With the school year starting to wind down and renewal contracts being negotiated, sick time is likely one of those things your school is taking a look at.
Allowing faculty and staff to accrue sick days is often seen as an added benefit in many schools—one that is perhaps cheaper than offering Short Term Disability (STD) insurance. But is it really cheaper? Let’s take a closer look.
School policies regarding sick time vary. Some schools allow faculty and staff to accrue up to 15 days, some allow up to 30 days, and we’ve even encountered schools that allow employees to bank up to 90 days, or more! Ninety days equals 18 weeks of school—yes, 18 weeks! (Remember, weekend days do not count.) And, of course, while they’re out, you’re responsible for paying both their salaries and the cost of substitute teachers or temporary employees. It is easy to see where this can quickly become quite an expense.
STD insurance can help offset that financial burden, and often for much less than you might expect. With a STD insurance policy that has a 14-day qualifying (elimination) period, a school could reduce its sick day accrual maximum from 90 to 30 days, meaning the greatest number of consecutive days that an employee would need to be out before qualifying for STD insurance benefits would be just 10 working days. An employee who had banked 30 sick days could then have as many as three separate episodes of short term disability before he/she exhausted all accrued time.
The cost of STD insurance depends on plan design. As an example, for a plan that begins paying benefits after 14 consecutive calendar days of disability, at 60% of salary, the cost is normally in the $2.50–$3.00 per employee per month range (assuming an average annual salary of $40,000–$48,000) for a STD plan that dovetails with a 90-day qualifying period Long Term Disability (LTD) plan. Put another way, for a school with 40 benefit eligible employees and a covered monthly payroll for those 40 employees of $150,000, the monthly premium would be in the $450—$500 range.
For a school that wants to offer a more robust benefit, you can elect to self-fund the additional 40% of salary for any period of short term disability so that employees end up with 100% of pay. By using accrued sick days for that 40%, one day of sick leave can account for 2½ days at 40%.
Another option is not to offer STD insurance, but instead shorten your LTD plan’s qualifying period to 60 days. Doing this does increase your LTD rate and monthly premium (normally 20%-25%—if you are going from a 90-day qualifying LTD period plan to one with a 60-day qualifying period). However, it may actually cost substantially less if you purchase STD insurance that kicks in after 14 days … instead of your having to continue salary for up to 60 days. We suggest looking back at employee absences over the last several years and crunching numbers to learn what is most cost-effective for you school.
If you’re looking to adjust your sick time parameters, one of the most important things to remember is to clearly communicate the change to all faculty and staff members. Do so at an employee meeting and, if possible, have your Board Finance Chair there in support. After all, if it is worth a Board member’s time to be present, it must be important enough for employees to really listen to what is being said.
