<i>Dear Workforce</i> How Do Companies Typically Treat Unused Sick Leave

June 20, 2001
QDear Workforce:

Our company has separate accruals for vacation and sick leave. Sick leaveaccrues at the rate of 3.33 hours per month, up to five days per year, and thebalances are not paid out at termination. How are other companies treatingunused sick leave? Are employees allowed to carry over their balances from yearto year to a maximum number of hours?

- Office Manager, Internet services company, Mountain View,California

A Dear Mountain View:

There are very few, if any, companies that pay out for unused sick days atthe time of termination. Unlike vacation, sick time is typically granted and notan earned benefit, therefore not required (by law) to be paid out.

Some employers are allowing employees to carry over unused sick days, but themajority of companies don't allow this. Sick days are granted to employees touse if needed -- so employees are not punished with lost wages for being ill.However, companies do not want to set standards for paying employees when theyare not working; they only want employees to use these days when they arenecessary.

If an employee is legitimately ill beyond the maximum five days, mostorganizations have short-term disability, which pays approximately 60 percent to75 percent of an employee's base salary, to ensure a continuance of income.

The concern for most organizations is: "Will employees take unused sickdays off at the end of the year, knowing they will lose them?" There willalways be some employees that will call in sick, even when they are not, ratherthan lose these days. To combat this, some companies reward employees forperfect attendance, either with money ($100-$500) or, ironically, a day off.However, this sets a poor precedent because it rewards employees for coming towork: the goal of the paycheck. These companies justify the rewards based on thefact that $500 is less than five days of salary.

The few organizations that carry over sick days typically allow up to 2 or 3days to be carried over into the following year. However, these organizationsoften require the carryover days be used in the following year, which preventsemployees from banking sick days year after year and taking a 30-day paid sickleave. Additionally, the value of the carried-over sick days will go up eachyear, assuming the employee's salary increases annually, which may affect yourbudget.

The recent trend is to combine sick and vacation into a Paid Time Off (PTO)format, in which employers combine the accrual for sick/vacation and personaldays. Under this program employees are granted a set number of days per year tobe used for any reason. In this program the employees are responsible formanaging their time off. Any time off beyond the PTO balance will be unpaid(before any additional insurance such as Short Term Disability takes effect). Intheory, under a PTO system, an employee only will call in sick when it's needed,thus saving the remaining time to be utilized for vacations.

Employers who allow employees carryover days feel that they have earned thosehours and should have a right to use them in the future should they need them.Most employers, however, only allow employees to carry over half of their annualaccrual (2.5 days), and require it be utilized before July 1 of the followingyear. One issue that has arisen from allowing unlimited carryover days is womenwho accrue sick days for many years, utilizing all the accrued days during theirmaternity leave.

SOURCE: BenchmarkHR, Salem, NH, March 16, 2001

LEARN MORE: "Don't Let Unscheduled AbsencesWipe You Out"

The information contained in this article is intended to provide usefulinformation on the topic covered, but should not be construed as legal advice ora legal opinion. Also remember that state laws may differ from the federal law.