The COVID-19 pandemic is significantly affecting small businesses and local economies across the country. On Sunday, the CDC updated its guidance to encourage all gatherings of 50 people or above to be canceled for the next eight weeks, and governors are calling on restaurants, bars, festival and sports venue owners, etc to switch to takeout or severely limit capacity at any one time. This pandemic will continue to harm small business for many weeks and months to come, and those who work for them.
With business impacted by concerns around the spread of coronavirus, and customers practicing social distancing, the last thing you want is your employees coming in when they’re sick. But some of your workers may feel like they have no choice, if they can’t afford to miss a week, or even a day, of work. Front-line workers who serve food, drive buses, care for children or the elderly and run cash registers are much less likely to be able to take time off if they are sick, increasing the risk of infecting so many others.
Despite the common perception that paid leave imposes unmanageable additional costs on small business owners, studies have shown that businesses have actually reaped benefits from the practice. And small business owners like you are increasingly seeing the value. With a paid leave policy, you can do more than just keep your people healthy. Offering family or medical leave demonstrates to employees that you care about their health and general wellbeing, and that you’re invested in their future at your business.
A paid leave policy lets you:
- Recruit and keep talented workers: Leave policies that help your employees balance their professional and personal lives, especially for major events like the birth of a child or caring for a sick relative, allows your company to attract and retain talented staff members.
- Increase productivity: While many small businesses owners fear that paid leave policies are too costly to manage, studies of workplaces with mandatory paid leave policies have consistently shown that most businesses do not suffer financially, but actually see positive results.
- Reduce absenteeism:One way to combat the persistent problem of absenteeism is to establish a sick leave policy. Many organizations have success with setting up a paid time off policy in which hours of paid vacation time are accrued as an employee works.
So how do you set up a paid leave program?
1. Find out what’s required under law
At the national level, under the Family and Medical Leave Act (FMLA), businesses with 50 or more employees are required to offer leave to employees to take care of their own health or that of a family member, including a new baby. However, the law does not require that employees continue to receive pay while on leave. State and local laws can add other requirements. To make sure you’re complying with the requirements of paid leave in your area, business owners are encouraged to consult with a legal expert or your state’s Office of Small Business. For city and county laws, see this guidance provided by the National Partnership for Women & Families
2. Think through your goals
Determine what you hope to accomplish with a leave policy. Whether your goal is to attract and keep talented employees, or to promote a healthier workplace, knowing the intent behind your policy will help you decide which types of leave to build into it. For instance, if your aim is to promote healthy workers, you might consider prioritizing paid sick days over vacation time.When deciding whether paid leave policies make financial sense for your business, remember that denying employees compensation for necessary time off might cost you valuable workers, or add unanticipated costs in the form of absenteeism or poor job performance.
3. Decide on the type and amount of leave you can offer
You can implement separate policies regarding paid leave for vacations illness, and other common events, but many business owners choose to simplify their systems by adopting a single PTO policy.
While not a comprehensive list, some of the most common options can be found in the table located here.
As the business owner, you must determine the number of days off to give your workers, and—if you prefer—the rate at which they can accrue those days off. According to the Bureau of Labor Statistics, only 1% of small business workers reported receiving 13 days or more of paid holiday leave, and only 2% received more than two weeks of paid sick leave. That means even workers who can take time off may not have enough leave to weather a 14-day quarantine on top of days with symptoms, or caring for family members with them.
4. Determine the rules that will shape your policy
Beyond complying with laws in your area, you have the flexibility to design the policy that best accommodates and incentives your workers. In addition to determining how many hours or days your employees can take off of work and—if applicable—at what rate that time will be earned, you can also decide whether and how much paid leave time can “roll over” from one year to the next, and if employees can “cash out” on unused paid leave upon leaving the company.
Remember that your policy can be flexible. To cut down on costs, you could consider taking a flexible approach with your paid leave policy. Options include offering the benefit only to full-time and not part-time employees, or extending it to employees once they’ve been with the company for a certain amount of time. You can also pro-rate leave allowances for part time employees. For example, if a part-time employee works 20 hours per week, compared to full-time employees who work 40, that part-time worker can access or accrue paid leave at 50 percent of the rate at which full-time workers access or accrue it.
5. Simplify administration with benefits software and online platforms
Tech tools and solutions designed to help business owners manage employee benefits have made setup and administration of paid leave policies much simpler. Online and software platforms like Justworks, Gusto, and Quickbooks, among others, can help you design your policy, offer it to employees, and manage time off requests.
It’s OK to ask for help
For more information on coronavirus, and to stay up to date on developments and ways to protect yourself and your business, make sure to consult trusted resources. The CDC has up-to-date information online, as does OSHA. Your state or local Department of Health and Human Services is also a great resource.
For more information on how to protect any paid leave policy from abuse, or suggestions on finding temporary workers if you need them, you can find more information on PCV’s Good Jobs, Good Business website. If you’d like additional guidance, free advisors can be found through places like our BusinessAdvising.org platform which connects small business owners like you with experienced pro bono business advisors who can offer advice on topics including HR, marketing, and other small business concerns. PCV also has a rebate program for small business owners in our lending portfolio who make improvements in the Good Jobs framework.
Small business owners are trying to find a way to make paid leave a reality all across the country. Bora Architects, a Portland-based architecture firm, successfully created a paid family leave program after finding that replacing an employee would be twice as expensive as offering paid time off. It’s good to see major employers like Apple, Google, Walmart and national restaurant chains like Olive Garden expanding paid leave and paid time off during this time. Even major sports leagues like the NBA are doing the right things and creating plans and funds to pay arena workers during the stoppage. Cities like New York City require 5 days of paid leave for all hourly workers; and U.S. Treasury is helping to advance funds to employers for paid sick leave.
If you are a small business who already provides paid leave or sick leave for your workers as part of your #goodjobsagenda, or is doing so in this public health emergency, we’d like to hear from you. Share your story with us on Twitter at @PCVtweets
If you are an HR professional interested in joining PCV’s first cohort of the Good Jobs, Good Business Advisors, please reach out to firstname.lastname@example.org.
PCV is continuing to gather resources to share with our small business community through this hard time; please watch our social media, and future newsletters for some that may be relevant for you.
About Pacific Community Ventures
Pacific Community Ventures is a nonprofit community development financial institution (CDFI) that envisions a world of thriving communities where everyone has a fair shake. PCV’s mission is to invest in small businesses, create good jobs for working people, and make markets work for social good. PCV achieves this mission through a combination of fair lending, free mentorship, skilled volunteerism, social impact measurement and management tools, and field-building research. You can follow PCV on Twitter at @PCVtweets.