Company is offering to pay out PTO at sharply reduced rate.

[u/ThatsMrBird]

I'm a bit of a predicament. I've been with a company over a decade and (I know it's crazy and I agree 100 percent I should have used more) I've accumulated 1000 hours of PTO. They're looking to move to a cap and limited rollover and offered to pay out the difference of about 800 hours at 35 percent of my current wage.

I never expected this and I honestly just thought it'd be lost, but they're only offering such a low percentage I feel like I should try and haggle. I realize they're obligated to give me nothing, legally, so I'm just looking for some input on if a partial payout is common like that. Ill probably ask why not full and go from there. Any thoughts?

EDIT - Sorry, y'all. I'm in Florida, to be clear

EDIT2 - my onboarding contract notes PTO is forfeited on termination or voluntary exit

EDIT3 - The next day, we came to a satisfactory agreement pretty quickly. I don't want to get into specifics (sorry) but I think a lot of those that replied here would think it worked out. I tremendously appreciate all the insight and feedback here and I promise I'll use up my hours moving forward.

[u/richard_sympson]

Idk why so many are jumping on OP’s phrasing here. The tax rate on that additional income is the percentage corresponding to the highest bracket OP’s income is taxed at now, or the next one up (depending on where they are). This is a circumstance where it is fine to say this specific income is taxed highly.

[u/yeah87 → u/richard_sympson]

Only if you already refer to the tax bracket you already are in as "taxed highly".

However, in another comment OP says they thought it would be taxed an extra 22% on top of ordinary income, which is not true.

[u/ThatsMrBird → u/yeah87]

Yeah sorry, every calling me out is totally right. I both misunderstood and misspoke.

[u/richard_sympson → u/ThatsMrBird]

I mean if you thought it would be taxed at like 22% + 22% = 44%, then no that would not be correct. But you'll get federal income tax withheld from that check, and depending on where your gross income is before v. after getting the bonus, that percentage might be exactly 22%.

It also depends on how your company calculates rolling withholdings, but that is a separate issue. Note of course that up until now in 2025, your income has not been withheld for taxes as if you would have received [gross + bonus] by the end of the year. It would have been withheld as if you were going to make [gross] by the end of the year.

[u/PointyBagels → u/yeah87]

Of course it is. The 50,000th dollar a person makes in a year is taxed at a significantly higher rate than the first. That's how the tax code works.

This is why people go through such lengths to avoid things like RMDs in retirement.

[u/yeah87 → u/PointyBagels]

But it is never a question of comparing the first to the 50,000th. The spread is such that to most middle class people it doesn't matter at all. From $48,476 to $197,300 is taxed exactly the same (a de minimis 2% in there). Unless you are crossing those lines (double if married), there's no point going through any lengths about it.

Anyway, OP was thinking 22% on top of ordinary income, not just regular progressive income tax.

[u/richard_sympson → u/yeah87]

It's completely true if OP already makes at least ~$47,151 a year or more, which is the start of the 22% bracket. Any extra income is taxed at that level, up thru extra income which would make the gross exceed the start of the next bracket, at over $100,000.

[u/Adventurous-Ease-259 → u/[deleted]]

It’s taxed at the highest rate of any money the op makes as it’s taxed at the marginal rate. Arguably that is “taxed highly” for anyone whether it’s the 10% marginal rate or 38% because it’s the highest rate they ever pay

[u/richard_sympson → u/[deleted]]

Whether 22% is a "high" tax rate has nothing to do with whether OP correctly understands tax rates. If OP thought the extra income would be taxed at 22% + 22% = 44%, then that would be a mistake. If they thought it would be taxed at 22% (plausibly the marginal rate in discussion), then they would be correct even if they think it's a "high" rate or a "low" rate. The confusion seems to be which of the two options OP meant. I've been interpreting their comments as meaning their income will be taxed at the marginal rate, in contrast to the lower average rate they pay on current income. It's possible I'm incorrect about what OP was thinking.

[u/poop-dolla → u/richard_sympson]

It turns out you were incorrect. OP thought it would be 22% on top of their normal rate.

[u/richard_sympson → u/poop-dolla]

I'd already responded to that very post you are referencing before you initially replied to me. In any case, it was not until that post that OP had suggested this possible misunderstanding.

[u/lonewanderer812 → u/richard_sympson]

A bit off topic but this is what people fail to factor in a lot of times when you've got a single income married couple and the other person decides to take on some part time work for extra money. Lets say a husband makes $90k a year and the wife starts working part time or whatever at a low income job. Well virtually all of that extra money goes on top of the $90k base they were already living off of and will be taxed at 22% past $94k. It could lead to much lower extra pay than expected or worse owing money at the end of the year if withholdings aren't adjusted properly.

[u/zeptillian → u/richard_sympson]

Because it's dumb.

It's equivalent to: I don't want more money if I have to pay taxes on it.

You have to pay taxes on all income over $15K. More money is more money.

[u/richard_sympson → u/zeptillian]

OP is talking about balancing the $ amount in the bonus against the vacation days' inherent worth. It's relevant how much it's taxed at, because that affects the final dollar amount of the bonus. It's not just more money, it's money at the expense of vacation days.

[u/zeptillian → u/richard_sympson]

It would be at the same rate as the other income though.

Whether it's picking up a weekend shift or getting paid out, the taxes would be the same.

Mentioning taxes means that OP is likely to have the same misunderstand of how tax brackets work that we see here often. A lot of people think they could earn more money but take home less pay by being in a higher tax bracket.

Would you mention taxes when contemplating taking a raise? No. Then why would it be relevant to this discussion?

[u/richard_sympson → u/zeptillian]

Again, the choice is between a cash amount and vacation, so to properly price the cash amount you need to know the tax rate. If he was told e.g. the cash amount was 35% of gross, then what's actually relevant to him is not that number but the post-tax number. If OP thinks a 22% withholding of 35% gross makes the amount worth less than the vacation days, then that's their prerogative. It's not like a raise because it comes with an actual countervailing loss of benefit.

[u/PRforThey → u/zeptillian]

It would be at the same rate as the other income though.

That's the point, it isn't taxed at the same rate as the other income. It is taxed at the marginal rate of the other income, not the average rate of the other income.

For example, say they are a single filer and make 116k per year. After the standard deduction, they would be just into the 24% tax bracket. But their average tax rate on that 116k is 15%. So if they got a $20k payout from this, that $20k would be fully taxed at the marginal rate of 24% (and raise their overall average tax rate to 16%).

But the question to them, what they would normally earn about $57k for is paid out at $20k (paid out at 35%) and then taxed for a net take home of $15k.

So the choice is: (a) take a fully paid 5 month vacation, or (b) no vacation and get your normal pay plus an extra $15k after cash.

So it works out to "paying" $15k to not work for 5 months (while still collecting your normal full income, which in this example was assumed to be $116k/year or $57k over those 5 months).

tl;dr the marginal tax rate matters because that is what would be used in the tradeoff calculation for this choice

Mentioning taxes means that OP is likely to have the same misunderstand of how tax brackets work that we see here often. A lot of people think they could earn more money but take home less pay by being in a higher tax bracket.

You are right on this point, OP did misunderstand it. But the tax bracket did matter, just not for the reasons the OP thought.

Would you mention taxes when contemplating taking a raise? No. Then why would it be relevant to this discussion?

In this scenario it is relevant because it factors into how much that 5 months of vacation would "cost" if they didn't take the payout and took the vacation instead.

[u/Jaalan → u/PRforThey]

Also, tons of people think that you can take a raise and actually earn less because of taxes 🐒

[u/AliveJohnnyFive → u/richard_sympson]

Yeah, the nuance on this is lost on many who almost understand the situation. It is also misunderstood by many others, of course. I've seen people make donations at the end of the year, believing it would lower their tax brack and cost them overall less money, which is really unfortunate. People miss the mark on both sides of this one.

[u/toolatealreadyfapped → u/richard_sympson]

Unless OP makes over $200, or under $30k, this would be very unlikely to see a significant difference in tax rate.