<i>Dear Workforce</i> How Could We Show Our Appreciation to Employees Who Dont Use Sick Days

July 10, 2009
Dear Well-Intentioned but Wary:
“Cash-out” of unused balances to reward employees who have taken little or no sick time during a year is a fairly uncommon practice, with roughly one in five employers opting for this model. There are some important considerations to address in evaluating whether this approach would fit your organization:
  • First, are you considering doing this just once, or every year? Even if you communicate this as a one-time event, if you don't do it next year, some folks will perceive it as a “take-away.”
  • Next, can you afford the cash-flow impact? If saving sick time to get the cash award catches on, you might be looking at a growing payout every year, and depending on your organization's accounting approach, this could result in a new accrued liability.
  • Finally, will you be providing an incentive for sick workers to come to work when they shouldn't? Certainly, recent concerns about pandemic illness make this a very real consideration.
In general, we favor using unused sick time to build a “safety net” for more serious illness, such as creating and contributing to an “extended illness bank.” In an EIB, the employer can limit use to those who meet a definition of disability (as with a disability plan), and the employee can supplement payments from a disability plan by using time in the EIB. This approach has the advantage of isolating the use of this time to those truly disabled (about 8 to 10 percent of your population), and the time cannot be used for brief, incidental absences. Typically this does not create an accrued liability, since the time is never cashed out.
SOURCE: Ophelia Galindo, national leader of absence and productivity solutions, Buck Consultants, Orange, California, June 1, 2009
LEARN MORE: There are very few, if any, companies that pay out for unused sick days at the time of termination. Unlike vacation, sick time is typically granted and not an earned benefit, therefore not required (by law) to be paid out. Concern about mandated paid sick time is heightened as Congress considers new legislation.
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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