Boston’s Cost for Compensated Absences
Vacation day, sick day and compensatory leave liability exceeds $200M
The City of Boston’s unfunded liabilities for pensions and retiree health insurance (OPEB) are well known. Less known is the growing liability from negotiated benefits in employee contracts for the payment for unused vacation and sick days and lesser benefits. Boston’s total accumulated liability for compensated absences was $200.3M as of June 30, 2016 according to the City’s FY16 financial statements, the most recent audited statements available. Of that total, 71% is due to the payment of accumulated sick days with 28.5% attributable to the accumulated vacation leave and the balance for compensatory leave. This liability has grown by $23.7M or 13.4% over the past five years.
With a $142M sick leave liability, the City should evaluate the utility of the payment for unused sick days and seek to reduce future payouts in contract negotiations. The City did settle a new AFSCME contract that capped each eligible employee’s total sick leave payout at $15,000.
FY16 Compensated Absences Liability
$ in millions
The Research Bureau has periodically noted the actual costs incurred in a fiscal year for the payment of unused sick, vacation and personal days. The last Research Bureau Update article in 2016 found that the City paid $30M for accumulated benefit days not taken in FY15.
Negotiated Paid Absences
Vacation days are considered part of an employee’s earned compensation and upon separation from city employment, the City compensates all employees for the remaining vacation days based on their final rate of pay. Members of selected unions or positions are able to redeem for cash specified vacation days each year depending on years of service.
The City also has negotiated sick leave payouts for a portion of unused sick days upon separation, and employees in some unions are able to receive payouts up for up to five sick days annually. Uniformed police and fire personnel receive payouts for accumulated personal days upon retirement at 25% of weekly compensation or can buy back four personal days in the year earned at 25% of weekly compensation. The number of accumulated personal days that can be redeemed for cash at retirement is capped at 24 for police officers and 32 for firefighters.
City employees in some unions can be paid for compensatory leave for extra time worked that is not considered overtime if the time is not used within a fixed period.
The City’s upgraded Human Capital Management System should be able to fully capture eligible leave for all impacted employees by next summer. When completed, the liability for compensated absences for uniformed police and fire personal leave and compensatory leave will reflect the total costs.