Cities across the United States are writing and passing legislation mandating that businesses large and small begin prviding paid sick leave for their employees. Paid sick leave is a good thing, right? Why all the brouhaha? With no national requirement or policy on paid sick leave as many as 40 million, or 38 percent, U.S. workers are reported by The Center for American Progress to have no paid sick leave at all. As more attention continues to be paid by the media and others on healthcare, paid sick leave is a natural progression of the movement toward keeping a workforce healthy.
Going to work ill can cost a business plenty.
According to the Centers of Disease Control, American businesses spend $10.5 billion in illness-related costs associated with annual flu season. These costs reflect direct costs for hospitalizations and outpatient visits for adults and don’t even consider the lost time from work and reduced productivity for the businesses. Pandemics and super viruses are impacging larger and larger populations and it becomes a matter of public safety for workers to stay home when they’re ill. But many workers are struggling to make ends meet. Unpaid time for an illness is not in the budget. If workers feel penalized or worry about losing their jobs if they take a sick day, it becomes a confusing and sometimes dangerous message for employers to send. If workers do go to work ill, they run the risk of infecting other employees and causing a micro-epidemic where the entire business becomes ill. That loss in productivity be costly for big business but near fatal for a small business. Unlike corporations with large workforces, small businesses run a very lean operation. Losing half or more of their staff to illness can leave the business unable to maintain even the most basic of tasks.
Why the push for paid sick leave?
The U.S. is one of the few countries in the world without a policy that provides paid employees sick days. According to a CNN/Huffington Post report, there are “some 145 countries that provide paid sick days for short- or long-term illnesses. Japan, the Netherlands, Switzerland, Sweden, Denmark, Finland and Singapore require employers to provide at least 10 paid sick days.” Moreover, even employees of the U.S. Federal government are entitled to 13 paid sick days each year. Advocates for paid sick leave say that businesses and employment flourish after mandatory paid sick days are enacted. Opponents of the legislation believe that mandatory laws put undue financial burdens on already stressed small business owners. While still impacted by the laws, small business are usually required to provide less paid sick leave than their larger counterparts.
Tracking employee hours
Using payroll software to track cumulative hours and not just weekly hours, is a change that can help employers provide paid sick leave time based on hours worked. Most small businesses already offering the PTO, either on their own or because of new legislation, now say they “worried needlessly” because the paid sick leave benefit only increased payroll costs by one percent. If you do decide to offer paid sick leave and time off for your employees, let’s review the best way to track and calculate time off.
Outline your company’s policy. In the policy, include the standards that employees must meet in order to qualify for paid time off such as total number of hours worked in a week. For example, must employees work 30 to 40 hours a week in order to qualify for paid sick leave? Part time employees working less than 30 hours a week may be subject to different rules. Alternately, you can establish a policy regardless of part time or full time status and base it on accrued hours worked.
For example, an employee will receive four hours of sick leave for every 80 hours worked. Also include how the employee can use the sick leave. Options could inlude illness, medical visits, or as ‘personal time’ without being attached to medical reasons. Remember to outline what happens to any remaining sick leave at the end of a year and if the employee is terminated or leaves the company.
Do the math. Determine the number of periods or hours worked and multiple it times the hours of sick leave per period. For example, an employee has worked 400 hours and received 4 hours of sick leave for every 80 hours worked. Divide 400 hours by 80 hours worked. This equals 5. Now multiply by 4 hours of sick leave to equal 20 hours of paid sick leave.
To learn more about how paid sick leave might impact your small business’ bottom line, talk to a PASBA small business professional near you.
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Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice. Any information contained in this article does not fall under the guidelines of IRS Circular 230.
Copyright Information 2013 Professional Association of Small Business Accountants