State Contemplates How to Pay Workers for Time Off Earned, But Not Taken

By Amanda Iacone, Virginia Statehouse News Tuesday, October 11, 2011

RICHMOND - Betty Banks has earned more than 2,000 hours of sick time and 400 hours of vacation time during her 30-year state career.

The vocational specialist at Southeastern Virginia Training Center in Chesapeake could use a portion of her time off to retire a few months early, or she could receive a check, Banks said.

State workers have racked up more than $330 million in unused, earned time off, according to the state’s long-term debt obligations from 2010, the most recent data available.

Virginia paid $7.7 million in earned time off to retirees, 4 percent of the workforce, in 2010, according to Department of Human Resource Management, or DHRM.

This year, more than 11,000 workers are eligible to retire, but only 2 percent are expected to leave, according to DHRM.

This financial burden on the state is expected to compound as about 25 percent of the state's baby boomer workforce becomes eligible for retirement in the next five years. If the economy improves, that number could surge, said Sara Wilson, DHRM director.

Wilson is leading a focus group to study ways to simplify the time-off system, which offers 21 alternatives for earning paid time off, and cut costs for the state. (Click here to see that list.)

“The issue for me, from a management point of view, is I want people to take the leave they are supposed to take,” said Wilson. “It’s an unfunded liability for me, because I don’t have the money to pay for retiring workers.”

Wasting time
When employees retire, they can cash out up to 336 earned vacation hours for 25-year employees and 25 percent of accrued sick time. The state pays out that earned time off at the workers’ current pay rate, which ends up costing the state more for higher-paid employees, Wilson said.

Different groups of employees accrue earned time off at different rates, creating a paperwork nightmare for managers who track and approve the time off, according to DHRM.

In addition to the various rates, the state offers more than 20 time-off options, such as leave for bone marrow or organ donors, according to DHRM.

Taking earned time off is not only complicated by a complex system governed by federal and state laws as well as policies, but also a two-year statewide hiring freeze still in effect.

“People are doing double jobs. They can’t all take the leave they have earned. It’s accruing; it’s adding up. We’re trying to be fair to employees and keep it simple,” Wilson said.

Options
Gov. Bob McDonnell's Commission on Government Reform and Restructuring, which aims to save state government money by streamlining operations, last year recommended reducing the options in the employee leave program to make it manageable.

Delegate Barbara Comstock, R-Fairfax, introduced a bill in the House of Delegates this past session that would have furthered those recommendations, but the bill failed to garner support.

To carry those recommendations forward, Wilson convened several work groups, including state workers, to brainstorm. Some proposed options were:

• Creating a time-off bank in which employees earn a set number of days and use them how they want. This approach would eliminate some leave options.

• Cashing out the employee’s time off at the worker’s pay rate when the time off was earned initially. Retiring workers would receive less money when they cash in their accrued time off.

• Capping the amount of time off employees can earn.

The Reform Commission expects to hear an update from Wilson at its November meeting, said Commission Member Sandy Bourne.

Depending on the policy changes the commission supports, legislative changes may be needed, but some proposals could be handled administratively, Wilson said.

While state workers want a simpler time-off system, they are concerned about protecting the time they earned, said Ron Jordan, president of the Virginia Governmental Employees Association, or VGEA, which has been working with Wilson to revise the program.

“It’s an administrative mess,” said Jordan, whose association represents the interests of 20,000 state workers. “The devil is in the details.”

Jordan declined to comment on options being considered.

Banks, who works at the Chesapeake training center, cautioned that capping earned time off could hurt employees who have difficulty scheduling time off. Some employees are denied taking time off, because they must work for a co-worker, who is sick or having an emergency she said.

“I don’t think they should have to suffer at the end of the year and lose their leave just because they couldn’t take it,” she said.

Time-off banks, an option Virginia is considering, are becoming more common as an incentive for employees.

“Companies are recognizing the need to be flexible and to retain top talent. A lot of companies do try to offer pretty generous packages,” said Cindy Parker, an assistant professor of management at George Mason University.

But private-sector companies are reducing time-off benefits to decrease payroll costs, Parker said.

Dr. Rod Mayberry, who runs a dental practice in Fairfax, requires his staff to use or lose their vacation time by the end of the year. He said he can’t afford to cut large checks for accumulated sick and vacation time to departing workers.

He said businesses — and government — must be flexible with employee benefits.

“State workers, government employees are paid, according to what I’ve heard, better than the private sector,” said Mayberry. “My feeling is the government is out of control and to a certain degree, state worker benefit programs are part of the problem.”