The issues concerning sick leave come down to, for the most part, two big questions:
• What controls should an entity have in place to make sure that sick leave is not being abused? No employer wants people staying home when they’re only sick of working, especially when that means that someone else in the organization has to put in overtime.
• And how do you manage the process that permits state or local employees to accrue sick days from year to year and then turn them in for cash value when nearing retirement?
In terms of the abuse of sick days, entities have tried several different mechanisms. One of the most common is requiring a doctor’s note in order to take a day off. The number of sick days that require a note varies from place to place. The concern here is that this requirement can damage employee morale by suggesting to employees that they are not trusted.
One solution: Gather the appropriate data and only target employees who have demonstrated that they might be abusing the use of their sick leave. To do this, a government would need to have an automated system to track leave and attendance. Virginia is working toward that kind of technology, and Sara Wilson, director of the state’s Department of Human Resource Management, argues that this kind of data can be used to create an even more efficient sick leave process. For instance, it can be used to ferret out employees who call in sick on an unusually high number of Mondays and Fridays or some very specific events during the year, like opening day of the local baseball team or the first day of hunting season (which Virginia has identified as a particularly big day for sick leave).
Much of the concern about sick days, however, centers on the other side of the equation. When people are allowed to bank unused sick days, governments can wind up with large unfunded liabilities, particularly when accumulated sick days are added to accrued vacation days. “No matter what the economic climate, these numbers are staggering,” says Pilar Turner, mayor of Vero Beach, Fla. Over the past five years, her city has paid out $2 million for unused vacation and sick days. The most recent comprehensive annual financial report lists the liability for these items as $2.8 million, with a sizeable piece of that likely due in three to five years as baby boomers retire -- a heady amount for a city with an ad valorem tax base of $4 million a year. Turner argues that these numbers are not sustainable and that vacation and sick pay were never intended to be a retirement bonus. She wants the accrual practice ended for new hires and management.
It isn’t just smaller cities that are accumulating this kind of debt. As of the end of fiscal 2010, Massachusetts had accumulated a long-term sick leave liability of some $225 million, a number that’s rising steadily.
There’s a further fiscal complication. In a number of places, when an employee cashes in accumulated sick days in the last year of employment, that amount is added to ordinary compensation for the calculation of pensions. The practice can “pad out retirement benefits,” says professor Thom Reilly, director of the San Diego State University School of Social Work and author of Rethinking Public Sector Compensation.
The problem is worse in the public sector than the private sector. The average accrual of sick days is about eight days in the private sector compared to about 11 days in the public sector, according to Reilly. Moreover, public-sector employees may carry over sick leave time until they leave the job and then cash it out, whereas most private-sector employees don’t have that opportunity.
As strained budgets expose heretofore hidden costs, these issues are beginning to gain attention. They aren’t necessarily the kind of fight government leaders want to start with unions and employee organizations.
Of course, there are some relatively straightforward remedies that can be explored by states, cities and counties. Reilly offers a few:
• Do not allow unused hours to be calculated for retirement. States could basically say, “in times of reduced revenues and for the sake of fairness in public pay, that is not allowed.”
• Limit the amount of hours employees accrue per year and have a set number they can carry over.
• Maintain payouts but structure them with a nominal amount paid annually instead of accumulating it all until retirement.
• Work with employees to adopt more sustainable sick leave policies -- ones that ultimately help the employees and the organization.
