Is Sick Leave Paid? A New York State Law

If you're a business owner, you might be wondering, "Is sick leave paid?".

The answer is, yes!

A new law took effect recently that requires most New York companies to provide some level of paid sick leave to employees. We can help you comply with this new law in a way that saves you money.

By Larry Kagan, Founder & CEO, Baron Payroll

You're opening your morning mail, and inside is a letter from the Department of Labor. They want you to send them timekeeping and payroll records for a long-terminated employee who worked for you four years ago. The DOL wants to see detailed records for every pay period showing how much sick time your terminated employee earned, what their sick time balance was, and how much sick time you paid them.

And you would need to be able to produce all these records at lightning speed, within a few days, under a New York State law that took effect on January 1, 2021.

Otherwise, the DOL will believe your terminated employee and bill you for backpay, double-liquidated damages, fines, and penalties. Sound expensive? It could be even more costly if the DOL decides to go back six years and investigate all your employees for other wage and hour infractions.

That's why, if you haven't correctly implemented this new paid sick time law, you and your business need to do this now. Fortunately, Baron knows the best practices for managing New York paid sick time and how you must keep detailed records to comply. Otherwise, bad things could happen, and the financial impact on your business can be significant.

If that day comes and you get that dreaded DOL letter, we would have the records ready swiftly and easily, giving you peace of mind, so you can avoid any financial disaster.

Don't let this new employment law stress you out, especially after an already stressful year for businesses.

Baron will coach you through what the law means for your payroll, the best practices for implementing it, and how to make it as painless as possible to your bottom line.

The basics of the law

In New York State, most employers are required to provide paid sick time to their workers beginning on January 1, 2021. This is a new law, separate and distinct from other New York laws on paid family leave and COVID-19 leave.

For NY businesses with more than 100 employees, employees are eligible for up to 56 hours of paid sick leave per calendar year.

For NY businesses with five to 99 employees, a worker can earn up to 40 hours of paid sick leave per calendar year.

For businesses with less than five employees, there's a business top-line revenue threshold that dictates whether you must provide paid sick leave. If your business's revenue is more than $1 million in the previous tax year, employees can get up to 40 hours of paid sick leave per calendar year. If it's less than $1 million, the employer must provide up to 40 hours of unpaid sick leave per calendar year.

Under the new law, employees accrue one hour of paid sick leave per 30 hours worked. The accruals started adding up on September 30, 2020.

With the new law taking effect so soon, it's important to start figuring out how your business will manage payroll to follow the law.

The law will require employers to keep payroll records for six years, and these records must include the amount of sick leave accrued and used by each employee each week.

If an employee requests it, employers must provide a summary of sick leave accrued and used by an employee in a current calendar year or any previous calendar year. You have to produce these records within three business days.

Your company should accrue sick time, regardless of size

We mentioned that the requirement of paid sick time varies depending on the size of your business. If you have three employees, you may have read that and felt relieved that it didn't apply to you.

But here's what we think: It's not clear from the law what happens if one of those three employees quits and another takes their place. Would that make your business a four-person business? And what if your revenue eclipses $1 million, but you hadn't set employees up for paid sick time? What if you use part-time or seasonal workers who are entitled to sick leave under the law as well?

You don't know what's going to happen. This past year has been a strong indication that the best-laid plans can go sideways. So you want to be prepared, regardless of what comes next.

As with many employment laws, failure to follow them will likely cost more than it does to do things right in the first place.

The reality is, many of you are probably providing some kind of paid leave to your employees in a small business anyway, either informally or formally. You're a family. It makes sense to be proactive and implement this for your small business, so everything is in place, just in case.

Why accruals are better than frontloading

There are two ways your business could provide the required paid sick leave to employees.

Employees can accrue one hour per 30 hours worked, which is kept track of automatically using our technology from the Ultimate Kronos Group. Employees and employers can easily access and monitor these accruals and paid sick leave usage at any time.

Or, companies can "frontload" the paid sick leave, giving all employees 40-56 hours in your payroll system upfront at the beginning of the year based on their anticipated work hours and the size of your business.

This may seem easiest, but it has some big downfalls that we believe make it a problem for businesses.

An employee could work for only one month of the year, use all their paid sick leave, and then exit the company. You would be out the money for their paid leave.

The employee could work fewer or more irregular hours but benefit from having the paid sick leave frontloaded.

What do you do about new hires – people hired during the year? Are you willing to give them their full allotment even if they're hired in December?

The accrual method is the fairest and best way for every company. It allows for multiple scenarios that employees may go through and provides transparency to all parties. In addition, it makes sure your business doesn't lose money on paid sick leave that wasn't earned.

You may not have to spend more money

We know what you're thinking: Here's another new law that comes with a price tag, and you've been through enough financial hardship this year managing the economic effects of the COVID-19 pandemic.

Many businesses are in survival mode. We can help you adjust to this new law in a way that has the most negligible impact on your bottom line. For most businesses, there are no added employee expenses.

Your business may already provide some types of paid time off. First, we will create a new bucket for New York paid sick leave with all the usage, carry-over, and other specific rules. Then, we will carve out time from your existing time-off policies so that the employees will be whole and the employer incurs no additional time-off expenses.

This won't cost you more money on paid leave; it will simply rename part of the existing policy you have in place. It keeps you in compliance with the law, doesn't affect your bottom line, and provides employees with the same amount of leave they already had. Everybody wins.

As another example, let's say you provide four days of personal time for your employees, and that's it. In that scenario, we would add just one additional day to your existing time-off program and rename the policy as complying with the New York State paid sick leave law. That would cost you an additional eight hours of time per person per year extra instead of five additional days.

Baron offers a turn-key solution

No matter your scenario, no matter the size of your business or the complexities you're dealing with on complying with the New York paid sick leave law, we're able to complete this entire process for you.

There's no need to stress – we can go through your payroll practices and time-off policies to ensure they align with the paid sick leave law requirements. We can make sure you're recording hours properly to accrue paid sick leave for your employees accurately. We'll make sure your employees are correctly classified as exempt or non-exempt from overtime laws.

As mentioned, accruals for paid sick leave started already and can be used by employees beginning January 1, 2021. If you haven't done so already, you must get your sick time accruals going and get the proper practices in place to comply with this law.

Baron knows New York. We live here and work here. We know the New York laws, and we know what you need to do to comply with the NY laws.

Our goal is to simplify your business life and help you avoid nasty, costly surprises. In addition, it's our mission to help make your job easier when it comes to payroll and employee compliance.