When it comes to employee benefits, one particular type may not be on your business’s radar: paid leave. Also known as paid time off, paid leave is an important component of a comprehensive employee benefits package. Many workers highly value being able to take paid leave, making it a critical factor in employee satisfaction.
Paid leave may seem like an expensive benefit to offer employees, as you will essentially be paying them to not be at work. In actuality, paid leave can be incredibly beneficial to employers, as it helps to increase productivity and employee retention. In this way, paid time off can have a positive impact on your bottom line.
What Is Paid Leave?
Paid leave is any time that an employee takes off work, but the business pays him or her as if they had worked regularly for the day. Companies can set up paid leave in any number of ways, from offering certain categories of paid leave (such as sick time or bereavement leave) to a set number of days that an employee can use for any reason.
Most employers provide paid time off for holidays, including New Year’s Day, Memorial Day, the Fourth of July, Labor Day, Thanksgiving (and the day after Thanksgiving) and Christmas. Employers are free to offer additional paid leave for holidays, such as Martin Luther King Day or a state-specific holiday that is important to employees.
In addition to holiday leave, many employers offer different types of leave for their employees, such as sick leave, bereavement leave, personal leave, and vacation time. These types of leave can be provided individually (i.e., 5 days off per calendar year for illness) or as a block of time. The advantage of giving employees a block of paid time off rather than a set number of days for a category of leave is that it is less complicated to administer, and more valuable to employees. For example, a worker who is rarely ill might prefer to use their paid leave on vacation, whereas an employee with a chronic illness might require more days off for being sick than for taking vacation.
Employers should be aware that there are certain types of paid leave that they may be required to provide under federal or state law. Employees should be given paid time off for jury duty, with the pay they receive being equal to the difference between their regular salary and the amount that they receive for serving on a jury. Companies must also permit employees leave to fulfill their military reserve training obligations; however, in most situations, this leave is not considered paid time off unless an employee chooses to use vacation time.
When companies give their employees paid leave, it is typically on an accrual basis. In this system, employees accumulate leave based on the number of hours that they have worked or the number of years of service. Businesses that offer paid leave often require workers to be employed for a certain period of time (such as six months or a year) before they are eligible to receive the benefit. Typically, there is a cap on the amount of leave that can be accumulated. Employers should set up policies that describe eligibility requirements, how employees can request paid leave, whether leave can be denied, and how unused paid leave time will be handled. In some states, companies are required to compensate employees for unused paid leave time.
Employers with 50 or more employees should also keep in mind that they are required under the Family and Medical Leave Act (FMLA) to provide up to twelve weeks of unpaid, job-protected leave for their employees. This leave can be used for a number of reasons, including the birth or adoption of a child or to care for a sick family member. It is separate from paid leave. When an employee requests time off pursuant to FMLA, a company should carefully review its policies and procedures to ensure that it is in compliance with federal law.
How Paid Leave Affects Your Business
Paid leave may seem like a costly option for businesses, but in most cases, the benefits of paid leave outweigh the expense. Payroll costs tend to be fixed, so that employers who offer paid leave will typically not see additional expenses from month-to-month. Instead, they will often reap the advantages of offering paid leave to their employees, which includes a happier, more productive workforce and reduced employee turnover.
As a general rule, employees do not want to feel as though they are a cog in the wheel or that their employers do not care about them as people. This perception can be hard for employers combat, particularly in high-stress jobs. One way that employers can show their workers that they view them as a valuable part of the team is through offering paid leave. In turn, employees show increased morale and loyalty — which can have innumerable benefits to a company.
Work-life balance is a critical component to employee happiness. Paid leave is one way to achieve this balance, as it permits employees to take time off when necessary without having to determine whether they can afford to take leave. Offering paid leave can reduce employee stress. When an employee can choose to take paid time off to do something that matters to them — from going on a field trip with their child to visiting a friend to staying home to rest and recharge — they feel more in control. As a result, they tend to have more positive feelings about work and higher morale.
When employees are happy, they tend to have increased performance and creativity. Their quality of work improves, and they pay more attention to detail. Increased morale also improves workplace safety, as employees tend to be less distracted and focus more on safety rules and the task at hand. These are all incredibly positive effects that paid leave can have on your business.
Employees who are offered paid leave also tend to be more productive when they are at work. Being able to take time off work without worrying about the financial aspect of leave allows employees to handle personal issues outside of the workplace. The result is fewer distractions while at work, which results in increased productivity.
A higher level of productivity is a natural outcome of paid leave given that employees and employers alike find their personal lives bleeding into their work lives at some point. Many times, important calls and appointments must be made during business hours. Giving employees paid time to take care of personal issues can reduce the need for them to handle these matters while at work — or to be thinking about them while on the clock. Overall productivity tends to increase as a consequence of giving employees paid leave.
Increased Employee Retention
Replacing employees is costly, from advertising to interviewing to training. Studies have shown that turnover costs approximately 20% of an employee’s annual salary. These expenses are often far greater than the alternative of offering paid leave to current employees.
Employees value paid leave. Giving workers the benefit of paid time off can increase employee happiness and morale, which has the ultimate effect of improving employee retention. Employees who are satisfied with their job and their benefits are less likely to quit, and paid time off is a critical component of overall employee contentment.
Importantly, paid leave has become a standard benefit in many industries. If a company chooses to not offer some form of paid time off, then the chances of their employees going to another employer increases. Providing paid leave is critical to maintaining a competitive advantage when it comes to attracting and retaining employees.
Fewer Unplanned Absences
When employees have the ability to take paid leave when they need or want to, it decreases the amount of unscheduled absences from work. They can more readily schedule appointments, meetings with contractors, or even days off to spend with family or friends when they have a bank of paid leave days to use. While sickness and emergencies still occur, when employees have the ability to schedule paid leave, it reduces the overall number of unplanned absences. This gives employers greater predictability and the ability to plan work based on who will be in the office. Offering paid leave can help reduce the costs of scrambling to cover a shift or having to reschedule a meeting because a crucial employee is absent from the office.
Setting Up a Paid Leave Program for Your Business
Establishing a paid leave program requires a certain amount of foresight and administration, which can be a daunting task for many employers. Because paid leave can have an incredibility positive impact on a business, it is often necessary to continue to grow a business or to maintain a competitive edge.
A benefits consulting group can assist with the legal, financial, and administrative aspects of setting up a paid leave program for your business, from creating policies to running the program. Contact The Business Benefits Group today to learn more about offering paid leave for your employees.