• LinkedIn
  • YouTube
  • Twitter
  • Facebook
  • Google+

Unused leave takes a bite out of municipal budgets

by on
in Compensation and Benefits,Human Resources

It’s a benefit designed to retain long-term employees, but the practice of allowing retiring government ­workers to cash out unused leave may turn in­­to an actuarial time bomb. The prob­­lem: Local governments are shedding employees at a record pace, often through early-retirement packages. And the leave liability is largely unfunded.

Hennepin County, for example, pays retiring workers (with at least eight years of service) for an average of 100 days of unused leave when they retire. That can be a tidy sum. When the county’s chief information officer recently retired after 38 years of service recently, he received a lump sum payment of $87,776.

He wasn’t the only employee to cash in a big chunk of leave. The total tab for the county last year was a record $4.8 million, a figure that has grown by 41% since 2007. In all, the county owes about $97 million to employees, but had only allocated $71 million as of the end of 2010.

Not every municipality is as generous as Hennepin County. Min­­ne­­apolis only pays unused leave benefits to workers who retire with more than 20 years of service. Retirees can cash out 60 days of unused sick leave, with the money going into a health savings account (HSA). Payments for unused vacation time are capped at 50 days.

St. Paul employees can receive cash for unused sick days after 14 years of service. Like Minneapolis, the money goes into an HSA.

Note: Employers that allow this benefit should consider the long-term costs when negotiating labor contracts. In most municipalities, leave payouts are part of collective bargaining agreements. Those benefits may improve retention and maintain morale, but they still have to paid for at some point. As baby boomers retire in large numbers, the bill is coming due.

Like what you've read? ...Republish it and share great business tips!

Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...

We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.

The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.

" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/31489/unused-leave-takes-a-bite-out-of-municipal-budgets "

Leave a Comment