Cashing out Sick Leave at Retirement

coxswain

We are thinking of allowing employees to cash out accumulated sick leave at retirement. If you have a policy like this, please let me know. I'm looking for the positives and negatives. Do you allow employees to accumulate sick leave up to a maximum or to infinity? How do you keep employees from coming in sick so that their accumulation continues untouched? Do you pay 100% of all sick leave or another percentage? Anything else would be greatly appreciated.

In a similar vein, does anyone provide a charitable donation in the employee's name in lieu of cashing out sick leave? What IRS regulations should I be aware of?

jbnunzio

We are a smaller non-profit with approximately 45 employees. We pay out sick time upon separation/termination as long as it is not due to a violation in the discipline policy. Our employees are allowed to accumulate up to 30 sick days a year. Upon reaching their limit, they either use them or lose them. We pay at 100% of the value. I can tell you that in talking to other HR professionals, this is a very rare policy.

sonny

Where I worked previously, you could accumulate up to 960 hours of paid sick leave and were paid cash for 50% at termination. (also a non profit) Where I work currently (municipality) you can earn up to 72 hours a year paid sick time. Once a year you can opt to roll over up to 57 hours of unused time to "payable sick" to be paid at termination (if not used prior, of course) or cash it out or any combination of the two (too complicated of a system if you ask me) there currently is no ceiling on how much you can accumulate, but I predict it may be coming. Right now we have no STD and we have no ceiling because people need to be able to cover the 6 month period til LTD kicks in.
I think that people who come to work sick are going to come to work sick regardless and not because they are thinking down the road that far to think of cashing it in. Hope this helps.

Margaret Morford

I designed a pretty radical program for one of my clients that goes like this:

Employees were required to bank at least two weeks (80 hours) of sick time. Once they had that in the bank, they could sell back up to 4 weeks(160 hours)of sick time at 50% value once a year on their aniversary date. We put a cap of 6 months of time that could be saved (the waiting period for LTD). This plan had several advantages. Employees quit using their sick time like unscheduled vacation because of a "use it or lose it" mentality. Almost all employees had a minimum of two weeks saved to cover them if they were seriously ill because they couldn't cash any sick time in unless they had at least two weeks banked. The company could reduce its liability to pay these days by redeeming them at half value. Allowing redemption only once a year on the employee's anniversary date spread the economic hit throughout the year (otherwise everyone would have redeemed at Christmas time). This would also take care of the huge hit the company would take if you paid these days out when someone left the company because employees were limited to cashng in no more than four weeks annually. Employees were not allowed to cash in any remaining sick days upon termination of employment. I'll be glad to discuss this with you if you like. Please feel free to call me.

Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
[url]http://www.thehredge.net[/url]

franfields

If they could cash in 4 weeks each year, how much sick leave were they given?

Margaret Morford

Employees accumulated 6 days of sick leave per year (half a day for each month worked). This meant that an employee had to work almost two years without missing a day in order to bank enough time to be able to sell back time. The result was that people began to save their days instead of using them for fear of losing them.

Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
[url]http://www.thehredge.net[/url]