In April 2014, New York City became the latest jurisdiction to require employers to provide paid sick leave, joining Washington, D.C., Milwaukee and the state of Connecticut. Is your city or state next?
No federal law requires employers to pay employees for time not worked — such as sick days, vacations and holidays. (The Family and Medical Leave Act, or FMLA, only requires certain employers to provide unpaid leave for qualifying employees.) Still, most employers recognize the importance of paid leave programs for employee health and performance. Effective leave policies also help companies retain top people. But are your leave policies effective?
Circadian, a workforce solutions provider, estimates that unscheduled absenteeism costs roughly $3,600 per year for hourly workers and $2,650 per year for salaried employees. In addition to paying the direct costs of wages for an employee who isn’t producing and often costly replacement workers, employers also bear the indirect costs of lost productivity, additional supervisory time, safety problems due to less-trained employees filling in, lower-quality goods and services, and lower morale from workers who must fill in for absent workers.
Some employers with sick leave suffer from “leave abuse” due to ineffectively structured programs. Other organizations suffer from the opposite problem—dubbed “presenteeism,” where employees come to work when sick. A study by the Cornell University Institute for Health and Productivity Studies found that presenteeism might account for between 18 and 60 percent of employers’ health costs. Although its costs are difficult to determine, presenteeism causes lost productivity, the spread of contagious infections and possibly longer illnesses, since workers don’t take the time to rest and recuperate. One study found that nearly 20 percent of 25,000 workers surveyed had a cold or flu during the study period.
To get the most of your company’s sick leave programs, start by determining how employees use their leave. Is leave usage higher in one department or under a particular supervisor? Are workplace practices or policies causing presenteeism? Do children’s illnesses lead to staff absenteeism? Finding the cause of problems allows you to address core issues. If absences stem from a personal problem, you can recommend counseling or refer the employee to your EAP (employee assistance program).
Consider whether the structure of your paid leave programs is working for your firm and its employees. Options include:
- Traditional plans. For years, employers have provided workers a set number of paid sick leave and vacation days per year. The amount varies by company and industry, but new employees get an average of 17 or 18 days off per year, allocated evenly between sick and vacation days. Professional, long-term employees may accrue 30 or more days off annually. To learn more about the norms in your industry, check with trade associations or chamber of commerce salary and benefits reports for your area. This type of leave plan is easy to institute and administer. Simply decide how many sick and vacation days to give employees per year, put it in writing — your employee manual is a good place to start — and let everyone know. While this system works well for many companies, alternatives can give your employees more respect and autonomy, without costing your company considerably more.
- Paid time off programs. Some companies combine different types of leave into one unified bank of “paid time off” (PTO) hours. A 2010 survey of employers with 100 or more employees found that 42 percent of respondents — up from 30 percent in 2000 — offered paid time off banks. Instead of ten vacation days and five sick days a year, these employers provide 120 hours of PTO for workers to use as they see fit — for vacation, personal time or illness. A “leave account” means employees won’t feel cheated when they’re not eligible for certain types of leave (for example, childless workers who can’t take advantage of time off for a sick child). You can build in even more flexibility by allowing employees to redeem unused days off for cash or to accumulate unused sick days from year to year, or match it with a short-term disability program. PTO banks can reduce unscheduled absences by allowing employees to use paid time off, rather than sick leave, to take care of personal business.
- Attendance incentives. To encourage employees to use leave programs properly, many organizations structure attendance policies to reward rather than punish. Some give employees a half-day off for every quarter in which they have perfect attendance and let it accumulate. Employees who use two days or fewer of sick leave during the year may earn the equivalent of one day’s pay. A note of caution: employers considering establishing an attendance incentive program should ensure that the program does not violate the Family and Medical Leave Act.Critics suggest that incentives indirectly punish employees who have legitimate reasons for absence. Parents of young children may resent the perceived inequity vis-à-vis childless co-workers who don’t need to take time off to care for sick children.Some analysts say attendance incentives send the wrong message about taking leave, which has become increasingly important in today’s high-stress work environment. If workers perceive that using leave is the wrong behavior, employers risk encouraging employees to overwork to the point of serious illness, which could result in increased health care costs in the long run.
The bottom line: Examine current policies, leave trends and your firm’s management style, and then establish a program that meets your needs.