Creating a Paid-Leave Policy Your Team Will Love

What is a paid-leave policy? Paid-leave policies allow employees to take a leave of absence from work for valid reasons without forfeiting their paycheck. Paid time off can be a crucial part of your company's job offer, as it helps employees balance their family and health needs while fulfilling their work obligations. It is also one of the factors employees intensely focus on when deciding between several job offers.

Although federal law doesn't require all companies to offer a paid-leave policy, doing so can have a positive impact on both you and your employees. 

Paid-leave policies not only allow employees to look after themselves and their family members but also reduce work stress in difficult times and give staff essential time to recharge. Many studies have shown that paid leave results in higher productivity. Paid leave also helps boost employee morale and promotes a healthier work environment, leading to better retention rates.

Read on to learn more about the different types of paid leave and how to create a paid-leave policy for your organization.

Common Types of Paid-Leave Policies

Paid Family and Medical Leave

This type of paid leave is usually given for a set number of weeks or months if the worker or one of their family members suffers from a severe, long-term health condition. Likewise, new parents are also given paid time off to care for and bond with their newborn child. This is known as maternity, paternity, parental, or bonding leave. 

Many companies allow six to 12 weeks of paid family and medical leave per year. Moreover, paid family and medical leave may be insured or may be 100% funded by the workers. However, insurance funds typically offer partial wage replacement instead of fully paid days off. This is usually about two-thirds of the employee's weekly pay.

Paid Sick Leave

Sick leave is generally for a short-term period. It may be given to an employee so they can recover from a cold or flu or take time off for a doctor's appointment. The employer pays the sick leave benefits. Typically, private sector companies allow up to seven days of paid sick leave per year. Recently, many businesses that did not previously allow paid sick leave became more flexible during the COVID-19 outbreak as employees were struggling with their own illnesses, illnesses of family members, and a lack of childcare coverage due to the pandemic. 

Paid Vacation Leave

Employees may use their paid vacation leave to take time off from work for relaxation, traveling, or whatever else they choose. This is usually a planned leave of absence, for which many companies offer two to six weeks per year. 

While these are the most common types of paid leave, some companies give their employees a single paid-time-off bank to use as they see fit. You may also consider offering holidays off in addition to paid leave as well as designated time off for volunteering, bereavement, and jury duty. Unique perks like these may help you stand out to potential hires and keep your existing employees on board.

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How to Create a Paid-Leave Policy

If you are unsure about how to create a paid-leave policy, here are some guidelines to follow:

1. Start by identifying your budget and what type of leave to offer to employees.
2. Determine how much time off employees will be eligible for each year, and whether it accumulates, they “use it or lose it,” or a set amount can be rolled over from year to year. For a sample paid leave policy, you can offer eight to 22 days for vacation leave, and seven to 19 days for sick leave.
3. Decide when employees will earn and be able to use paid time off. For example, new employees could be allowed to take their paid leave immediately, or they may have to wait for a certain amount of time to elapse, such as three to six months, after they are hired.
4. Then, establish when and how employees can take their paid leave. Depending on the seasonal nature of your industry, for example, you should decide whether employees will be allowed to take their paid leave at a certain time and whether they need to inform the organization in advance, particularly for vacation leave.

Is a Paid-Leave Policy Required? 

Although there are no overriding federal requirements for paid leave, some states have their own laws, such as Arizona, Colorado, and Michigan. For example, according to laws in Arizona, employers with 15 or more employees must offer up to 40 hours of paid sick leave per year. And as covered above, a paid-leave policy can make a big difference when it comes to hiring and retention.

Looking for more hiring and employee relations advice? Check out our Resource Center for articles, tip sheets, templates, and more. iHire's HR Services & Consulting team can also help you implement the perfect paid-leave policy or tackle other HR projects so you can focus on the rest of your business.