How to Calculate Sick Leave Accrual

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Sick time is time an employee takes off from work when they’re ill or need medical attention. In most cases, sick leave accrual works the same way that other accrual systems do by giving employees a specific number of sick hours for every hour of work they complete. 

For example, say an employer gives employees one hour of sick leave per 30 hours worked. An employee who typically works 40 hours a week could get up to about 69 hours of sick time each year. This is equal to around eight or nine days of sick time annually.  

However, many states and countries have specific regulations regarding sick time. Therefore, it’s important for employers to know how to calculate sick leave accrual properly to comply with local law. Plus, it’s usually a good idea for employers to have a sick leave policy in place, regardless of the law, and knowing how to calculate sick time can help businesses create and adhere to their policy.

Get Paranoid About this One Thing

The Bureau of Labor Statistics (BLS) notes that 79% of American workers were entitled to paid sick leave. Other workers get unpaid sick leave or don’t have access to any employer sick leave policy. 

Although the federal government does not have regulations for sick leave, states can define their own laws. In some areas, cities and counties even have their own paid sick leave policies that vary from state requirements. 

In summary, employers must know their state’s requirements for sick leave. This includes:

  • Whether the employers must pay an employee for sick leave
  • How to calculate sick leave accrual for employees
  • How much sick leave an employee is entitled to annually
  • The rate of pay for sick leave
  • What circumstances qualify for using sick leave

If you have a specific sick leave policy at your company, you must ensure that your sick leave accrual calculation aligns with state law. If your state requires you to give employees one hour of sick leave per full workweek of 35 or more hours, your company should have a system in place to ensure that employee hours get tracked properly to calculate enough sick time.  

For international employees, it’s crucial to understand the sick leave laws in each country as well. You can offer differing sick leave policies for non-domestic workers if needed, but it’s easier to keep everything the same across the board.

Let’s look at how state law affects how to calculate sick time. 

A State Example of Sick Leave Accrual

Washington has had its current paid sick leave law in place since 2018. The law requires employers to pay their employees sick leave. 

Specifically, sick leave in Washington accrues at one hour per 40 hours worked. Therefore, an employee working 160 hours in a month would earn four hours of paid sick time. Employers can give more than this amount to employees, but they must provide at least this level of sick time.

Additionally, Washington allows employees to use their sick time for multiple reasons, including needing to take personal time off work for an injury or illness or caring for a family member with an injury or illness. Mental health circumstances count, too. 

When an employee accrues sick time in Washington, they get paid for their sick time at the same hourly rate they get paid for working. For example, an employee earning $25 per hour for work would get paid $25 per hour of sick time they use. If they take off two days and typically work eight-hour days, their employer must pay them $400 for 16 hours of sick time.  

What Happens If Your Company Operates in Multiple States or Countries?

Every state and country differs in its paid sick leave laws. It’s crucial to have a sick time policy that covers the minimum amount of sick time required by a state or country. And, perhaps, offer more to employees to err on the side of caution.

When operating in multiple locations, understanding how to calculate sick leave accrual can get somewhat trickier. You’ll need to ensure that your company-wide policy accounts for each jurisdiction in which you must pay sick time. 

The best way to do this is to align your sick time policy with the state or country with the most stringent requirements. So, for example, if Washington required the highest amount of sick time of all the states your company operates in, you’d want to align your policy with Washington’s requirements.

Still, conducting frequent audits is the best way to ensure your company complies with each location’s rules. Regulations change frequently, and a slight shift in one law could kick your business out of compliance. 

How to Stay out of Hot Water with Sick Leave Accrual

There are a lot of points to consider when creating a paid time off policy for your business, including:

  • What will the company consider acceptable use of paid time off?
  • How much paid time off should employees get?
  • Should the company pay for unused paid time off?
  • Should sick time be included in a PTO policy?
  • Who is going to manage the company’s sick leave and paid time off?
  • What does the company’s governing state say about sick leave and paid time off accrual?

My advice? Lump personal time, vacation time, and sick time into a single PTO bucket. Although some companies prefer to separate different types of time off, I personally believe that combining any paid time off into one bucket is easier for employees to understand and simpler for companies to manage.

As of 2021, data from the BLS shows that 71% of workers were given access to single-bucket PTO plans through their employers.

When it comes to earned sick leave, it’s best practice not to ask employees why they’re using it, despite allowable reasons a state might name in its legislation. A company can avoid a lot of potential privacy violations by simply allowing employees to use their earned sick leave when they feel they need to.

That’s why adding sick time with any other paid leave is a good idea. When all paid leave is in a single bucket, employees can use it for any reason they’d like, including taking personal time off. They get paid either way, and your company remains in compliance.

Say your state, like Washington, requires one hour of sick time per 40 hours worked. If your employees typically work 40 hours per week, that’s a minimum of 52 sick time hours per year. To cover this amount of sick time, you’ll want to give employees at least two weeks, or ten working days, of sick leave annually.

Adding this amount to a single PTO bucket, you may decide to boost your annual PTO policy to three weeks per year. This not only more than covers the sick time required by your state, but it also adds an extra cushion of paid leave to ensure that your company remains in compliance.

Document Your Sick Leave Accrual Policy

However you decide to calculate sick time, be sure to document it. Documentation of your sick leave policy is necessary regardless of whether you include sick time in a single PTO bucket or offer it as a separate policy. 

For starters, having clear documentation of your policy helps your company manage sick leave smoothly. HR understands what each employee gets by checking the policy, and the policy is always there to fall back on if there’s a question. 

Keeping the policy in a central location that’s easily accessible is best. For example, we keep our sick leave policy for Stone Press in the benefits section of our Internal Company Wiki. 

Secondly, as many as 54% of American workers don’t understand their benefits. Your employees deserve a clear policy that outlines exactly what they can expect from your company regarding sick leave. Make sure every employee gets a physical copy of the policy upon hiring or have a digital version for all employees to access. 

Better yet, offer a benefits portal where employees can track their accrued sick time, paid leave, and other benefits on their own whenever they’d like.

Don’t Track Sick Accrual By Hand

One thing I’ve seen several companies try—and inevitably regret—is tracking sick leave accrual by hand. This typically happens in smaller companies with just a few employees. The owner of a small business might feel that using a spreadsheet to track sick leave hours is acceptable when there are only a few employees to manage.

However, every time I’ve seen a company try this, the process has failed. Calculating sick leave accrual can become messy when you’re doing your own calculations. Plus, you get busy and forget to track hours for the week. That week turns into two weeks, and suddenly, you’re a month behind and unsure how to catch up.

I highly recommend using payroll software or international payroll software to handle this task for you. It’s more reliable than human-made calculations, especially when you’re dealing with unusual accrual calculations. For example, Nevada labor laws require 0.01923 hours of paid leave for every hour worked, which isn’t as simple to calculate as states with a cleaner-cut ratio.

Even if you do use payroll software, complete occasional audits. These tools aren’t foolproof, so regular checks are necessary to ensure compliance. Still, they can reduce manual errors and increase efficiency, making them well worth the investment, even for micro businesses.

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