A Small Business Guide to Sick Leave 

It’s a fact of running a business — employees get sick, either for the short or long-term. Learn what you need to know about sick leave for your small business.


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Sick Leave Small Business

It’s a fact of running a business — employees get sick, either for the short or long-term.

Offering paid or unpaid sick leave may vary by company, but it’s inevitable that employees will need to take time off to attend to their health.

A recent study found 29% of America’s private sector workforce do not have access to paid sick time. For these 34 million-plus workers, they’re faced with a choice — to work while sick or lose wages. For many, that can mean spreading illness to others in the workplace or seeing their condition worsen.

Sick leave can take many forms — from half-days off to weeks (or even months) to address a serious health condition.

For business, having sick time/leave guidelines in place is a must.

A strong sick leave policy will outline:

  • The amount of time available to employees
  • Whether that time is paid or unpaid (or a combination)
  • Whether staff members will need to provide documentation or receive approval to take time off

Is sick leave required by law?

Extended sick leave, sick time off or even sick pay is not required by federal law unless the employee is eligible under the Family and Medical Leave Act.

FMLA provides up to 12 weeks of unpaid, job-protected leave for businesses that employ over 50 people. An employee eligible for FMLA will have completed one year of service and at least 1,250 hours worked.

Employees who utilize leave for their or a family member’s illness must provide documentation of the request and the medical need for time off work, light duty or other potential medical accommodations.

Although not required by federal law, 11 states and many cities (with more legislation coming in many parts of the country) have mandated business provide minimums of sick time off, sick day payments and sick time accruals.

Is paid sick leave required by law?

Paid sick leave is mandated by law in Arizona, California, Connecticut, Maryland, Massachusetts, Michigan, New Jersey, Oregon, Rhode Island, Vermont, Washington and Washington, D.C.

The laws range in the amount of days per year that employees earn, what employees are eligible to utilize as sick days, and how they receive sick pay.

For businesses without a mandate, there is no requirement to provide sick days or sick time pay under federal legislation, unless the employee is eligible for unpaid sick leave under the FMLA.

How does sick leave accrue?

Under state and municipal laws, sick time is accrued (or earned) based on hours worked.

In California, for example, for every 30 hours on the job, an employee will earn 1 hour of sick time. Over the course of a year, California allows businesses to cap the amount of sick time an employee earns and can use at 24 hours per year.

In other states and jurisdictions with sick time accrual/use laws, the amount of time earned and available varies. For businesses not under a mandate, sick time is also typically accrued based on hours worked. In many companies, policies outline the amount of time earned, when the earned time is available, whether any time is carried over into the next year, and in some cases, the minimum amount of time used.

Creating a sick time policy

When not required by law, a company can craft a policy to meet its own needs. An example might be to provide six paid sick days per year. Employees may earn half day per month worked; but a company could include they are not eligible to use the time off until they’ve satisfied their 60- or 90-day anniversary.

For example, a policy may ask employees to use time earned in no less than half-day increments and allow sick time hours to carry over into the next year. There are many choices businesses can make to develop a policy that meets their and their employee’s needs.

An aspect to carefully consider is carryover when developing a sick time policy. The majority of businesses who offer paid sick time allow staff members to carry unused days into the next year(s).

Remember, time off taken in the future may be paid at a higher rate if employees receive a raise.

Another way businesses can help workers is with sick time donations. In some organizations, employees can donate unused time off to coworkers in need. While the practice isn’t widespread, over 25% of companies polled allow it.

Unlike vacation time, accrued sick time does not have to be paid to employees if they leave the company under federal regulations. This often puts employees in a use-it-or-lose it situation.

Unless local law mandates your business, or your company policy specifically designates that it will pay separating employees for any unused sick time accrued, it is not legally required to compensate staff members for sick days they haven’t used on separation.

For some organizations, policies outline employees terminated for cause do not receive sick time payouts, while those who resign or laid off could be eligible for the payment.

Can I offer a general leave policy instead of sick leave days?

A new trend for business is to offer sick time/leave under an umbrella of paid time off (PTO). This allows employees to report when they are taking time away from work without having to designate it as sick, personal or vacation time. Businesses that utilize a blanket PTO policy generally do so because they want to give employees the flexibility to use their time as they see fit – for whatever their need.

Most employers outline sick leave separately, but there can still be variations on the theme. Some organizations allow staffers to use sick time to attend to their ill children; others only allow sick time to be taken for the employee’s own illness.

It can be challenging for working parents to allocate whether or not to use available sick time for themselves or their children. One-third of working parents worry they may lose their job or wages if they stay home with a sick child: 31% say they don’t have enough earned sick pay to take time off.

That can mean sending sick children to school or daycare, where they can spread disease to others or see their own condition worsen, making additional sick time needed.

Sick time versus sick leave

The difference between sick time and sick leave is generally the length of time an employee needs to attend to their health.

Paid sick time is typically earned by employees as they work. In most companies an employee earns between 5 to 9 paid sick days per year, according to the Bureau of Labor Statistics. Business can also allocate an amount of unpaid sick days an employee can utilize per year without the time off affecting their employment.

Why a sick time/leave policy is important

When it comes to attracting and talent, candidates look for a sick leave policy. A majority of workers believe paid sick time is important. But sick leave benefits business when it comes to retention as well. Turnover is costly ⁠— the time and resources saved allowing an employee to attend to their health needs can be minimal when compared to the cost of replacing a staff member. Studies suggest a paid sick time policy can reduce turnover by 50%.

In the workplace, presenteeism is also problematic. When employees don’t have access to sick pay, they often come to work ill. This can decrease their own productivity and increase the chance of spreading the disease to others.

When employees are not at their best, there’s an increased risk of injury on the job. In addition, workers who interact with the public can spread disease beyond the workplace. Some estimates put the cost of presenteeism to American business at $160 billion per year.

For many small- to medium-sized businesses, paid sick time may seem like a simply an expense: but from a larger perspective, offering the benefit is an investment. Attracting and retaining talent, productivity and a reduction in workplace outbreaks are just some of the returns on investment for this highly sought-after benefit.


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