updated 1/2/2009 9:01:51 AM ET 2009-01-02T14:01:51

At the checkout counter of a Manhattan office supply store, there is a rack stocked with disinfectant spray, throat lozenges, tissues and Vitamin C supplements — reminders to small business owners that a new season, the flu season, is upon us.

Flu season inevitably means employee absences. And so the beginning of the year is a good time for company owners to think about their policy not just for sick time, but time off in general.

Many business owners might not think about a policy for sick or medical days until an employee starts taking a lot of time off. Or, when a prospective worker asks, "how much sick time do you give?"

Before formulating a policy, owners should be aware that they're not required under federal or most state laws to grant employees paid time off when they're sick, but the federal Family and Medical Leave Act of 1993, known as the FMLA, might require that companies give workers unpaid sick leave. However, not granting any paid sick time at all is probably a bad idea — not only is it a morale-buster, it will make it harder to recruit good workers.

Many owners trying to come up with a sick time policy might not be sure how many days to give staffers. Rick Gibbs, a senior human resources specialist with Administaff, a Houston-based company that provides human resources outsourcing, said owners need to decide "how many days a year can they afford not to have people working from a productivity standpoint."

But they also need to be sure that their policies will make them competitive with other employers in the same industry and community. "Ask around other business owners what they typically offer," Gibbs said.

He also noted that typically, companies link sick time to tenure — the longer workers have been with a business, the more time they are likely to get.

Sick time gets more complicated when employees use up their allotment. Should the boss dock their pay? Make them dip into vacation time or personal days? Borrow from next year? Or should the owner just shrug and keep paying them?

This can be a thorny issue, but generally, the advice from human resources consultants and small business owners alike is to be flexible, but also fair to the entire staff. Keep in mind that docking an employee's pay may come across as punishment — and could motivate a good employee to leave.

One solution that many companies are turning to is to grant employees paid time off that in effect lumps together sick time, personal days and vacation.

At LVM Group Inc., a New York-based public relations firm, "we've had a system whereby you can be sick or you can take a personal day or you can take vacation and we allotted X number of days for each," President David Grant said. "Over a period of time, it occurred to us that it made more sense to bundle it together."

One advantage of paid time off that doesn't differentiate between sick, personal or vacation days is that no one needs to keep track of why an employee is taking a day off.

But Diane Bates believes in keeping vacation and sick time separate at her New York-based PR firm, Blue Sky Marketing Communications.

"Vacation is part of someone's compensation package" that they negotiate with the company, she said.

Bates resisted creating a sick-time policy, believing "if you're sick, or think you're sick," don't come to work. But she found that some of her staff of 20 wasn't comfortable with an amorphous policy based on "we trust you."

So her company now gives five sick days and two personal days per year. But, Bates said, she won't dock workers' pay if they exceed those numbers.

"If you're unfortunate enough to have jury duty, a death in family and a flood in your basement in the same year, who are we to say you can only take 2 personal days?" she said.

Like many employers, Bates has run into a situation where a staffer seemed to be abusing sick time. In such cases, a boss is allowed under the U.S. Americans with Disabilities Act (ADA) to require an employee to get a doctor's note that states the staffer has been under medical care. Bates said the absences were part of a larger performance issue, and the staffer eventually left.

It's a good idea for an owner to be familiar with laws that deal with employee illnesses, including the FMLA and the ADA. Information about the FMLA can be found on the Department of Labor Web site at http://www.dol.gov/dol/topic/benefits-leave/fmla.htm. Information about the ADA can be found on the site for the Equal Employment Opportunity Commission, http://www.eeoc.gov/types/ada.html.

Individual states may also have laws that deal with sick employees.

Employers may also want to consult with a human resources professional or a labor lawyer, particularly if they're running into a problem with an employee's sick time.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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