Developing Vacation and Sick Leave Policies

When developing sick leave and vacation policies for your company, there are some things you must do, because you're required to by law, and some things you should do, because they'll help you retain your top people.

When developing sick leave and vacation policies for your company, there are some things you must do, because you're required to by law, and some things you should do, because they'll help you retain your top people.

First, the legalities: The Fair Labor Standards Act (FLSA) doesn't require payment for time not worked, such as vacations, sick days, or holidays. These benefits are matters of agreement between an employer and an employee (or the employee's representative). However, the decision not to provide such benefits can affect employment conditions such as the applicability of overtime rules. Believe it or not, the only legally required benefit employers are obligated to maintain is workers' compensation insurance; employers aren't required to give paid time off for sick days or vacation days. If paid time off is a benefit, a host of legal requirements ensue. For more information, read Complying with the Fair Labor Standards Act (FLSA).

Furthermore, the Family and Medical Leave Act (FMLA) entitles eligible employees to take up to 12 weeks of unpaid, job-protected leave in a 12-month period for specified family and medical reasons. The FMLA applies to all public agencies as well as any private-sector employers who employed 50 or more employees in 20 or more workweeks in the current or preceding calendar year. Eligible employees include those who have worked at least 1,250 hours over the previous 12 months. Check out What Do I Need to Know About FMLA? for a more detailed explanation of this federal law.

Beyond your legal duties, you should adopt policies that make sense for your employees and your business. Good benefits are a key component of employee satisfaction and retention. Traditionally, companies have set up programs where employees get a certain number of days for paid sick leave and a certain number for paid vacation. This type of plan is easy to institute; you simply decide how many sick days and vacation days to give employees per year, put it in writing - your employee handbook is a good place to start - and let everyone know.

While this system works well for many companies, you might want to consider altering it to give your employees more respect and autonomy. There are ways to do it that won't cost you anything extra. For example, some companies pool these different types of leave into a unified bank of hours from which employees can withdraw. Instead of giving employees 10 vacation days and five sick days a year, you might decide to give each person 120 hours of paid time off a year to use as they see fit.

This plan has many benefits. First, it allows employees to schedule days off without having to tell any white lies. It also means that employees don't feel cheated when they're not eligible for certain types of leave. What good is it for employees to have time off to be with their sick kids if they have no children? The great thing about this plan is that employees get choices for using their time off. They may use it for vacation, personal time, or sick days, or they can just accumulate it, like a savings account. Some employers even allow employees who accrue more than a predetermined amount of paid time off - 80 hours, for example - to redeem the excess hours by exchanging them for cash at the employee's current pay rate.

The amount of paid leave you give your employees is up to you, but there are industry standards to keep in mind. On average, new employees usually get about 17 or 18 days off per year, allocated evenly between sick and vacation days. Professional, long-term employees could accrue 30 or more days off a year. To learn more about the norms in your industry, check your local Chamber of Commerce salary and benefits reports. Industry associations might also be able to provide this type of information.

Get more information on salary and compensation and employee benefits at AllBusiness.com.

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