Vacation & Sick Leave

As a small-business owner, you may feel you have little room to provide generous vacation or sick-day benefits. Losing a key employee for weeks at a time may make the difference in closing a sale or missing a shipment date.

However, having a sensible vacation and sick-day policy as part of your employee-benefits plan helps you to recruit and retain employees. An employee-benefits manual or Intranet Web site is the perfect place to communicate these policies.

You may wish to address the following topics in a vacation and sick-leave policy:

• Basic benefit offering. At the very least, you should offer a basic benefit. In general, a basic vacation benefit is one or two weeks of paid vacation. A handful of paid sick-leave days may accompany paid vacation. You may want to ask a benefits consultant about an appropriate basic-benefits package or check with what the competition offers.
  
  
• Milestone offering. Often, when employees reach key milestones -- five years of service, for example, or a year with no sick leave -- you want to offer a "milestone" benefit. A common employer practice is to offer an additional week of vacation or similar form of compensation. For example, a year of perfect attendance may be rewarded with a free vacation day.
  
  
• Accrual of benefits. You will want to explain unambiguously what method you use for employees to accrue benefits. For example, will an employee be immediately eligible for two weeks of paid vacation, or must they complete a year of service before being eligible? A common approach is to require a year or similar period of service before granting paid vacation. However, sick-day leave is often offered from the employee's first day of work.
  
  Similarly, you will want to address how long an employee can accrue vacation or sick-leave benefits. A "use-it-or-lose-it" policy requires an employee to give up any unused days of vacation or sick leave after awhile. In general, the clock is reset every 12 months for sick days, while paid vacation can accrue up to a certain number of weeks. If a union represents your employees, you will have to comply with the terms and conditions of any collective bargaining agreement that may deal with benefits.
  
  
• Safeguards from abuse. You may wish to address potential abuses in vacation or sick-pay leave. For example, you may have an employee who calls in sick 10 times in a year when you only offer five paid sick days. You may decide to let the employee take the extra days as unpaid leave or you may require the employee to document the reasons for the absences with a note from a doctor.
  
  You may also choose to refer him or her to your employee assistance program (EAP). EAPs are effective forums for treating workers with mental illness or substance abuse problems. They are also useful for counseling employees who may be calling in sick every chance they have.
  
  
• Equitable treatment. It helps to be as fair as possible when establishing vacation and sick-leave benefits. For example, using a milestone policy that rewards employees for years of service of perfect attendance is not unfair if it is applied to everyone. You should do all you can to avoid offering certain perks to only certain employees in designing a vacation and sick-leave benefits plan.
  
  Instituting a policy of training your employees to provide basic coverage in the absence of a vacationing employee may be useful. The opportunity enriches the experience of the employee facing the temporary duty, and ensures that the needs of your business and the vacationing employee are met.
  
  

In addition to vacation and sick-day leave, you may wish to address these other categories of leave:

• Unpaid leave. Unpaid leave allows employees to take a hiatus from work for an indefinite period while keeping their jobs. Employees tend to skip unpaid leave opportunities when the economy slows down: they simply aren't as secure to take too much time off. At other times in a business cycle, however, unpaid leave may allow an employee to satisfy a major personal goal that will translate to increased productivity at work.
  
  Employees who are military reservists may get called up for active military duty, particularly following the September 2001 terrorist attack in the U.S. While military reservists are accorded some job protection under federal law, a written policy on unpaid leave is a good place to address this or other cases of taking unpaid leave.
  
  
• Maternity leave. Maternity leave is addressed under the Family and Medical Leave Act (FMLA). FMLA is a 1993 federal law that requires employers to protect employees' rights to take as much as 12 weeks of unpaid leave in a year to care for a newborn, adopted or foster child. The law also allows an employee time off to care for an immediate family member or oneself if afflicted by a serious medical condition.
  
  
• Funeral leave. Employees inevitably lose family members and friends to tragedy. A compassionate employer that grants leave for employees to attend bereavement services for loved ones is more likely to be rewarded with worker loyalty than an employer that doesn't show similar compassion. Most companies grant a few days of unpaid leave for funerals or other bereavement services.
  
  
• Leaved-based donation programs. Some employees seek to donate their accrued vacation or sick leave to a charitable organization. This contribution of services is called a leave-based donation. As employer, you may deduct the value of these services as business expenses. For additional information, see the Web site of the Internal Revenue Service (IRS).

Setting up a vacation and sick-leave policy comes down to common sense. It's good practice to offer a competitive benefits package that accommodates major life events of employees. Employees may be primarily motivated by compensation. However, employees are also motivated by compassionate policies that consider their personal welfare.