How Paid Leave Affects Your Business

When it comes to employee benefits, one particular type of benefit may not be on your company's radar: paid leave. Paid vacation, also known as paid time off, is an important part of a comprehensive employee benefits package. The ability to take paid leave is highly valued by many employees, making it a critical factor in employee satisfaction.

Paid leave may seem like an expensive benefit, since you're essentially paying your employees not to go to work. In reality, paid leave can be incredibly beneficial to employers, helping to increase productivity and employee retention. In this way, paid vacation can have a positive impact on your bottom line.

What is paid vacation?

Paid vacation is any time an employee takes off from work, but the company pays them as if they had worked regular hours for the day. Companies can set up paid leave in a variety of ways, from granting certain categories of paid leave (such as sick leave or bereavement leave) to allowing an employee to take a certain number of days off for any reason.

Most employers offer paid leave for holidays, including New Year's Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving (and the day after Thanksgiving), and Christmas. Employers are free to offer additional paid leave for holidays, such as Martin Luther King Day or a state-specific holiday that is important to employees.

In addition to vacations, many employers offer different types of leave for their employees, such as sick leave, bereavement leave, personal leave, and vacation time. These types of leave can be granted individually (e.g., 5 days off per calendar year for sick leave) or as a block of time. The advantage of giving employees a block of paid time off, rather than setting a specific number of days for a leave category, is that it is less complicated to administer and more valuable to employees. For example, an employee who is rarely sick may prefer to use his or her paid time off for vacation, while an employee with a chronic illness may need more days for illness than for vacation.

Employers should be aware that there are certain types of paid leave they must grant under federal or state law. Employees should be granted paid time off for jury duty, with pay equal to the difference between their regular salary and the amount they receive for jury duty. Companies must also grant leave to employees to fulfill their military reservist training obligations; however, in most cases, such leave is not considered paid time off unless an employee elects to use vacation time.

When companies grant paid leave to their employees, it is usually on an accrued leave basis. In this system, employees accrue vacation based on the number of hours worked or years of service. Companies that offer paid leave often require employees to be employed for a certain period of time (e.g., six months or a year) before they are eligible for the benefit. There is usually a cap on the number of vacation days that can be accrued. Employers should establish policies that describe eligibility requirements, how employees can request paid leave, whether leave can be denied, and how unused paid leave time will be handled. In some states, companies are required to compensate employees for unused paid leave.

Employers with 50 or more employees should also keep in mind that they are required by the Family and Medical Leave Act (FMLA) to provide their employees with up to 12 weeks of unpaid, job-protected leave. This leave can be used for a number of reasons, such as the birth or adoption of a child or to care for a sick family member. It is separate from paid leave. When an employee requests leave under the FMLA, a company should carefully review its policies and procedures to ensure they comply with federal law.

How paid leave affects your business

Paid leave may be a costly option for businesses, but in most cases, the benefits of paid leave outweigh the costs. Payroll costs are typically fixed, so employers who offer paid leave typically don't incur additional expenses from month to month. Instead, they often reap the benefits of paid leave for their employees, such as a happier, more productive workforce and lower employee turnover.

Improved morale

Typically, employees don't want to feel like they're just a cog in the wheel or that their employer doesn't care about them as people. This perception can be difficult for employers to combat, especially in high-stress jobs. One way employers can show their employees that they consider them a valuable part of the team is by offering paid leave. In return, employees show higher morale and loyalty - which can have countless benefits for a company.

Work-life balance is a critical component of employee satisfaction. Paid leave is one way to achieve this balance, as it allows employees to take time off when needed without having to decide if they can afford it. Offering paid leave can reduce employee stress. When an employee has the option to take paid leave to do something that's important to them - from taking their child on an outing to visiting a friend to staying home to rest and re-energize - they feel like they have more control. As a result, they tend to have more positive feelings about work and higher morale.

When employees are happy, they tend to increase their performance and creativity. The quality of their work improves, and they pay more attention to detail. Higher morale also improves workplace safety, as employees are less distracted and more focused on safety rules and the task at hand. These are all incredibly positive impacts that paid leave can have on your business.

Higher productivity

Employees who are offered paid leave also tend to be more productive when they are at work. Being able to take time off from work without having to worry about the financial aspect of the leave allows employees to take care of personal business outside of the workplace. The result is fewer distractions while at work, leading to higher productivity.

Higher productivity levels are a natural result of paid leave, as both employees and employers find that their personal lives eventually spill over into their work lives. Often, important calls and appointments need to be taken care of during business hours. When you give your employees paid time off to take care of personal matters, they have less to worry about while they're working - or thinking about them during work hours. Overall productivity usually increases as a result of giving employees paid time off.

Increased employee retention

Replacing employees is costly, from advertising to interviewing to training. Studies have shown that turnover costs about 20% of an employee's annual salary. This cost is often far greater than the alternative of providing paid leave to current employees.

Employees value paid leave. Giving your employees paid leave can increase employee satisfaction and morale, which ultimately leads to better employee retention. Employees who are satisfied with their jobs and benefits are less likely to quit, and paid leave is an important component of overall employee satisfaction.

Importantly, paid leave has become a standard benefit in many industries. If a company does not offer some form of paid leave, the likelihood that its employees will move to another employer increases. Paid leave is a key competitive advantage when it comes to attracting and retaining employees.

Fewer unplanned absences

When employees have the ability to take paid leave when they need or want it, the number of unplanned absences from work decreases. They can more easily schedule appointments, meetings with contractors, or even days off with family or friends when they have a bank of paid leave days to use. While there are still sick days and emergencies, when employees have the ability to schedule paid leave, the overall number of unplanned absences decreases. This gives employers greater predictability and the ability to schedule work based on employee presence in the office. Offering paid leave can help reduce the costs incurred when a shift cannot be filled or a meeting must be rescheduled because a key employee is out of the office.

Setting up a paid leave program for your business

Setting up a paid leave program requires a certain amount of forethought and management, which can be a daunting task for many employers. Because paid leave can have an incredibly positive impact on a business, it is often necessary to keep a company growing or to maintain a competitive advantage.

A benefits consulting firm can assist you with the legal, financial and administrative aspects of establishing a paid leave program for your business, from creating policies to implementing the program. Contact The Business Benefits Group today to learn more about paid leave for your employees.

Related Blog: Why Paid Leave is Worth the Cost