Paid Time Off: How Small Businesses Can Navigate the Possibilities

It’s never easy being a small business owner, particularly when the subject of paid holidays, sick leaves and vacations comes up. These days, employees expect more from their employers than a salary, but trying to compete with big business when it comes to time-off benefits can quickly eat through a budget.

Studies have shown, however, that nearly three out of four U.S. employees earn paid time off in some form. These benefits result in employees being more productive, happier and most satisfied with their jobs, and more loyal to their employers. So how do small businesses strike a balance that can keep everyone happy?

Determining Sick Leave

Offering paid sick leave isn’t a federal or state mandate in Pennsylvania, but offering it is a way to let your employees that they are valued. This is particularly important if some of your employees are parents or have family members who have health problems. Having to choose between work and caring for themselves or others who are ill can be an impossible task if an employee relies on his or her wages to pay the bills. By offering some form of sick leave, employers can assuage that fear.

Here are some things employers should consider when putting together a sick leave policy:

  • Make sure you can afford to offer sick leave and how much of it you can offer. Crunch the numbers and determine a maximum number of days you can give in the event that your employees all have to use their sick leave in the same year.
  • Determine whether you’ll expect proof of illness, such as a note from a doctor, for more than one consecutive day off for illness. While everyone is occasionally down with the flu or a bad cold, if an employee wants an entire week off, ask yourself if you want to require some proof. This may largely come down to your level of trust and the culture of your business.
  • Decide whether sick leave can include family members such as a sick child or parent who needs care.
  • Will sick days roll over to the next year or are they only usable during the calendar or fiscal year? Keep in mind that if you have several employees, roll-over days could quickly add up to less coverage for your business if two or more employees accumulate then use multiple sick days at the same time. You don’t want to cripple your business.
  • Serious illnesses can run for weeks or even months; be prepared to be able to cover those absences financially if your business has over fifty employees. The Fair Labor Standards Act states that you can make deductions from an employee’s paycheck if they have used up all of their sick leave for the year. If you have more than fifty individuals on the payroll, however, your company will have to offer a sick employee at least twelve weeks of sick leave.


tropical-paradiseHow Much Vacation Time?

Not all small businesses have to offer paid vacations if they have fewer than fifty employees. If you have more than fifty, you are required to give each of them up to twelve weeks off without pay in the event of illness. More and more companies, however, are offering paid vacation time as an incentive when making job offers. Some also offer paid time for “official” or “bank” holidays (those that are federally recognized days off for federal and/or state employees. These usually include Thanksgiving, Christmas, New Year’s Day, the 4th of July, Labor Day and a few others. Although it isn’t necessary to pay your employees if they aren’t working on these days, it is certainly a thoughtful gesture.

Aside from legal holidays, how much paid time off or vacation time should a small business offer? Here are some helpful guidelines:

  • Tying time off to length of employment can be a powerful inducement to stay. If you can afford it, give each new employee a week’s paid vacation at the end of their first year, then add a paid week every so many years until they reach a business-wide cap.
  • Decide whether part-time employees can also earn paid vacation. If you do offer this, it might be best to tie their vacation time to total hours worked rather than how long they’ve been employed.
  • Do you have an especially busy season when it could seriously impact the success of your business if anyone takes a vacation? If so, put these “blackout dates” in writing in your employee handbook or any employee contact. For many retailers, the months leading up to Christmas and Hanukah mean everyone has to work and put vacation plans on hold.
  • While roll-over time is more common with vacations than with sick days, it isn’t mandatory.
  • If an employee doesn’t take their paid vacation days and then takes a job elsewhere, will you pay them for those unused days? In Pennsylvania, the law doesn’t address this issue, so it’s really up to the employer and whether you have a written policy in place. Make sure this is covered in your employee handbook!

Whether you’re offering sick time or vacation time to your employees, be consistent so that those who work for you don’t have cause to complain or file suit against you. Be as generous as you can so that they will feel valued and appreciate all your small business has to offer.