Paid Sick Leave for Hourly Workers – Benefit or Backfire?

Guest blog contribution from Colleen Daigle, Product Marketing Manager at Kronos.

State legislators have recently approved a bill to make Connecticut the first state in the nation to guarantee paid sick leave for hundreds of thousands of hourly service workers. Whether you are employed in Connecticut or not, this landmark ruling marks what some promise to be a groundbreaking victory for proponents of this legislation.

The scope of this bill covers hourly service workers (i.e. wait staff, cooks, cashiers, hair stylists, security guards) at companies with 50 or more employees. Exempt from this bill are manufacturing companies, nonprofits, day laborers, independent contractors, and temporary workers. However, those that do qualify (an estimated 200,000 to 400,000 workers) are entitled to earn one hour of paid sick time for every 40 hours worked, with the number of days capped at five per year. As of today, Philadelphia, Seattle, and Massachusetts are proposed to be the next states that potentially adopt this mandate.

Advocates of the bill see this as a first step in a new progression of benefits for hourly workers. According to the National Partnership of Women and Families, over 40 million workers in the US don’t have a single paid sick day off throughout the year. Based on this ruling, hourly service employees in Connecticut no longer have to risk their job or lose pay because he/she (or a family member) is sick. This will also help control the spread of illness, essentially preserving labor productivity, (we don’t want service workers working when they are contagious, right?).

However, in a time when employers are strategizing on how to bounce back from the worst economic recession in the history of our nation, many wonder if approving a bill like this makes fiscal sense.

Minimum wage in Connecticut is $8.25 an hour. With five allotted paid sick days per year, $330 will now need to be reserved annually for an employee’s sick time. Hypothetically, for a chain restaurant that employs 4,000 employees, this bill will add roughly $1.3 million a year in labor cost. Every additional employee added to the workforce will only increase this cost, so where is the incentive to hire? Or, is this rather an issue of employee and family rights (are we really to assume that hourly workers and their families are not susceptible to illness?).

While one cannot disagree that the concept of paid leave will give employees more options when illness strikes, there is no doubt that the bill will significantly increase labor costs for organizations. Employees could also be adversely affected by this legislation if companies opt to decrease wages or cut jobs in order to offset the cost. I wonder if simply tweaking a company’s attendance policy allowing employees to pull from a company-wide paid sick pool would have been a more practical and cost savings solution for organizations.

Whether your organization is required by law, or not (yet) required by law, to pay hourly employees for sick time, one should still have means to manage employee leave. Connecticut may be the first to adapt this mandate, but if it trickles down to other states, will your company be prepared for the potential changes that could affect labor costs and compliance risks?

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