OLMIS

by Jason Payton
Published Feb-1-2010

Wages Only Part of Total Compensation Employer Costs for Paid Leave Vary Paid Leave Not Available for All Workers Like History Repeating

Stay-at-home-vacations, or staycations, have become a part of the lexicon of the current recession. Perhaps in the past, loading up the family car and hitting the road for a couple of days was the family tradition. As the workforce looks to trim expenses, the option of spending vacation time at home becomes more appealing. Reading the newspaper travel section in a bathrobe, rather than actually traveling, is just plain cost effective. However the time is spent, paid leave is an important benefit for most workers, and a cost to employers.

Workers today are compensated through a mixture of wages and benefits. Total compensation for an employee may include a combination of benefits such as supplemental pay, paid leave, insurance, and retirement benefits. Employers are also required to pay an array of legally required benefits that include unemployment insurance contributions, and workers compensation. The Bureau of Labor Statistics (BLS) tracks the costs and access of these benefits through the National Compensation Survey and the Employee Benefits Survey. While the BLS does not publish benefit estimates at the statewide level, recent national estimates provide some insight into the relative costs Oregon employers face.

National estimates show total compensation averaged $27.49 per hour in September 2009. Workers' wages averaged $19.45 per hour, and accounted for about 71 percent of total compensation. Graph 1 shows paid leave averaged about 7 percent of total compensation. Average compensation can vary significantly due to differences in firm size, occupation, and hours worked.

Whether you plan and direct a growing start-up company, or you're working the stock room of a clothing boutique, occupations will have different pay structures. For instance, sales-related jobs had an average total compensation of $20.07 per hour (Table 1). Their average cost for paid leave was $1.06 per hour, or 5.3 percent of total compensation. In contrast, management and professional occupations had the highest rates of compensation, averaging $48.91 per hour. Paid leave also represented a higher share of total compensation (8.4%). Service workers had the smallest total compensation, averaging $13.65 per hour. The low rate of compensation and percentage of compensation from paid leave, 4.3 percent, has several causes. Service workers have job duties that typically require less training and have a higher likelihood of working part time.

The cost of compensation and paid leave also depend on how many hours a worker puts in every week. Nationally, part time workers averaged $15.66 per hour, or about one-half of the compensation for employees working full time. Paid leave accounted for 7.3 percent of compensation for full time workers, while for part-time workers it averaged 3.1 percent. Many establishments have benefit packages that are contingent on how many hours an employee works. Part time workers may not work enough hours to qualify for paid leave benefits, lowering the average costs to employers.

The size of the firm also dictates how much a worker is compensated through paid leave. Larger companies are more likely to provide multiple types of paid leave. Estimates show paid leave plays a more important role in employee compensation as the firm gets larger. Paid leave provided by companies with fewer than 50 workers averaged 5.3 percent of total compensation. In contrast, paid leave provided by companies with 500 or more workers averaged 8.6 percent of total compensation.

Vacation, sick leave, and personal leave are examples of benefits an employer may provide. But not all workers have access to paid leave. An employer may provide any combination of paid leave to their workers, or none at all. State laws like the Oregon Family Leave Act of 1995 (OFLA) require employers with 25 or more workers to hold an employee's position if they need a leave of absence due to a family or personal medical emergency. They do not necessarily require that leave be paid. If a worker previously accrued sick, vacation, or other paid leave the worker can typically use that benefit during their absence. In 2009, the OFLA was amended to allow spouses of those enlisted in the military to take a leave of absence under the law.

According to the May 2009 estimates from the Employee Benefits Survey, most of the nation's private industry employees had access to some kind of paid leave. Paid vacation leave was the most commonly available benefit to all workers (78%). Table 2 shows the same characteristics that affected the cost of paid leave also define the differences apparent in access to the benefit.

Workers who worked part time had the least access to paid leave. Just over one-quarter of part-time workers had access to paid sick leave. As much as 91 percent of full-time workers had access to paid vacation.

Workers represented by a union typically had more access to paid leave than non-union workers. Labor contracts, occupational mix, or differences in hours worked could all be factors contributing to the difference.

Smaller firms provided less access to paid leave than larger firms. Just over one-half of workers in businesses employing fewer than 50 workers had access to paid sick leave. Service-related workers had the lowest rates of access to paid sick leave among occupation groups (42%).

Paid leave is, and has historically been, an important component of total compensation. The relative cost and access workers have to paid leave depend on the work performed, the hours worked, and the size of the business. BLS estimates going back to 1986 show the relative cost of paid leave remained nearly unchanged over the past two decades. One explanation may be that while some employers may change paid leave into furlough days, others may offer employees paid leave as a substitute to pay raises. Whether a worker spends paid leave in the uniform of a sedentary couch warrior, or attempts a hike on the Obsidian Trail, paid leave will continue to be an important component of employee compensation.