that limit is forfeited at the end of the cycle.
No carryover: Unused PTO is forfeited at the end of the cycle. Note: Some states don’t allow this—check your local laws before selecting this option.

These options can be combined. For example, you can allow positive carryover up to 10 days while also allowing negative carryover.

Note: In the past, a carryover cap of 0 was often used as a workaround for a “use-it-or-lose-it” policy. However, this still allowed negative balances to carry over. Now, policies with a carryover cap of 0 will show negative carryover as enabled. If that’s not what you want, review your policy settings and update them as needed.

If you're selecting limited carryover for the PTO policy, check the box under "Carryover limit." After that, you can choose the amount of unused PTO that an employee can carry over when the policy restarts.

The Carryover and Carryover limit section of the Policy add ons workflow, with both checkboxes checked, a 'Carryover amount' field set to 0 days, and a 'Carryover effect' info box explaining that carryover will appear in the balance at the start of the next policy cycle. — When the 'Carryover limit' checkbox is checked, a 'Carryover amount' input field appears where you can specify the maximum number of days an employee can carry over to the next cycle.

Balance caps

Balance caps, also known as accrual caps, are another method of managing employee PTO balances. In Justworks, accrual caps halt the accrual of PTO when an employee’s total balance has reached the preset cap, set by the policy. Once the employee uses some PTO and falls below the cap, they immediately resume accruing PTO until they hit the cap once more.

These caps are popular in states such as California, Montana, and Nebraska where carryover caps or “use-it-or-lose-it” PTO policies are not allowed.

A balance cap is typically set at an amount greater than the amount that is allotted annually. In California, there is even a requirement that any balance caps imposed by employers be “reasonable”, which means in part that such caps must be significantly greater than the annual allotment, such as a cap of 18 days for a policy that allows employees to accrue 10 days per year.

How to: Set a Balance Cap

A balance cap can be set during the creation of a PTO policy, under the“Policy add ons” section of the workflow.

The Policy add ons section showing the Balance cap option with an unchecked checkbox and a diagram titled 'Holding limit until balance used' illustrating balance accrual stopping at a cap line across cycles. — The Balance cap option in the Policy add ons section, shown in its default unchecked state. The diagram to the right illustrates how accrual pauses once an employee reaches the cap.

The Balance cap section with the checkbox checked, revealing a 'Balance cap amount' input field set to 0 days, alongside the 'Holding limit until balance used' diagram. — After checking the Balance cap checkbox, a 'Balance cap amount' input field appears where you can enter the maximum number of days an employee can hold before accrual temporarily stops.

Note: We do not recommend editing existing policies (for example, adding an accrual cap). Please refer back to editing and disabling policies here for additional context. If you do apply an accrual cap to an existing policy, any employee with a balance above the cap will have their balance reduced to the accrual cap amount. In this case, you may be required to pay out the difference depending on applicable state law. Please reach out to the customer success team.

Note: When trying to edit an existing policy, you’ll see that certain settings like the start date, cycle, and balance structure are locked to avoid changing employees’ historical balances.

The Balance cap section with the checkbox checked and the Balance cap amount field set to 40 days (equivalent to 320 hours), with a yellow warning box labeled 'Heads up: Balance reduced' advising users to review their state's compliance guide before continuing. — When editing an existing policy and entering a balance cap amount that reduces available time off for at least one employee, a 'Heads up: Balance reduced' warning appears with a link to the state compliance guide.

Maximum Cycle Accrual

Maximum cycle accrual will set a limit to the amount of time off an employee can accrue throughout the cycle. Once the limit is reached, the employee will stop accruing PTO until their policy resets.

How to: Set a Maximum Cycle Accrual

Setting up a maximum cycle accrual on the Justworks platform is simple. When creating a PTO policy, you are able to do so in the “Policy add ons” section of the workflow. Only policies with an hourly accrual rate can have a Maximum Cycle Accrual limit set.

The Policy add ons section showing the Maximum cycle accrual option with an unchecked checkbox and a diagram titled 'Accrual limit until next cycle' showing a dashed blue line representing the maximum accrual ceiling over a cycle. — The Maximum cycle accrual option in the Policy add ons section, shown in its default unchecked state. The diagram illustrates how accrual stops once an employee reaches the maximum for the cycle.

The Policy add ons section with the Maximum cycle accrual checkbox checked, showing a 'Maximum cycle accrual amount' field set to 15 days (120 hours), and the 'Accrual limit until next cycle' diagram to the right. — After enabling Maximum cycle accrual, a 'Maximum cycle accrual amount' input field appears. Enter the maximum number of days an employee can accrue within a single policy cycle.

Tenure

The Tenure add-on adjusts how much PTO an employee receives based on their length of employment. Admins define tenure tiers — for example, employees with 0–2 years of service receive 10 days, employees with 3–5 years receive 15 days, and employees with 6+ years receive 20 days.

As employees cross tenure thresholds, their PTO amount updates automatically at the start of their next policy cycle.

Tenure is available as an add-on for policies using the Granted up front or Total amount for the cycle balance structures only. It is not available for Accrual rate or Unlimited/Flexible policies.

The Tenure section of the Policy add ons workflow with the 'Offer increase based on the length of employment' checkbox checked, showing a 'How it works' explanation and a tenure table with three rows: 1st January (0 days increase, 10 days balance), 3rd January (5 days increase, 15 days balance), and 7th January (5 days increase, 20 days balance), with an 'Add increase' link at the bottom. — The Tenure add-on section, enabled here for a Calendar Year policy. The table shows how PTO balance increases at configurable tenure milestones, with options to add additional increase tiers or delete existing ones.

Resources

Mineral: State Vacation Carryover + Payout Chart*

*Be sure you’re logged into your Justworks account with administrative permissions to access Mineral.

Disclaimer

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.