PAID TIME OFF BENEFITS
MGMT 139B, Section 1
By: Soraya Montgomery
Nick Ionashku
Daniel Thai
Tri PhanExecutive Brief
Every organization must be prepared for their employee’s being absent for one reason or another. Whether it’s due to an illness or a vacation, a plan must be in place to cover both the employer and the employee. First, the employer must understand what a paid time off benefit is. In short, paid time off is any time not worked by an employee where their regular rate of pay is accrued and paid to them. Although some paid time off benefits are mandated, most employers offer these employee friendly benefits to be competitive. The list of paid time off benefits is long, and getting longer due to new innovations. It is important for an employer to have the most up to date knowledge of the programs and what they offer. We have complied a report of the most popular paid time off benefits for your review. Read them, study them, but most importantly, implement them. They are a huge part of the success your company will have in attracting and retaining competent employees.
Legal Public Holidays
Although there is no standard, many organizations give their employees nine to ten days off a year as public holidays. Federal holidays, or legal public holidays, are recognized by Congress but are not recognized by all employers. Legal public holidays consist of the following:
· New Year's Day, January 1
· Martin Luther King, Jr. Day, the third Monday in January
· Washington's Birthday, the third Monday in February
· Memorial Day, the last Monday in May
· Independence Day, July 4
· Labor Day, the first Monday in September
· Columbus Day, the second Monday in October
· Veterans Day, November 11
· Thanksgiving Day, the fourth Thursday in November
· Christmas Day, December 25
In addition to federal holidays, some employers also observe state and local holidays. For example, in California we recognize March 31st as Cesar Chavez Day. Many companies reserve the right to schedule work hours during holidays. This is particularly true in organizations such as hospitals, law enforcement, and emergency agencies. Those scheduled to work on these days may be compensated at a premium or ‘holiday pay’ rate.
Paid holidays have a positive affect on the employer even though they are the ones paying out the wages. These paid days off help boost employee morale, and often serve as a much needed ‘mini’ break. Holidays also offer employee’s extra time to spend with their friends and family. Rest and relaxation are good ingredients for increased productivity and a harmonious work environment. In addition, offering these paid holidays are a good way to attract and retain employees.
Jury Duty
Jury duty is considered a civic responsibility. Most organizations allow employees to take paid time off if they are called for jury duty. The length of time granted varies depending on the jurisdiction and the case. It could take only a few hours, several days, a week, or longer. Even though courts provide a small amount of compensation for jury service, companies customarily compensate employees at their regular base rate of pay. Employers may require verification from the court that their employee has served on jury duty. If the employee’s jury is excused earlier than the close of business, the employer could require them to report to work.
Jury duty can have a positive affect on employers by showing their employee’s support. Often times, the employee may not want to serve on jury duty. The fact that they do not need to worry about financial strain is comforting. It also gives the employee a sense of stability knowing that they have the support of their employer when they need it.
Maternity Leave
On September 23, 2002, the State of California enacted the first-in-the-nation paid family leave. Beginning on July 1, 2004, nearly all non-governmental employees in California will be eligible to receive up to six weeks of Family Temporary Disability Insurance (FTDI) benefits over a 12-month period. These benefits will replace wages to cover periods where a worker is unable to work to care for an ill child, spouse, parent or domestic partner, or for the birth, adoption or foster care placement of a child. Employees are immediately eligible for the program upon hire and can begin to receive benefits following a seven-day waiting period.
Under Paid Family Leave, employers must provide a brochure to new employees who start after January 1, 2004 and persons who request Paid Family Leave after July 1, 2004. FTDI benefits will be funded through increased employee payroll deductions, beginning in January 2004 (six months before any employees are eligible to receive benefits). These deductions will be based on a payroll tax schedule and are estimated to average $27 per employee per year. Currently, the top contribution is capped at $70 for those earning $72,000 or more a year. California workers will be able to collect as much as 55 percent of their salary, up to a maximum of $728 per week.
Employers with fewer than 50 workers are not subject to the Family Medical Leave Act (FMLA) or the California Family Rights Act (CFRA), so they have no legal obligation to provide employees with a leave of absence or hold their jobs open simply because these workers are receiving FTDI benefits. While the new program provides paid benefits to employees taking leave to care for a registered domestic partner or to care for a child born to a registered domestic partner, neither the FMLA nor the CFRA has been amended to guarantee employees the right to such a leave. Although employees may be entitled to paid leave in these situations, employers do not have to grant the leave or guarantee those workers a job once their leave is completed. Additionally, an employee must verify that he or she is the only person who will be caring for a family member or domestic partner. Finally, employees must be off work for at least seven days before FTDI benefits are available and employers may require employees to use up to two weeks of earned vacation leave prior to receiving FTDI benefits. If an employer requires that an employee take earned vacation leave, up to seven days of the vacation leave may be applied to the seven-day waiting period.
Employers are preparing themselves for the affects of this new act. For example, because more workers will now take family leave, employers are likely to incur additional costs. Overtime costs may rise because those employees not out on leave will have to pick up the slack for their absent co-workers. Employers will face expenses relating to locating, hiring and training replacement or temporary workers. There also will be additional costs for administering the program, such as verifying the medical reasons for the leave. It may not be practical for employers to verify that the employee is the only person who can care for a family member or domestic partner, or whether the ill person even is a family member or domestic partner.
Positive aspects of this act are that it is another way the employer essentially takes care of their employees. Being able to take needed time off, and not having to worry about job stability is a comforting thought to many employees. Offering this benefit may assist in the recruitment and retention of employees.
Sick Leave
One of the most common types of paid time off is sick leave. Employers allow sick leave days to be used for personal medical needs, to take care of a family member, or for adoption related purposes. Regarding personal medical needs, there are three main categories, one of which the employee must fall under in order to use his or her sick leave day. When using sick leave under the first category, an employee must be unable to perform his or her regular tasks and procedures due to physical or mental illness, injury, pregnancy, or childbirth. Under the second category the employee must be receiving a medical, dental or optical examination or treatment. The employee may also use sick leave under the third category, when their presence at work jeopardizes the health of others, which must be prescribed by a doctor.
Employees may also use their sick leave to take care of their family members who need medical care. A family member is considered to be a spouse, child, adopted child, parents and parents of spouse, brother and brother of spouse, sister and sister of spouse and any individual related by blood to the employee.
Regular full-time and part-time employees are eligible to accrue and use paid sick leave. Often part-time employees accrue sick leave at a prorated rate. This means that a part timer would earn less sick leave days per one day of work compared to a full time employee. The more an employee works the more sick days he or she accrues and may use.
California employers don’t have to offer sick leave, but if they do, they will have to comply with the requirements of a fairly recent law that went into effect on January 1, 2000. The new measure, A.B. 109, requires employers to allow employees to use sick leave not only when they are ill, but also to care for a sick child or other immediate family member, as mentioned earlier. The law applies to all private, state and municipal employers regardless of the number of people employed.
A demonstration calculator can be found at: http://www.employeradvice.com/sick_leave_calc_intro.pl. This calculator can help employers figure out the number of family related sick leave days that they need to be ready to provide their employees. In addition, the employees can figure out approximately how many days they can use for family related medical care.
Utilization of Sick Leave
According to a survey done by Hewitt Associates in 1997, “45 percent of responding firms did not keep track of utilization of sick leave by their employees in 1997. The average number of sick days used per year by a salaried exempt employee was 3.8 days; salaried nonexempt employees used 5.6 days; nonunion hourly employees used 4.8 days; and union hourly employees used 5.5 days.” Based on this study we could estimate that an average employee will use 5 sick leave days per year. The question remains, will those days really be used for personal medical needs, to take care of family members and for adoption related purposes?
According to a survey done by ComPsych Corporation on March 9, 2004, “About 77% of employees say they show up at work when ill.” According to the survey, the reasons why some employees take their sick leave days when ill, and others do not are as follows:
· 33% said they come to work sick because their workload does not permit them take a sick day.
· 26% said they feel the risk of taking off in the current work environment.
· 18% said they save their sick leave days for children related activities.
· 23% said they take their sick leave days because they treasure their health.
Based on this study we can see that 77% of employees misuse their sick leave days. Employees come to work when they are sick and when they do use their sick leave days they use it to take care of their personal needs.
Funeral Leave
Employees may be approved for leave with pay in cases of death of a spouse, parent, parent-in-law, step-parent, child, step-child, grandchild, brother, sister, son-in-law, daughter-in-law, aunt, uncle, niece, nephew, grandparent or person regarded as member of employee's immediate family. Some employers will even cover traveling expenses if the funeral service is not local. A typical employee is allowed three funeral leave days in order to make arrangements and attend the funeral.
Utilization of Funeral Leave
According to a survey by EBRI done in 1997, among full-time employees in medium and large private establishments, “81 percent were eligible to participate in paid funeral leave.” Today it is one of the more common or standard paid time off benefits that employers are offering.
Vacation Time
Vacation time off with pay is a benefit that is usually available to eligible
employees to provide opportunities for rest, relaxation, and personal pursuits. Although
it is not required, employees are encouraged to use their available paid vacation.
Paid vacation time is a voluntary benefit that organizations offer to employees. There are no federal regulations requiring employers to provide vacation days, but it has become common business practice to do so.
Employees accrue hours of paid vacation time at a certain rate for each day worked. Different employers use different formulas to calculate vacation time. For example, an employee with 15 days of paid vacation time at one company may or may not enjoy the same number of paid vacation days after changing jobs.
Generally speaking, the amount of paid vacation time depends on the length of service and the level in the organization. Usually, companies have some scale that decides how many paid vacation days an employee will receive. Four or five weeks of vacation is not unlikely for an employee who remains with a company for more than 15 years, although that's typically the upper limit for vacation benefits in the United States.
Average number of vacation days in the United States
Years of service / Average days per yearLess than 1 year / 9.7
1 year of service / 9.9
2 years of service / 10.8
3 years of service / 11.4
4 years of service / 11.7
5 years of service / 13.7
6 years of service / 14.5
7 years of service / 15.0
8 years of service / 15.3
9 years of service / 15.5
10 years of service / 16.8
11 years of service / 17.5
12 years of service / 17.6
13 years of service / 17.7
14 years of service / 17.8
15 years of service / 18.8
More than 15 years of service / 20.2
Some employers base vacation days on the employment anniversary date, while others use the calendar year to keep track. Exempt employees should receive the same salary pay rate for vacation days. For example, if an exempt employee takes two weeks of paid vacation, they should receive a paycheck for the same amount of salary for the two weeks as if they had worked.