Question

For the past several weeks, Adele Delgado, payroll manager for Petrillo Packing Company, has been studying the mounting costs of accrued vacations and sick leave. Most of her firm’s employees are entitled to two weeks’ vacation each year and the privilege of accruing their vacation time for future use. Also, the workers have a generous sick-leave plan that reimburses them while they are ill at home or in the hospital.

Scanning the employees’ accrued vacation times on the computer printout, Delgado notes the line entry for John Mannick. Mannick recently retired and cashed in 14 weeks of accrued vacation—all paid at his current wage, which was much more than when he originally earned the vacations. And, of course, the firm’s payroll taxes for the accrued vacation payout were significantly increased.

Delgado also knows that some workers feel shortchanged if they do not use their sick leave each year. They realize that if the leave is not used, they lose it for that year. Probably, she thinks, this accounts for those who regularly become ill on Mondays or Fridays.

What solutions can you offer to limit the cost of and more effectively manage the firm’s policies for compensated leave time?

Answer 1

Effective policy for sick leave and vacation encashment:

Organization Petrillo Packing (PP) is going through a troublesome time in controlling expense, identifying with the encashment of accrued vacations and taking undue advantage of a liberal sick leave plan by its representatives.

It is seen that the workers who are resigning are liquidating out the entirety of their accrued vacations at the current pay rate or wage rate . This outcomes in huge cash outflow ,placing the organization in challenges ,and causing unnecessary payment of substantial payroll tax, which lead to lessening the profitability of the organization . Additionally, because of a liberal sick leave plan ,wherein the leave lapses if not availed during the year, the workers feel that they lose the facility in the event that they don't will avail the equivalent . This prompts them to be untrustworthy and take sick leave as a rule on Mondays or Fridays to drag out their end of the weekend holidays in the pretext of being sick. In this way ,the organization's efficiency is influenced thus too the productivity or profitability.

In the current context, the accompanying steps could be adopted by organization PP , to streamline the circumstance it is in.

Mr. D , the payroll manager,ought to register the encashment of the accrued vacations of the workers for every year , considering the overall compensation rate around then. As the representatives are qualified for about fourteen days vacation consistently , the computation of the balance vacations can be made year-wise and all the years' complete can be added to show up at the gross aggregate sum ,for the accrued vacations, to be paid to the workers at the hour of their retirement.

This would make the all out encashment a lot lesser than computing based on wage rate at the wage rate of retirement of the representatives. In this manner, the organization doesn't need to manage a substantial burden of payroll tax payment , and the policy of encashment of accrued vacations by the representatives can likewise be maintained.

So as to have a mind the workers taking sick leaves again and again, regardless of whether they are not generally sick and wish just to avail the facility ,Company PP can present a carry - over plan of sick leaves. The workers ought to be permitted to extend the unused balance of sick leaves to the next years. Likewise , the organization ought to likewise permit encashment of sick leaves toward the finish of every year, whenever settled on by the representatives . In this sick leave plan , the representatives won't be in a hurry to take sick leaves just to exhaust the facility for the year ,and furthermore not expand their end of the week holidays , taking leaves generally on Fridays or Mondays . In this way ,Company PP will be profited by the non-absenteeism of its workers on key days (Fridays and Mondays). While keeping up a liberal sick leave plan for its workers.