Connecticut has started phasing in major changes to its paid sick leave law, and for small business owners, this is not something to put on the back burner.
Previously, Connecticut’s paid sick leave mandate only applied to employers with 50 or more employees in certain service-related occupations. But under Public Act No. 24-8, signed into law in 2024, that threshold is going away. By 2027, nearly all Connecticut employers will be required to offer paid sick leave, regardless of size or industry.
This isn’t just an HR issue, it’s also a financial and compliance issue that business owners need to plan for.
What Changed?
The law gradually expands eligibility and lowers the employee threshold over the next two years:
- January 1, 2025: Applies to employers with 25 or more employees
- January 1, 2026: Expands to employers with 11 or more employees
- January 1, 2027: Applies to all employers, including those with just one employee
Employees accrue one hour of paid sick leave for every 40 hours worked, capped at 40 hours per year. Leave can be used for an employee’s illness, medical needs, or to care for a sick family member.
Accounting and Financial Considerations
For employers that haven’t offered paid sick time before, these changes can have real implications for cash flow, payroll planning, and expense tracking.
- Budget for the Expense: Even if only a few employees use their full 40 hours per year, the cost of paid sick leave can add up, especially when you factor in replacement labor or lost productivity. Businesses should account for this in operating budgets and payroll forecasts starting this year and going forward.
- Track Accruals Properly: Whether you manage payroll in-house or through a provider, your system needs to be configured to track hours worked and leave accruals in accordance with the law. This becomes a key compliance area, both for accurate financial reporting and recordkeeping.
- Consider Tax Implications: Wages paid for sick leave are typically deductible as a business expense, but they need to be properly recorded and categorized in your books. If you’re making changes to your compensation structure to absorb the cost of this new benefit, we can help ensure those adjustments are set up in a way that supports your tax and financial goals.
- Align With Other Benefits: For businesses offering PTO banks or paid family leave, be sure your sick leave policies are distinct, compliant, and well-integrated. This helps avoid double-dipping and payroll confusion, especially when year-end reporting comes around.
What You Should Do Now, If You Haven’t Already
- Review or draft a compliant sick leave policy that matches the new state requirements.
- Work with your payroll provider or bookkeeper to ensure your systems can track and report on accrual and usage.
- Include paid sick leave costs in your financial projections and HR planning for this year and beyond.
- Talk to us to understand how to properly record and deduct these expenses.
These changes are significant, especially for small employers who haven’t offered paid time off before. But with some planning, you can absorb the impact without disrupting operations or overextending your budget.
If you’re unsure how these changes affect your business from a financial or tax perspective, we’re here to help. At Bailey Scarano, we work with Connecticut business owners to ensure their accounting and compliance strategies keep pace with evolving state requirements.