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Paid sick leave has its advantages

By Yosie Saint-Cyr, LL.B., Managing Editor at HRinfodesk.com---Canadian Payroll and Employment Law News, December 2007

Paid sick leave (PSL) is an optional benefit employers may grant to employees. Several employers address the issue of periodic absence from work due to ill health by providing employees with a limited number of paid days off per year often referred to as sick days. This type of plan is usually found in workplace policies or collective agreements. However, some provinces and territories require employers to provide unpaid sick leave.

Legal requirements

Eight of Canada's 14 jurisdictions require employers to provide unpaid sick leave. And they are: the federal jurisdiction, Quebec, Yukon, Newfoundland and Labrador, New Brunswick, Nova Scotia, Prince Edward Island, and Saskatchewan.

In Ontario employers are not required to provide unpaid or paid sick leave, or paid benefit plans for sickness to employees. However, employees who work for employers that regularly employ at least 50 employees or more are entitled to unpaid personal emergency leave in certain situations under the Employment Standards Act, which includes for the employee's illness.

In Manitoba, employers are required to provide employees with unpaid family leave to deal with personal illness or the needs of their families.

In the above jurisdictions, employees may not be dismissed, suspended, laid off or demoted when using sick leave or emergency leave entitlements.

Alberta, British Columbia, the Northwest Territories and Nunavut don't have any provisions in their employment standards legislation for sick leave.

In provinces or territories where unpaid leave for illness is not required, it is left at the employer's discretion within its workplace policies. When the employer pays the employee's salary during the leave, that period of leave is generally called paid sick leave.

In addition, if a jurisdiction does require employers to provide unpaid sick leave, it does not stop an employer from also providing paid sick leave as a greater benefit than what is required by law; or to also provide a PSL on top of the minimum requirement.

The table below provides an overview of legal requirements across jurisdictions:

Jurisdictions

# of days

Qualification

Verification

Conditions

BC

Not legislated

AB

Not legislated

SK

Serious illness or injury: 12 weeks in a period of 52 weeks

Illness or injury that is not serious 12 days per calendar year

Completed at least 13 consecutive weeks of employment before the absence

Can require a medical certificate certifying that the employee is unable to perform his or her duties due to illness or injury

Period of leave is considered continuous employment

Can be extended under certain conditions

Cannot carry over

MB

3 days for family leave to deal with personal illness or the needs of their families

Completed at least 30 days of employment with the same employer

May require the employee to provide reasonable verification of the necessity of the leave

Family leave does not carry over to future years

Period of leave is considered continuous employment

ON

10 days each year for personal emergency leave:

Taken in the case of:

-a personal illness, injury or medical emergency, or a death, illness, injury, medical emergency of or urgent matter relating to certain relatives

For employees who work for employers who regularly employ 50 or more employees

There is no qualification period

May require the employee to provide reasonable verification of the necessity of the leave

Period of leave is considered continuous employment

Cannot carry over

QC

26 weeks of absence from work during a 12-month period due to sickness or accident

Completed at least 3 consecutive months of employment with the same employer

Employee must give the employer the reasons that help specify the nature of the absence, namely if it is a sickness or an accident. It is not necessary for these reasons to be provided in writing. They are generally communicated to the employer verbally. If the employer wishes to obtain more details on the reasons for the absence, other than the usual reasons provided by the employee and usually accepted by the employer, he must do so taking into account the limits associated with respecting the employee's privacy.

Period of leave is considered continuous employment

Cannot carry over

NB

5 days off without pay in a 12-month (calendar) period

Completed at least 90 consecutive days before the absence

After three consecutive days of absence for illness or injury, the employer can require a medical certificate certifying that the employee is unable to perform his or her duties due to illness or injury

Period of leave is considered continuous employment

Cannot carry over

NS

3 days off without pay in a 12-month (calendar) period

There is no qualification period

Employees may have to provide a medical certificate from a medical professional if the employer makes a request

Period of leave is considered continuous employment

Cannot carry over

NL

7 days off without pay in a 12-month (calendar) period for family responsibility or sick leave

Completed at least 30 consecutive days before the absence

After three consecutive days of absence for sickness, the employer can require a medical certificate certifying that the employee is unable to perform his or her duties due to sickness

Period of leave is considered continuous employment

Cannot carry over

PEI

3 days off without pay in a 12-month (calendar) period for sick leave

Completed at least six consecutive months before the absence

If the employee takes three consecutive days, the employer can require a medical certificate certifying that the employee is unable to perform his or her duties due to sickness

Period of leave is considered continuous employment

Cannot carry over

NWT

Not legislated

NU

Not legislated

YU

12 days off without pay in a 12-month (calendar) period (1 day per month, up to 12 days)

No qualification period

May request a doctor's certificate as a condition of entitlement

Period of leave is considered continuous employment

Cannot carry over

Federally regulated

12 weeks of sick days and for work-related illness and injury

Completed three consecutive months of employment with the same employer

Employer can request in writing a medical certificate within 15 days of an employee's return to work as proof of entitlement

Pension, health and disability benefits and seniority continue to accrue during an employee's absence

Employers must subscribe to a plan that provides an employee who is absent from work due to a work-related illness or injury with wage replacement

Cannot carry over

Best practices

Some companies offer employees the opportunity to be off work for a set period of time for illness without loss of wages as part of their benefit plans.

While the size and location of the business have a substantial impact on if an employer will provide these types of paid leave, according to several studies these options are crucial to the ability of employees to meet their own health needs and family responsibilities. When sick employees come to work, they may spread infectious illnesses or reduce productivity. A sick adult cannot perform to his or her best ability at work, care for children and dependent adults, or participate in the community as well as he or she could when in good health.

Often, entitlement to a period of paid leave is based on a formula related to the length of employment. A long-term employee may be entitled to more paid sick leave than someone who has recently started with the same company. On the other hand, a long-term employee who has suffered from ill health may not have any sick leave entitlement remaining.

Many employers and HR professionals struggle with the planning and implementation of a paid sick leave plan; which is a greater benefit than what is required by legislation. One of the questions often asked is how many paid sick days should be allotted to employees. Of the 501 people who responded to our latest HRinfodesk poll that asked participants: How many paid sick days are employees entitled to in your organization? The majority of respondents who participated in the poll indicated that employees in their organization were entitled to five paid sick days (32.7%/164). Employees were entitled to three paid days or less in 28.9% of responding organizations (145 of our respondents); and 22.2% or 111 respondents indicated that their organizations offered more than 10 paid sick days.

Below is a breakdown of the results of the poll that asked participants: How many paid sick days are employees entitled to in your organization?

Responses

%

total

3 days or less

28.9%

145

5 days

32.7%

164

10 days

16.2%

81

More than 10 days

22.2%

111

100%

501

Generally, some of these days may be taken each year without a medical certificate.

If the employee needs to take a longer sick leave because of health reasons, he or she may be entitled to take longer unpaid sick leave. He or she may then be eligible for Employment Insurance (EI) sickness benefits or benefits from other compensation plans for work-related illness or injury or long-term disability insurance.

Some employers may allow their employees to use part of their banked sick leave for certain family obligations.

Sick leave may also be combined with maternity leave if there are complications related to the birth of a child.

Among those organizations with these types of benefits, the waiting period before employees are entitled to paid sick leave is three months; the median amount of sick leave earned by employees in organizations that provide paid sick leave is 12 days annually. A majority of those organizations allow employees to accumulate sick leave credits. While most allow unlimited accumulation, the amount allowed varies widely. Most organizations do not allow accumulated sick leave to be converted to cash or additional vacation time.

A successful paid sick leave depends upon having a disability management program which consists of the following elements:

  • Determining the number of days to grant.
     
  • Having criteria for entitlement and an approval/denial process (in accordance with the applicable policy or Collective Agreement).
     
  • Reporting procedures such as reporting the absence to the immediate supervisor in accordance with the applicable policy or Collective Agreement requirements.
     
  • Tracking absences and timelines procedures.
     
  • Requiring employees to maintain regular contact with the immediate supervisor while absent.
     
  • Having a return-to-work policy and program in place.
     
  • In the leave agreement (form) always having a start and end date to the leave period.
     
  • Ensuring that employees seek the appropriate medical treatment and comply with the treatment plan to ensure a timely regular or graduated return to work where indicated.
     
  • Providing acceptable medical certification as requested, substantiating the inability of the employee to perform regular duties for the period of absence, confirming appropriate treatment is being sought, indicating the expected date of return to work, fitness to resume normal duties and any medical restrictions and/or functional limitations upon the return to work (e.g., restriction on hours of work or modified duties as a result of a specific medical limitation such as inability to concentrate, stand/sit, etc. for prolonged periods of time).

If requesting medical verification, remember that medical information is private health information. Maintain confidentiality of medical information. The employer should only request medical information that states how the medical condition affects ability to do the job from onset to anticipated return date.

Employees should make the physician aware that, if medically necessary, the organization endeavours to accommodate a gradual return to full duties and hours. Thus, the information required should provide the necessary information to employers on fitness to resume normal duties and any medical restrictions and/or functional limitations upon the return to work.

Employers should record all absences including sick leaves and report sick leaves to the payroll department.

Wage-Loss Replacement Plan and EI Reduction Program

If certain organizations are wondering why they should provide employees with short-term disability coverage, the answer resides in the Employment Insurance (EI) premium reduction program.

When employers make similar income protection coverage available to their employees, employees may not have to collect from EI, or may collect for a shorter period of time. Because this reduces the demands made on the EI system, the government initiated this program to return the savings to both employers and their employees.

If you are an employer who provides employees with disability coverage for short-term illness or injury (wage-loss replacement plans/certain paid sick leave plans), you may be eligible for the Premium Reduction Program, sponsored by Human Resources and Social Development Canada (HRSDC). If you are eligible, this program will help reduce your Employment Insurance (EI) premiums.

The employer must demonstrate to the Program that the short-term disability plan meets certain standards. If the employer's disability plan meets the standards, the employer must then demonstrate that employees covered by the plan will receive their portion of the reduction. The amount to be passed on to the employees must be at least five-twelfths (5/12) of the total reduction.

The amount of savings (the difference between what the employer would have paid at the standard rate and what would now be payable at the reduced rate is the amount of savings) depends on the type of plan, the employees' insurable earnings, the date the employer applies and the date the short-term disability plan meets all the requirements.

The savings can be used to give the employees cash rebates, new employment benefits, or increased employment benefits.

Overview of EI Premium Reduction Rates

Under the Employment Insurance (EI) Act and Regulations, an employer's EI premiums may be reduced when employees are covered by a qualified short-term disability plan, which reduces EI benefits that would be payable if such a plan did not exist.

For each calendar year, the rates of premium reduction are established based on four categories of qualified plans, with a distinct rate for each category as follows:

  • Category 1 - A cumulative paid sick leave plan that allows for a minimum monthly accumulation of 1 day, and a total maximum accumulation of at least 75 days
     
  • Category 2 - A cumulative paid sick leave plan that allows for a minimum monthly accumulation of 1 2/3 days, and a total maximum accumulation of at least 125 days
     
  • Category 3 - A weekly indemnity plan with a maximum benefit period of at least 15 weeks
     
  • Category 4 - A weekly indemnity plan with a maximum benefit period of at least 52 weeks (This reduction is available only to public and para-public employers of a province.)

In November of each year, Actuarial Services calculate the annual reduced rate applicable for the following calendar year for each plan category based on statistical data. Because an annual reduced rate is only given when the effective date of an employer's reduction is January 1, a reduced rate is often pro-rated based on the number of months in the year for which the employer is entitled to a reduction.

The annual and pro-rated rates of reduction and their corresponding multiples for a particular year can be accessed at www1.servicecanada.gc.ca/en/cs/prp/0300/0300_020.shtml.

Eligibility

To qualify for a reduction, the employer must:

  • Provide short-term disability coverage that meets the requirements of the Program;
     
  • Apply for a reduction;
     
  • Demonstrate to Human Resources and Social Development Canada (HRSDC) that the short-term disability plan meets certain standards, which are found in Part III of the EI Regulations, sections 60 to 76 inclusively;

Basic Requirements

  • The employer must provide evidence of a written formal commitment made to employees to supply them with a short-term disability plan, i.e., paid sick leave or weekly indemnity benefits, if they are unable to work because of illness or injury. (Paid sick leave plans may also provide for maternity, parental benefits and/or compassionate care benefits.) The formal commitment is a document (or documents) containing or detailing the short-term disability plan provided to the employees and must include a complete description of the benefits provided.
     
  • The plan must provide at least 15 weeks of benefits for short-term disability, or match or exceed the level of benefits provided under EI. The plan must pay benefits to employees within 14 days of illness or injury and be accessible to employees within three months of hiring. The plan must also cover employees on a 24-hour-a-day basis.
     
  • The employer must demonstrate that employees covered by the plan will receive their portion of the reduction. The amount to be passed on to the employees must be at least five-twelfths (5/12) of the total reduction. EI legislation reduces only the employer's premiums although the intent of the program is to reduce premiums for both the employer and employee; therefore, employers are required to return 5/12 of the savings from the premium reduction to all employees to whom the reduced rate applies. Employers must make effective arrangements for returning the employees' portion of the savings obtained through the premium reduction. Acceptable arrangements are:
  • A written mutual agreement between employer and employees or their representatives on the method of returning the employees' portion of the premium reduction;
  • A cash rebate in an amount equivalent to 5/12 of the reduction savings (considered taxable and insurable income);
  • New employee benefits provided as a result of the premium reduction, such as a dental plan, group life insurance; or
  • An increase in employee benefits or upgrading of existing benefits, such as more holidays, more time off work, or an increase in life insurance.

  • The employer must use separate payroll deduction accounts (business numbers used for payroll purposes) if employer EI premiums must be remitted to the Canada Revenue Agency (CRA) at different rates. For example, if some employees are not covered by the plan, the employer must continue to remit employer EI premiums on behalf of these employees at the standard rate of 1.4 and not at a reduced rate. This would require a separate payroll deductions account.

Types of Short-Term Disability Plans

The following types of plans could qualify for an EI premium reduction:

  • Weekly Indemnity Plan - This type of plan provides coverage through an arrangement set up by an employer (self-insured) or a plan underwritten by an insurance carrier. It pays weekly indemnity benefits in cases of illness or injury.
     
  • Cumulative Paid Sick Leave Plan - This is a short-term disability plan based on the sick leave credits accumulated by employees for use in case of illness or injury. Some plans may also allow for the use of paid sick leave credits for pregnancy, caring for a newborn or newly adopted child or for compassionate care.

How to Participate

To participate in the program, employers must register by submitting an initial application, which can be downloaded at www1.servicecanada.gc.ca/en/cs/prp/070.shtml.

Employers who are already participating in the Program must renew their entitlement to the reduction by completing a renewal application, issued every year at www1.servicecanada.gc.ca/en/cs/prp/0200/0200_090.shtml.

The HRSDC has prepared a Program guide that will provide employers with all the information needed about the EI Premium Reduction Program and how to apply under the Program Guide section on the HRSDC website at www1.servicecanada.gc.ca/en/cs/prp/0200_000.shtml.

EI sickness benefits

When employees have to take considerable time off due to ill health but their employers do not offer paid sick leave, or they have used all their accumulated PSL, employees can apply for Employment Insurance (EI) sickness benefits.

Sickness benefits may be paid up to 15 weeks to an employee who is unable to work because of sickness, injury or quarantine. To receive sickness benefits, employees are required to have worked for 600 hours in the last 52 weeks or since their last claim. When applying for sickness benefits, employees must provide Service Canada with a medical certificate confirming the duration of their incapacity. The fees requested by their doctor or dentist are entirely at the employees' expense.

An employee who makes a claim for sickness benefits is not only required to prove to be unable to work but also that he or she would be otherwise available for work.

Employees must not work while receiving sickness benefits. If they do, they must report any earnings they make while collecting sickness benefits. The earnings they make while receiving sickness benefits will be deducted dollar for dollar from their benefits.

An employee is able to collect sickness benefits outside Canada only if they are going to another country to receive medical treatment not readily or immediately available in Canada at an accredited hospital, medical clinic or a similar facility. If they decide on their own to go to another country to rest and recuperate, they will not be entitled to benefits. Employees must also advise their Service Canada Centre if they go out of the country.



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