Which method works best for your business? The answer depends upon a few items. One key is whether your payroll company can accommodate the tracking at no charge or a nominal cost. Putting that aside, lets look at an example:
- An employer decides to simply give (front load) the employees 40 hours of sick pay effective July 1st for a plan year from this July through next June 30th.
- An employee works 300 hours in July & August, then uses all 40 hours sick time with pay - and then quits.
- Under the accrual method, you would only pay 10 hours (1 per 30) rather then then the 40 hours.
- In this example, the up front method cost 30 hours more then the accrual method.
It comes down to this. If you are a small business with less than 50 employees and have a steady/stable workforce, with low turn-over, then loading the hours may make sense. Front loading eliminates the need to accrue/track hours. Keep in mind, you will have to keep track of the front load 40 hours used, which is less labor intense.
If you have more than 50 employees, high turnover, or a large percentage of part-timers then the accrual method most likely makes more sense. We have a Sample Sick pay Written Policy for each method - send us an e-mail for copies.
Another interesting scenario is a business that has a core group of benefit eligible employees and a host of part time workers with no benefits. The employer would like to front load the sick time for the full timers, but would prefer to accrue hours for the part timers. WE have just learned that this is an acceptable alternative.
In the end, no matter what you do it is important that you:
- review all other current PTO (paid time off) polices (vacation/holidays)
- have a Sick Pay Policy in writing with employee sign off
- post the notice from the AG
- coordinate with payroll company
There is no question that this new law will be a material new cost to fellow business owners.
You do have the discretion to reduce paid holidays, or revamp vacation formulas.
|