For small and growing businesses, President Obama’s plan to require employers to provide up to seven paid sick days a year is nothing to sneeze at.
The plan — teased in a LinkedIn post by presidential senior adviser Valerie Jarrett prior to the president’s State of the Union address on January 20 — follows health care, minimum wage, and overtime initiatives that may make running a small business more costly.
In addition to the president’s call on Congress to pass a law mandating paid sick leave, the administration also intends to use federal funding to help states and municipalities develop sick-leave programs.
For years, small businesses have tended to use informal policies to address absenteeism. “If one of the guys is sick and needs time to stay home… I do not dock their pay,” says the owner of a boutique marketing design firm in Ohio who requested anonymity. “On the flip side, there are times when we have to put in extra hours to get the job done, for which there is no overtime,” he says.
Fifty-two percent of workers in firms with one to 99 employees had access to some form of paid sick leave, according to a recent Bureau of Labor Statistics study. But the bureau also notes that paid leave varies greatly by occupation, with the lowest access occurring among construction and agricultural workers. Further, access varies by race, with whites and blacks virtually tied and Hispanics trailing, according to a study from the Institute for Women’s Policy Research.
Studies of regulations already in place at the local and state levels highlight the challenges of formalizing sick-leave policies.
An analysis of the City of San Francisco’s 2006 first-in-the-nation paid sick-leave ordinance (PSLO) addresses the relative costs, administrative requirements, and competitive issues that resulted.
Ten of the 26 employers surveyed altered vacation time, raises, or bonuses once the regulation was enacted, according to The Urban Institute, which conducted the study. Some converted vacation policies to paid time off to avoid having to track vacation and sick leave separately. Others complained that businesses just over the city line not covered by the regulation put them at a competitive disadvantage in pricing and bidding.
By the time The Urban Institute completed its study, San Francisco had also raised its minimum wage to .51 higher than the federal rate and had enacted a new health insurance mandate. “Most employers were quick to say that of the three, the PSLO was the least costly to their bottom line,” the study states. “However, in a city where labor cost increases were piling up, the PSLO did not help.”
Another study of a 2012 sick-time mandate in Connecticut, conducted by Spotlight on Poverty and Opportunity, paints a somewhat rosier picture. The authors found that about two-thirds of the 251 employers they surveyed reported either no increase in costs or an increase of less than two percent. Also, 60 percent of employers reported that record-keeping was “very easy” or “somewhat easy” and that, on average, workers used only about half of the paid sick days available to them.
Proponents of paid sick leave believe that employers can manage costs by trading off benefits, and that paid days off allow workers to remain healthy and productive, care for family members, keep communicable illnesses out of the workplace, and maintain positive morale.
Mike Rose, owner of Washington Properties, a Medina, Ohio property management firm, is optimistic that small and growing businesses will be able to navigate new sick-leave regulations successfully.
Rose currently offers his seven employees four paid personal days off on top of official holidays. When one of his employees was seriously ill and gone for months, everybody jumped in to pick up the slack, he says. “You just work around it.”
The costs of a new mandate can always be rolled up into pricing without affecting business, he believes. “People are willing to pay a bit more” if they know that a business offers a high-quality product and is consistently responsive to its customers, he says — which business owners may want to aim for anyway.
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