Small Businesses Face Paid-Time-Off Challenges

Generous paid leave benefits can yield talent attraction and productivity dividends

By Andy Roe June 9, 2015

The allocation of paid sick and vacation days for employees has long been a dilemma for employers and HR managers, especially for small businesses.

How many days do you give? Do they carry over from year to year? Should you just replace sick and vacation time with a combined paid-time-off (PTO) bank? How much vacation time do you need to offer to attract new employees? At what point does the issue of employees taking too much time off detract from your business?

The answers to these questions, of course, depend on a number of factors—the size of your organization, the type of work being done, the flexibility of a given department, the ability to do work from home and the competition you face when hiring.

The Data

To start breaking this subject down, let’s look at proprietary survey data provided to SurePayroll by small business owners across the U.S., showing how they handle sick and vacation days. U.S. companies with under 100 employees were surveyed in January 2015. When it comes to sick days, small business owners said:

  • 30 percent offer less than five days.
  • 16 percent offer exactly five days.
  • 14 percent offer six-10 days.
  • 32 percent offer no sick days, only paid time off.

*9 percent offer unlimited sick days. Many small business owners said that, when running a small operation, having just one person out for more than a day can put a strain on the company. They simply don’t have the backup to accommodate an individual being out for an extended period of time. That would explain why 46 percent offer five days or less of paid sick time.

Conversely, many workplaces have realized they really don’t want people coming to the office when they’re sick. While employees may think they’re “toughing it out,” many employers believe they’re just putting everyone else at risk, causing more missed time and decreased productivity. Therefore, one in 10 small business owners are telling their employees, “Take as many sick days as you need; we don’t want your germs at the office.”

Increasingly popular, as well, is the elimination of sick days in favor of a paid-time-off bank. No explanation necessary—if you can’t make it in, you can’t make it in; just mark it down as PTO. Some employers feel this limits confusion and avoids unnecessary excuses or made-up illnesses.

When it comes to vacation days, small business owners report the following:

  • 46 percent offer less than 10 paid vacation days.
  • 30 percent offer exactly 10 days.
  • 17 percent offer 15 days.
  • 8 percent offer more than 15 days.

The trend among smaller employers is clearly towards the lower end of the spectrum. An astounding 76 percent offer only 10 days or less of paid vacation time.

Making Up the Difference

While 10 days off, or even less, may seem severe, often small businesses have a more flexible relationship with employees. They allow them to work from home, for instance, or leave early for personal and family obligations, because it’s hard to escape accommodating employee requests when there’s only a few people in the whole company.

At the same time, it’s difficult to maintain productivity in a small business environment when people are not working. There are frequently no backups, and money may be lacking to hire freelancers.

For those running a business in an area where there isn’t intense competition over job candidates, this may not affect them greatly. However, those who find themselves competing for top talent had better offer an attractive benefits package or they’ll lose out.

Aside from attracting talent, productivity is also an issue. People need breaks and the ability to recharge if they’re going to do their best work.

This is the dilemma that small businesses, in particular, face. Do they stretch themselves thin to give their employees more time off and more time to recover from a cold or flu? Or, in an effort to do more with less, do they continue to maintain fairly strict sick and vacation day policies, and make it up to employees with other benefits—flexible work schedules, more responsibility in their roles, greater job security?

It may come down to a balancing act. But employers who are able to provide more generous paid leave benefits will likely find that doing so yields talent attraction and productivity dividends.

Andy Roe is the general manager of SurePayroll Inc., a Paychex company. SurePayroll is a provider of online payroll services to small businesses nationwide, and compiles data from small businesses through its Small Business Scorecard optimism survey. You can follow Roe on Twitter @AndrewSRoe.

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