Small businesses worry about paid sick time

Thomas Erb is ticked about the possibility he'll be forced to hand employees even more paid sick time.

He fears lapses in productivity at his 30-employee clock-making firm, Electric Time Co., from possible increases in unscheduled absences. "We have one person per job here," says Mr. Erb, of Medfield, Mass. "If someone starts to abuse the sick [leave], the organization doesn't function."

A debate over paid sick leave is intensifying around the country, amid concerns that economic pressures are prompting workers to place their financial security above their health.

Many people will go to work while ill—and even send their children to school sick—because they can't afford to stay home, supporters of paid sick time say.

Supporters are concerned by signs that small employers have begun cutting back on paid sick-day benefits. About 32% of businesses with fewer than 50 employees provided paid time off specifically for illness in 2011, compared with 39% in 2009, according to the Society for Human Resource Management in Alexandria, Va.

Connecticut in January became the first state to require paid sick leave, though businesses with fewer than 50 workers are exempt.

Seattle will mandate paid sick time, starting in September, even for firms of a relatively small size. Those with between five and 49 employees, for instance, must let their workers accrue at least five days of paid sick time yearly.

The push for paid sick days initially gained major prominence in late 2008, when President Obama, while president-elect, said he wanted a federal sick-day mandate. By then, the city of San Francisco and the District of Columbia had already begun to mandate paid sick days.

One federal proposal, which Mr. Obama backed at that time, would require employers with 15 or more workers to provide seven paid days for their own or a family member's illness.
 
But the weak economy was an obstacle to that movement, partly because of fears that a one-size-fits-all approach would put businesses at a disadvantage.

After the 2009 swine-flu outbreak, many began to more urgently fear the risks of spreading disease.

Providing paid sick leave "doesn't affect your bottom line. It isn't going to make or break you," says Makini Howell, owner and chef of vegan restaurant Plum Bistro Inc. in Seattle. Generally, absences for sickness at her establishment are rare, says Ms. Howell, who lobbied in support of Seattle's forthcoming mandate.
 
Small employers that don't provide paid sick leave in most cases have made that choice because they can't afford it, according to Helen Darling, president and CEO of the National Business Group on Health, a nonprofit employer advocacy group in Washington. "It isn't that they're being mean-spirited," she says.

At a 30-employee firm that pays an average of $10 an hour, the cost of providing seven paid sick days could amount to roughly $18,700 a year, including payroll taxes, according to Daniel L. Haynes, a Fredericksburg, Va., accountant.

Business owners are also wary of the possibility of a lapse in their operations if paid sick leave days are abused. Overall, the direct cost of incidental absences is only about 2% of the payroll, according to a 2010 survey of 473 employers of all sizes by benefits consultants Mercer.
 
But indirect costs from unplanned incidental absenteeism—including finding replacement workers, paying overtime, filling out additional paperwork, and disruptions to their businesses that might hurt customer service—amount to about 3.8% of payroll, Mercer estimated.

Many small-business owners already struggle with managing turnover and absenteeism, says John Haltiwanger, a professor of economics at the University of Maryland, who adds that small firms generally don't have human-resources departments.
 
"If you have one hundred people and one person is out, it isn't even a speed bump," adds Ted Clark, executive director of the Center for Family Business at Northeastern University. But at a business with just a handful of employees, when one person is out, "it is a stop sign."
 
In Massachusetts, paid sick-day legislation was reintroduced last year following three unsuccessful attempts at passage. The legislation would force employers to allow workers—including part-timers and contract workers—to accrue at least seven paid sick days yearly. One proposal would exempt businesses with fewer than six workers.

Mr. Erb, the clock maker, says he already informally provides five paid sick days—and he believes that is enough.

Erin Calvo-Bacci, the Reading, Mass., owner of Bacci Chocolate Design, doesn't want sick workers spreading their germs around the high-end oversized peanut-butter cups and caramel-stuffed brownies that she sells to candy stores around the country. Yet, an increase in unplanned absences could hurt sales, particularly at her two retail locations, she says.
 
She already gives her two full-time employees up to three days of paid sick leave, she says. The other 10 people on her staff, all part-timers, can take off whenever they're not feeling well or need to care for a sick loved one, she says—they just won't get paid during that time.

"If someone calls out sick from a morning shift, and I can't find a replacement, then the store doesn't open until the afternoon person can get there," says Ms. Calvo-Bacci, who adds that profitability has slipped slightly at her business for the past four years.

The National Federation of Independent Business, a small-business lobby group, on Feb. 21 released its estimates that the Massachusetts proposal could result in nearly 16,000 jobs lost by 2016 and a decrease of more than $8.4 billion in lost production. Firms with fewer than 500 employees would bear two-thirds of the job losses and more than half of the lost sales, it says.

New York City and Denver shot down paid sick day mandates last year, at least in part because of concerns that the mandates would threaten the survival of small businesses, or hurt their ability to hire.