How Small Business Owners Can Create an Employee Sick Time Policy


It happens a few times a year. The dreaded cold virus takes your office by storm, and you’re left with extra work to delegate to fewer and fewer people. This is when your employee sick time policy needs to be up to snuff … or sniff? In addition to being sympathetic toward afflicted employees, you also need to take the financial and operating needs of your business into account, ensuring you can continue to run a successful business with your staff out sick.

When you’re scrambling to meet your business’s day-to-day demands, it can be difficult to take the time to establish an official employee sick time policy. There are a few reasons why it’s important to do so, however, including:

  • To help ensure that your informal employee sick time policy complies with minimum state and local legal standards
  • To give employees a clear understanding of their opportunities and obligations
  • To help ensure that sick leave is used appropriately, minimizing its disruptive impact on your business

How to Create an Employee Sick Time Policy

When crafting a policy, begin by addressing these six questions:

  1. What are the legal requirements for sick leave in my jurisdiction, including possibly overlapping state and local laws?
  2. What are the typical sick leave policies of my competitors?
  3. Should I combine vacation and sick leave allowances, folding them into a simple “paid time off” policy so that I don’t have to police the legitimacy of a sick day?
  4. How much sick time are employees typically using today, and is there any reason to think it will change in the near future?
  5. What should the sick leave notification requirements be?
  6. What are the penalties for employees who violate the policy?

Once you’ve established (or updated) your sick day policy, be sure to explain it carefully to your employees. In doing so, you might discover that some hypothetical sick leave scenarios are not addressed by the policy, giving you an opportunity to fine-tune it.

Empty desks and chairs signify many employees out sick

Look for Patterns

Updating or establishing a new policy is also a good occasion to review employees’ sick day patterns. Are there any associates who appear to be out more often than might be justified by actual sickness? If so, you might consider delicately probing to ascertain whether any non-sickness related causes, such as low morale, need to be addressed.

No matter how carefully you developed your policy, it cannot protect you from a major labor disruption caused, for example, by a local flu epidemic. That doesn’t mean that you can’t factor such a contingency into your workforce and financial planning, however.

Suppose, for example, that you always experience a seasonal surge in business during the winter months that typically coincides with frequent sick call-ins. You could pay a high price in lost business, possibly resulting in a cash flow squeeze, if multiple employees call in sick at the same time. How can you prepare for that?

Financial Contingency Planning

You might consider moderately overstaffing during that period to give yourself a little cushion. Alternatively, you might make arrangements with a labor agency or with specific individuals who you know could step in to fill a gap on short notice.

On the financial side, an adjunct to an employee sick policy might be tapping into your rainy day fund or arranging for a short-term business loan to keep your business running when employees are out sick. You could use these funds to hire temporary staff, for example.

Making predictions is hard, especially about the future, once quipped Yogi Berra. But a sound and consistently followed sick leave policy, coupled with contingency planning, might immunize your business against catching a nasty seasonal cold this year.

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