Thursday, May 5, 2016

Sick Leave Banks – They Work for Employees – Make Them Work for Employers Too

The catastrophic illness of an employee or a member of an employee’s family can bring out the kindness in their co-workers. Yes, for employees who are covered under FMLA, their employment and even continuation of their health insurance is protected. But what about pay continuation? If an employee doesn’t have sufficient benefit time saved to cover their absence, going without a pay check can add a great deal of additional stress to an already incredibly stressful situation. 

This is where co-workers want to help. Why not allow other employees to donate some of their sick leave to the employee in need? It’s a win-win, right?

Well, not exactly. It’s certainly a win for the employee who needs the pay during their time off. Donated sick leave provides financial relief as well as reducing the stress of worrying about how the bills will get paid. Donated sick leave is tangible evidence of the moral support that co-workers want to provide. That too can help to reduce the stress of a serious illness.

Unfortunately, it’s not a total “win” for the employer. While sick leave may appear as a liability on an employer’s books, few anticipate that they will pay out on most of the sick leave that employees are allowed to accrue or carryover from year to year. In other words, from the employer’s perspective, it’s great that workers want to help a co-worker in need; it’s not so great that the employer has to foot the bill. After all, it’s the employer who pays out on sick leave which it otherwise would have not likely paid because the donors weren’t going to use it. Add to that the fact that sometimes the sick leave that is donated was earned at a lower rate of pay than will be paid to the recipient. (i.e. a worker making $18.00 an hour donates five sick days to an employee who makes $25.00 an hour. The employer pays $7.00 an hour more than it anticipated the sick days would cost) 

Finally, in the “bad idea” category is the fact that a targeted sick leave donation policy, where employees donate their sick leave to a specific individual, can really benefit the popular employee, but not so much the less popular one. It’s high school all over again. The other usual way that employers operate a sick leave donation program is to create a general sick leave bank into which employees can donate sick leave on an annual or other basis. Employees who are in need of sick leave can withdraw from the bank if they meet eligibility criteria.  This eliminates the “popularity” factor but doesn’t ensure that sufficient time will be “on deposit” for every employee in need.

Despite the down side to these programs, many employers find that they’re an overall good idea and can control costs by following a few simple rules:
  1. Establish your sick leave donation program now. Emotions are too  high if you wait until a need exists and an employer may be pressured to be more generous than it is comfortable being.
  2. Whether a targeted donation program or a general sick leave bank is established, limit the amount that an eligible employee can use in a year. This will control costs.
  3. Clearly set forth the requirements for donors. Most employers require donors to have a certain number of sick days accrued before they can donate and limit the number of days that each employee can donate,  in order to avoid a veritable “round robin” of sick time donating and receiving.
  4. Clearly set forth the requirements for receiving donated time. A good rule of thumb is if an employee or family member has a medical condition that would qualify the employee for FMLA, and the employee has exhausted all of their own benefit time, then they qualify to receive donated sick leave.
  5. Consider paying the donated time based on dollar value of it when it was donated, rather than the recipient’s rate of pay.  For instance, three employees who earn $20.00 an hour each donate one sick day to Employee X, who needs three days of sick pay but makes $25.00 an hour (this is sounding like math class now… Then Employee X leaves Detroit on a train that is traveling at a speed of 50 miles per hour… Oh, never mind, wrong example.) The actual dollar amount available for Employee X is $480.00 (three days at $20.00 an hour) even though three days of Employee X’s pay would be $600.00. This method maintains the employer’s expenditure to that which it would have spent when the sick days were granted. 
  6. In targeted donation programs, either restore  unused sick leave donations to the donors, or put them into a general bank for future emergency use.
  7. Ensure that all donors sign an authorization which clearly states that they are donating sick leave, to avoid any questions down the road.
Clearly established sick leave donation policies and procedures can truly benefit an employee in need and allow co-workers to help their colleague. Establishing parameters to donations can ensure a fair program in the workplace as well as for the employer.