Fundamentals of Employee Benefit Programs PART FOUR OTHER BENEFITS. 2005, Employee Benefit Research Institute Washington, DC

Transcription

1 Fundamentals of Employee Benefit Programs PART FOUR OTHER BENEFITS 2005, Employee Benefit Research Institute Washington, DC

2 Chapter 30 Leave Benefits Introduction Leave time is perhaps the most commonly provided employee benefit. In 2003, paid vacations were offered to 79 percent of employees in private establishments and paid holidays were offered to 79 percent (U.S. Department of Labor, 2005a). In December 2004, paid leave (defined as vacation, holiday, and sick leave) accounted for 6.4 percent of employer costs for total compensation (U.S. Department of Labor, 2005b). Paid vacations allow workers a specified amount of leisure time to use at their discretion. The length of vacation time generally increases with tenure. Leave policies provide time off for holidays; enable workers to take leave for military duty, funerals, and the birth or adoption of a child; and provide time off for workers who have short or long periods of illness (sick leave is discussed later in this chapter; also see the chapter on short- and long-term disability for more information). Holidays Paid holidays are not mandated by law, but employers perceive them as a necessary business expense. After an employee has completed a probationary period, he or she becomes eligible for paid time off on holidays. The most commonly offered paid holidays are: New Years Day. Memorial Day. Independence Day. Labor Day. Thanksgiving Day. Christmas Day. According to a Hewitt Associates LLC survey, workers were offered a median of nine paid holidays in 2000, whether or not they were exempt from the Fair Labor Standards Act (FSLA), the major federal law setting minimum wage and workweek standards (Hewitt Associates LLC, 2001) (FSLA nonexempt means hourly workers, while exempt means wage and salary workers). 1 Some employers also offer what is known as personal 1 FSLA exempts from its basic rules employees who require minimal supervision and Chapter 30: Leave Benefits 3

3 or floating holidays. An example of a personal holiday would be the employee s birthday, whereas a floating holiday is one that varies from year to year, e.g., Election Day. The median number of floating holidays offered in 2000 was two (Hewitt Associates LLC, 2001). When a holiday falls on a Saturday or Sunday, another day off is substituted, most commonly Friday or Monday. For FSLA nonexempt employees (hourly workers), a general requirement for employees to receive pay for a holiday is that they must work the day before and after the holiday. If an employee takes an unscheduled leave of absence, he or she must provide medical documentation or forfeit pay for the holiday (Rosenbloom, 2001). Vacation Leave Like paid holidays, vacation leave requires the employee to complete a service requirement before he or she becomes eligible for the benefit. According to the U.S. Bureau of Labor Statistics, in 1997, 87 percent of full-time employees in medium and large private establishments were required to meet a service requirement (U.S. Department of Labor, 1999) to qualify for vacation. Thirty-three percent had a service requirement of six months or less, and 43 percent had a service requirement of seven months to one year. Additional vacation leave time is granted with increasing years of service. According to Hewitt Associates LLC, after an employee has completed five years of service, the median number of days of vacation leave was 15; after 15 years, 20 days; and after 25 years, 25 days (Hewitt Associates LLC, 2001). Hewitt Associates LLC found no significant difference between exempt and nonexempt employees (hourly vs. wage and salary) with regard to the number of vacations days allowed as tenure increases. Employees accumulate vacations days on an annual basis. Hewitt Associates LLC found that, at year-end, 37 percent of employers do not allow exempt (wage and salary) employees to carry over unused vacation days, while 36 percent do not allow nonexempt (hourly) employees to carry over unused days (Hewitt Associates LLC, 2001). Thirty-two percent of employers set a maximum number of days that can be carried over by exempt employees, and 31 percent allow nonexempt employees to carry over unused vacation leave (Hewitt Associates LLC, 2001). Only 15 percent of employers allow employees (both exempt and nonexempt) to cash out unused vacation days at the end of the year. The number of unused days that may be cashed exercise much discretion in performing their duties. According to the U.S. Department of Labor, the exact terms and conditions of an exemption must related to the employee s actual duties and not be merely a designation of the position as nonexempt. The ultimate burden of supporting the actual application for an exemption rests with the employer. The act also exempts specific categories and businesses. 4 Fundamentals of Employee Benefit Programs

4 out is usually capped; the median number of days for exempt employees is five, and for nonexempt employees it is 7.5 (Hewitt Associates LLC, 2001). Some employers (10 percent according to Hewitt Associates LLC in 2000) allow employees to buy or sell vacation days. If this transaction is offered through a Sec. 125 Flexible Benefits Plan, the days can be purchased only after accrued vacation leave has been used. The law prohibits the employee from carrying over the purchased vacation days. The employer may reimburse the employee for unused days, provided the reimbursement is done before the end of the employer s tax year or the end of the plan year, whichever is earlier (Rosenbloom, 2001). Personal Leave Some employers offer personal days as time off for an employee to deal with personal situations that arise, such as needing to wait at home for a delivery. Employers offer this type of leave to reduce the number of unscheduled leaves of absence. In 2000, employers offered a median of two personal days to employees (Hewitt Associates LLC, 2001). Military Leave Military leave is granted to individuals who are in the National Guard or reserve component of the armed forces and who need leave time to maintain their military status. According to the U.S. Bureau of Labor Statistics, 47 percent of full-time employees were eligible for paid military leave in 1997, with an average 15 days allowed (U.S. Department of Labor, 1999). In times of war (such as the Persian Gulf War) or military conflict (such as the 1999 Kosovo air strikes), the Uniformed Services Employment and Reemployment Rights Act (USERRA) of 1994 states that veterans, reservists, and National Guard members who are on active duty or in required training must be allowed up to five years of excused absences for their military service. This leave is allowed so long as advance notice is given, when possible, and the employee returns to work in a timely manner (Rosenbloom, 2001). Sick Days Nearly all employers provide sick days (92 percent in 2000, according to Hewitt Associates LLC). Sick days are a benefit that allows the employee to call in sick for a minor illness such as a cold or flu. For illnesses that last longer than two weeks, some employers provide short-term disability insurance (see chapter on disability insurance). Half of employers surveyed by Hewitt track the usage of sick leave days by both exempt and nonexempt employees. Chapter 30: Leave Benefits 5

5 Paid Time Off Banks To assist employees in balancing work/life conflicts and reduce their growing use of unscheduled leave, employers are increasingly turning to paid time off (PTO) banks. In short, a PTO bank combines separate vacation, personal, and sick leaves into one comprehensive plan that allows the employee the flexibility to use leave for any reason. This eliminates the stress an employee may experience when, for instance, he or she feels obliged to take sick leave inappropriately to deal with a personal situation such as attending a parent-teacher conference. According to Hewitt Associates LLC, 18 percent of employers offered a PTO bank in 2000 (Hewitt Associates LLC, 2001). In 2000, nearly 90 percent of employers surveyed reported that the PTO bank was effective in helping to attract and retain talented employees. When making the transition from traditional leave plans to a PTO bank, nearly all employers provided the same amount or more vacation leave. With regard to sick days, 60 percent of employers that did not offer health care coverage reduced the number of sick days employees were entitled to before implementation of a PTO bank (Hewitt Associates LLC, 2001). Among these employers, a median of 15 PTO bank days were provided for an employee (exempt and nonexempt) with one year of service; after five years of service, 20 days; after 15 years of service, 25 days; and after 25 years of service, 30 days (Hewitt Associates LLC, 2001). Nearly all employers with a PTO bank allow employees to carry over unused PTO bank days, but most limit the number of days that can be carried over into the next year. Family and Medical Leave Act (FMLA) of 1993 FMLA is a federal law that requires employers with 50 or more workers to provide employees with leave for certain medical and family-related reasons. It took effect on Aug. 6, 1993, and is administered by the U.S. Department of Labor. It covers private employees, state employees, and federal government employees who work for an employer with 50 or more employees within 75 miles of a given work place (Society of Human Resource Management, 2000). The law requires that, to be eligible for FMLA leave, an employee must have worked at least 12 months for the employer and for 1,250 hour in the past year. Employees are allowed to take up to 12 weeks of unpaid job-secure (or job-equivalent) leave during any 12-month period for the following reasons: Birth of a child. Adoption or foster care of a child. Caring for a spouse, child, or parent with a serious health condition. The serious health condition of the employee. 6 Fundamentals of Employee Benefit Programs

6 Leave for the birth or placement of an adopted or foster child must be completed within a one-year period from the date of the birth or placement of the child. A serious health condition is defined as one requiring inpatient care at a hospital, hospice, or residential medical care facility, or continuing care by a doctor of medicine or osteopathy (Society for Human Resource Management, 2000). FMLA allows employees to take the leave intermittently (such as a day here or there as needed) or use the leave to reduce the work week or work day. Intermittent leave for the birth or adoption of a child must be based on an arrangement worked out between employer and employee. Intermittent leave related to a serious health condition does not need the employer s approval provided it is medically necessary. FMLA allows an employer to require that an employee use up all available paid leave (e.g., vacation, personal, sick, or family) before taking unpaid leave. The employee is required to give 30 days notice prior to taking the leave or as much notice as is practical. Bibliography American Compensation Association. Total Rewards Guidebook: Paid Time Off Banks. Scottsdale, AZ: American Compensation Association, Hewitt Associates LLC. Survey Findings: Managing Time Off 2000/2001. Lincolnshire, IL: Hewitt Associates LLC, Rosenbloom, Jerry S., ed. The Handbook of Employee Benefits: Design, Funding, and Administration. Fifth edition. New York: McGraw-Hill, Society for Human Resource Management. SHRM 2000 FMLA Survey. Alexandria, VA: Society for Human Resource Management, U.S. Department of Labor. Bureau of Labor Statistics. Employee Benefits in Medium and Large Private Establishments, Washington, DC: U.S. Government Printing Office, National Compensation Survey: Employee Benefits in Private Industry in the United States, Washington, DC: U.S. Government Printing Office, 2005a.. Employer Costs for Employee Compensation: December USDL: March 16, 2005b. William M. Mercer. Work/Life Initiatives New York: William M. Mercer, Inc., Chapter 30: Leave Benefits 7

7 Additional Information Alliance of Work/Life Professionals 515 King Street, Suite 420 Alexandria, VA (703) American Benefits Council 1212 New York Ave., NW, Suite 1250 Washington DC (202) Society for Human Resources Management 1800 Duke St. Alexandria, VA (800) Fundamentals of Employee Benefit Programs