Paid Sick Days and Your Small Business:
Highlighting Cost Effective Management Strategies
April 2013
Small Business Majority
1101 14th Street, NW, Suite 1001
Washington, DC 20005
(202) 828-8357
www.smallbusinessmajority.org
Introduction
Many small businesses are wary of government requirements such as proposals for mandatory paid
sick days (PSD). A key concern is whether a PSD policy will add administrative burden and red tape.
However, most businesses already manage a paid sick days program. Those that do not can add one
without great difficulty, as they already track the elements essential for assessing sick days accrual and
utilization.
Paid sick days accrue based on the number of hours an employee works and the time they take off,
which every business already tracks because the data is used to determine pay—both for hourly and
salaried workers.1 Manipulating this data is simple. There are readily available tools to track paid sick
days via several systems businesses are already using. QuickBooks,2 the most common accounting
software for small businesses, has a system for tracking paid sick days. ADP and Paychex, the two most
common payroll providers, offer paid sick day management systems.
Several cities and states have passed PSD laws in recent years: New York City, San Francisco, Seattle,
Washington, D.C. and Connecticut. This memo demonstrates how easily a small business can manage
these new regulations, and then identifies resources available for administering PSD policies in a
simple and cost-effective manner consistent with the law.
Overview of the Laws
Laws on paid sick days are made up of a few essential elements that are important for our analysis.
First, they define which businesses are impacted by any mandates. Second, they set the maximum
number of sick days that can be accrued (although employers may be more generous than the law, if
they wish). Third, they indicate the rate of accrual. The laws that this memo explores are substantially
similar, with modest differences.
San Francisco
Seven years ago, San Francisco became the first
city in the United States to approve a paid sick and
leave ordinance. According to a 2009 report by the
Urban Institute, after the ballot initiative was
approved, there were 115,800 new employees in
the private sector that were newly compensated in
the event of absence or during leave.3 The San
Francisco Paid Sick Leave Ordinance (PSLO)
requires an employer to offer any employee that
has worked at least 56 hours in a calendar year the
ability to accrue time for sick leave.
Business sizes included:
1-9 employees,
9+ employees
Maximum number of sick days:
5 (1-9 employees)
9 (9+ employees)
Accrual rate:
1 hour of earned sick time for every 30
hours
The San Francisco PSLO requires that businesses with nine or more full-time-equivalent employees
(FTEs) be eligible to accrue up to 72 hours of paid leave annually. For small businesses with fewer than
nine FTEs, the cap is set at 40 hours. In both instances, an employee earns one hour towards their
maximum cap after every 30 hours worked.
1
This memo does not directly discuss Paid Time Off policies (“PTO”)—policies that provide a set number of days off for each
employee and allows them to use these days either as vacation or sick days. However, PTO is tracked in the same way using
the same tools as paid sick days do.
2
Quickbooks’ market penetration is around 90%. http://money.cnn.com/galleries/2012/technology/1204/gallery.most-admiredintuit.fortune/4.html
3
Walter Boots, Shelley, Karin Martinson, and Anna Danziger. Employers' Perspectives on San Francisco's Paid Sick Leave
Policy. Tech. no. 12. Washington, D.C.: Urban Institute, 2009. Print.
© 2013 Small Business Majority
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April 2013
Seattle
Nearly 200,000 workers found new protection
when Seattle implemented a PSD law.4 Like San
Francisco, the requirement in Seattle sets the
accrual and cap limits based on the size of one’s
business. However, the city chose to group
businesses in different pool sizes. There are three
categories: 2-49 employees; 50-250 employees;
and 250+ employees.
Business sizes included:
5-49 employees
50-249 employees
250+ employees
Maximum number of sick days:
5 (5-249 employees)
9 (250+ employees)
The Seattle law gives a longer wait period before
an employee has access to accrued sick days.
Although accrual of sick days begins immediately,
an employer is not required to provide access to
sick days until an employee has been employed
for 180 days or more. This nearly doubles the
wait-period of the San Francisco PSLO.
Accrual rate:
1 hour for every 40 hours (5-249
employees)
1 hour for every 30 hours (250+
employees)
Washington, D.C.
Washington, D.C. has taken a different approach
than both cities on the Pacific coast. D.C. set out
to build upon its 1991 Family and Medical Leave
Act (FMLA) while drafting the Accrued Sick and
Safe Leave Act of 2008. Under the law, an
employee must first be eligible under the criteria
set forth by the FMLA law before they can be
considered to earn paid sick and/or safe leave.
Further, the employee must be employed by their
company for one year and work 1000 hours
during that time to be eligible.
Business sizes included:
1-24 employees
25-99 employees
100+ employees
Maximum number of sick days:
5 (40 Hours)
Accrual rate:
1 hour for every 87 hours worked (1-24
employees)
1 hour for every 47 hours worked (25-99
employees)
1 hour for every 37 hours worked (100+
employees)
Under the law, employers are required to log both
the background of employment and their
employees’ current eligible accrual hours. The
accrual caps under this policy add additional
recordkeeping responsibilities, as measurements
are required to be converted from hours into days
for a D.C. business owner to comply with the law. In San Francisco and Seattle, business owners are
able to track a pool of hours and subtract the ones an employee was not present for. This method can
be especially convenient in the event of tracking a half-day, or if an employee arrives late after caring
for a sick child.
4
Seattle Times, 2/17/2013
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Connecticut
Connecticut's law applies only to businesses with
50 or more employees, and allows an employee to
earn one hour of paid sick leave for every 40 hours
worked.5 The accrual process only begins after six
months of employment with the same employer.
Business sizes included:
50+ (service employees only)
Maximum number of sick days:
5 (40 Hours)
Connecticut’s law is quite narrow in sector. It
applies only to service workers as defined under
the law; it includes workers that are paid on an
hourly basis, who commonly work in businesses
such as restaurants, child-care centers, hospitals and transportation. Because their hours are tracked
closely by employers, hourly workers are the most easy to handle for the purposes of PSD accrual and
utilization. The payroll data employers already have on file can easily be re-purposed for PSD tracking.
Accrual rate:
1 hour for every 40 hours worked
New York
The Earned Sick Time Act is law in NYC. The
legislation includes all employees that have
worked at least 80 hours during a calendar year,
and every business will be required to offer 5
unpaid sick days annually.
Business sizes included:
20+ employees (as of April 1, 2014)
15+ employees (as of Oct. 1, 2015)
Workers in smaller businesses entitled to
5 unpaid sick days
The law will begin by imposing a requirement of 5
days maximum on businesses with more than 20
employees, accruing an hour for every 30 hours.
The requirement will eventually apply to
businesses with more than 15 employees.
Maximum number of sick days:
5 (40 Hours)
Accrual rate:
1 hour for every 30 hours worked
5
An Employers’ Guide to Connecticut’s Paid Sick Leave Act. Issue brief. Hartford: Siegel, O’Connor, O’Donnell & Beck, P.C,
2012. Print.
© 2013 Small Business Majority
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Existing Software and Service
Opponents of PSD policies often raise the objection that complying with such policies is difficult for
small business owners. The basis for this concern is the absence, at many small businesses, of a fulltime human resources department capable of tracking paid sick days. This memo will now explore how
much time small business owners actually spend managing this issue.
A 2010 report published by the
NFIB—traditionally an opponent
of PSD policies— demonstrates
the relative ease of administering
a PSD program.
A 2010 report published by the NFIB—traditionally an
opponent of PSD policies— demonstrates the relative ease
of administering a PSD program. NFIB puts the total cost
associated with administering a PSD policy $400 a year.
Broken down further, NFIB members reported that on
average, administering such a program takes them merely
10 hours a year, and costs about $40 per hour.6 These
estimates provide a useful benchmark for the maximum
administrative cost associated with a PSD program.
QuickBooks is the most commonly used small business accounting software program. It offers a simple
function to manage paid sick days accrual and utilization, through QuickBooks Professional and
Enhanced Payroll. This program costs $400 annually, or $34 per month for all recordkeeping related
to human resource needs.7Most owners would likely use some or all of the additional tools included in
this package, such as tracking accrual and utilization of vacation days. Some of the cost for this
program could therefore be ascribed to these other tools, reducing the overall administrative cost
associated with PSD accounting.
To the right is a screenshot of the tracking wizard
provided by QuickBooks. As you can see, it
accounts for all the elements of a potential plan,
including accrual, caps on total days accrued, when
utilization can begin and actual usage.
While the Intuit QuickBooks Software Bundle
makes the process manageable, it is not the
simplest system. We can assume there is cost
associated with learning the program and
administering it. Fortunately, there are even
cheaper and more hands-off tool services to help
ease these burdens, offered by payroll companies
like ADP and Paychex.
The basic service that a small business can use
directly through Paychex is referred to as the Small
Biz paperless plan. Although an exact rate for this
service could not be obtained, estimates range from
$130 to $155 per month for a business of at least 10 employees. 8 The service includes weekly payroll
and Paychex vacation tracking. The tracking covers both paid sick days and leave for employees.
Similarly, ADP offers a service known as “ADP Compliance with Pay Convenience,” which is much
greater in cost due to setup fees and additional payroll functions. Depending on the level of assistance
an employer needs in setting up and using their service, however, ADP may be a better option for the
6
Chow, Michael J. The Economic Impact of H.R. 2460 and Mandatory Paid Sick Leave on U.S. Small Businesses. Rep.
Nashville: National Federation of Independent Business Research Foundation, 2010. Print.
7
To process payroll through this software then a $22.00 monthly fee would be applied for the service based on a business of 10
employees.
8
Conversation with Paychex representative. 2/8/2013
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responsiveness and directness of its representatives. Getting quotes for ADP services has been noted
by some as simpler and faster than obtaining such information from Paychex.
Internal Management
Every business tracks the total number of hours its employees work. This is necessary to determine
how much to pay those employees. These detailed records are all a business needs in order to
determine how many paid sick days an employee has earned and how many he or she has used. Put
differently, every company tracks precisely how many hours an employee works and when they take
time off, and this alone is sufficient to assess both sick day accrual and utilization.
This data may be kept in an Excel spreadsheet or in a Word document, and with this raw data, an
employer can quickly and efficiently determine accrual and utilization of paid sick days. There are a
number of free products available to facilitate this process.
Timesheets.com is notably accurate and easy to use. This web-based free software offers four templates
to track an employee’s hours in and out of the office. Each template comes equipped with formulas to
automatically calculate regular time-off totals and accruals. Further, these templates can all be utilized
in a format compatible for processing payroll in QuickBooks or general accounting software. The
greatest benefit of this freeware is that its stand-alone capabilities can produce clear results while
simultaneously working well on related platforms.
Conclusion
Businesses already track the raw data associated with managing a PSD program. By utilizing
affordable resources that can assist in compliance with new PSD requirements, employers are able to
administer a formal policy in ways that are not burdensome. As a result, there is no reason to assume
substantial administrative or personnel cost would be associated with implementation of a PSD policy.
In addition, evidence has consistently shown that employers benefit from such requirements, as they
experience increased stability, retention and loyalty of their workforce. 9
9
http://www.clasp.org/admin/site/publications/files/Business-Voices-on-Ease-of-Implementation-of-Sick-Days-DC-and-SF.pdf
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