In 2021, New York law changed and requires you to pay sick time for most employees. So chances are, you need to start keeping track of this new type of paid leave or face hefty fines and penalties.
By Larry Kagan, Founder & CEO, Baron Payroll
A new year in New York State often brings new employment laws, and 2021 was no different.
Starting January 1, 2021, most employers in New York are required to provide paid sick time to their workers.
Maybe the new law escaped your notice so far, but we want to make sure you're up to speed so you aren't accidentally out of compliance. Or maybe you saw the new law, but you already provide paid time off, so you think it doesn't apply to you. Unfortunately, it does.
And there are some other aspects of this law that require your attention and our help as well.
For instance, you now would be required to produce timekeeping and payroll records that show sick time for active and terminated employees at a moment's notice or face a Department of Labor investigation and substantial fines and penalties. Moreover, the investigation can expand beyond just one employee, consume valuable resources and financially drain your company.
That's why you and your business need to get this new law right. Thankfully, we know the best practices for managing New York paid sick time, keeping records in accordance with it, and helping your business mitigate the potential liability for non-compliance.
New employment laws can bring stress, especially after an already stressful year for New York businesses.
We'll coach you through what the law means for your business, 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 must provide paid sick time to their workers effective January 1, 2021. This is not the same thing as "paid family leave." This is a new law, and it is separate and distinct from the New York laws on paid family leave.
For businesses with more than 100 employees, employees are eligible for up to 56 hours of paid sick leave per calendar year.
For businesses with five to 99 employees, a worker can earn up to 40 hours of paid sick leave per calendar year.
There's a business top-line revenue threshold for businesses with less than five employees that dictates whether you must provide paid sick leave. For example, if your company'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. Conversely, if your revenue is 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 last year, on September 30, 2020.
With the new law, it's essential to figure out how your business will track time and manage payroll to follow the law.
The law requires employers to keep timekeeping and 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.
Maybe your company should pay 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 this NY law doesn'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. The pandemic showed just how unpredictable running a business could be. 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 paid leave to your employees in a small business anyway, either informally or formally. You're a family. So it makes sense to be proactive and implement this for your small business now, so everything is in place, just in case.
Why the accrual method is better than frontloading
There are two methods your business can use to calculate the required paid sick leave to employees.
Employees can accrue one hour per 30 hours worked, which is kept track of automatically using our cloud 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 significant downfalls that we believe make it a problem for businesses.
Employees 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 end up working 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.
The good news is you may not have to spend more money to comply with this law
We know what you're thinking: Here's another New York law that comes with a price tag for your business.
We can help you comply with this new law in a way that has the least impact on your bottom line. For most businesses, there are no added employee payroll expenses.
Your business may already provide some types of paid time off. So, first, we will create a new bucket for New York paid sick leave with all the usage, carry-over, and other specific New York sick time 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 approach won't cost you more money on paid leave; it will simply reclassify 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.
We will create a turn-key solution for you
No matter your scenario, no matter the size of your business or the complexities you're dealing with to comply with the 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 comply with the paid sick leave law requirements. In addition, we can make sure you're recording hours properly so you can accurately accrue New York paid sick leave for your employees.
We are New Yorkers. We live here and work here too. We know the state and local laws, and we understand how to comply with them.
Our goal is to simplify your business life and help you avoid ugly surprises. It's our mission to keep you up-to-date when it comes to payroll and employee compliance.
Need help complying with New York's mandatory sick time law?
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