To keep the bottom line healthy, a company needs a sick leave policy that works -- that means a flexible policy thatallows employees to take responsibility for balancing their work and personal needs.

Traditionally, some companies have set up silos "where you get x number of days for sick days, and xnumber of days for holidays, and so on," says Terry Smith, a principal with William M. Mercer Inc. in Princeton,N.J. "Companies have given sick, vacation, personal, and floating days. I've seen some unusual silos -- marriage,bereavement, divorce."

But as recruitment and retention become more difficult, companies are realizing that they need to be moreflexible in meeting employees' personal needs, he says. As a result, more forward-thinking companies now poolthese various types of leave into a bank that employees can draw from.

"The message is, 'We are giving you flexibility, but also responsibility," Smith says. The amount of leave in thebank is generally determined by tenure and salary grade, and may be used by employees for whatever they wish.

No "Little White Lies"

"It allows employees to schedule days off without telling little white lies," Smith says. "An employee is going tothink twice about calling in sick because there isn't the mentality that 'since I have 10 sick days a year, I have to call insick 10 days."

It also means that employees don't feel cheated because they are not eligible for leave in certain categories, Smithsays. "What good is leave for a sick child for an employee who does not have children dependent on his or hercare?"

A few companies deduct one day off for a scheduled day of leave but deduct a day and part of another if theemployee calls in unexpectedly. "They're trying to send the message that it's very difficult to schedule backuphelp, so if the employee knows that something is coming up, to make arrangements ahead of time."

How much time should the company put into the bank? On average, Smith sees banks set up for relatively new,nonexempt employees with paid time off ranging from 17 or 18 days into the 20s. Professional, long-termemployees could have 37 or 38 days -- including vacation, personal, or floating holidays and some scheduledholidays.

Seeding the Bank

"You've got to recognize the need for a healthy workforce. You have to properly 'seed' the bank at the beginningof the year and recognize that your population is going to be sick.

"Employers can't be too stingy about the number of days. Do not let the amount of paid time off keep someonefrom joining the firm or cause them to leave the firm," Smith says.

Flu Complications

The flu season can create special problems, Smith admits, because employees -- especially new employees -- may nothave enough time in the bank. In many companies "a new hourly employee stricken with the flu may take unpaidleave later in the year. In certain cases we see employees granting extra days, but it's not that prevalent," he says.

Some companies reward employees for not taking any sick days, but that may mean rewarding them for coming into work sick and spreading germs.

"Especially in the health care setting, you don't want to make an incentive for sick people to come in towork," Smith says.

And some companies allow employees to buy and sell time off, which poses legal complications. To comply withInternal Revenue Service rulings, the time must be sold in the year preceding the year it is earned or, if it is sold inthe same year, at a reduction of what it is worth.

If the company has a carry-over option, the best practice is to require employees to use at least half of their leave time each year, Smith says,and "preferably one week ought to be taken in a single block. Vacation is important for mental health."

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