Public Sector Silver Parachutes

Washington State paid out $21 million dollars over the last two years to its public workers for “silver parachutes,” or cashed-in unused sick days. Under a 1979 law to promote work attendance, state employees can turn in one-quarter of their unsued sick days for a retirment bonus. Facing a $4.5 billion budget gap, some are questioning whether the benefit should be kept.

Cash-outs for sick leave and vacation time are a common feature of public sector employee plans. In total, California paid $486 million over three years for unused vacation time.

According to the Congressional Research Service, when the federal government adopted the sick leave payout practice in 1969, it didn’t result in a more “prudent use of sick days.” Instead, sick leave became a valuable commodity. Employees retiring in 1984 and 1985 had higher sick leave balances than those who retired in 1968. The unforseen spike in payrolls is one reason why only 17% of private sector employees offer cash-outs for unused sick time. Another good reason: it penalizes the employee who gets sick.