Obama’s sick leave mandate called ‘wrong approach’

Middle class families were the stars of President Barack Obama’s State of the Union address Tuesday night, with financial wellness and retirement, while not forgotten, taking a back seat.

Several of Obama’s proposals may change how employers plan their strategies on wages, sick leave and child care, as well as how employees prepare for retirement.

“I think if you’re a large employer, some of these things talked about last night you may already be doing,” says Seth Perretta, a principal at Groom Law Group. But depending on the nature of one’s business, some employers may be nervous about how the President’s proposals could affect them. For example, says Perretta, small employers, mom-and-pop shops or low-margin industries such as hospitals, food and retail, may have a harder time complying with mandatory paid sick leave provisions.

The Society for Human Resource Management, meanwhile, says Obama’s call for a federal sick leave mandate is “the wrong approach.”

“Mandates limit employer flexibility and stifle workplace innovation and creativity, which are the hallmark of effective and flexible workplaces,” said SHRM in a statement. As an alternative, the organization says it is committed to expanding voluntary workplace flexibility initiatives, including paid leave and flexible work arrangements.

Also see: Obama sick-leave proposal would create admin ‘nightmare’ for employers

And while the President devoted time to workplace issues in his address, “what’s not as clear, is how he plans to work with the Republican Congress to actually improve workplace policies,” says Cara Woodson Welch, vice president, public policy, news & publications with WordatWork.

In addition to raising minimum wage and offering sick leave, another proposal Obama touched upon was two years of free community college. The federal government would front the cost through higher taxes on the wealthy.

The proposal could be cost neutral or even an eventual net positive for employers, Perretta says, but how the revenue is raised would need to be approved.

He notes Obama’s emphasis on the working middle class, pointing to the necessity of dual incomes but lack of child care. “I think he’s [Obama] really coming out with the perspective of ‘we need to create social programs to reinforce family,’” Perretta adds.

“Small businesses are the folks that will be predominantly impacted by these proposals,” he notes. “I think Republicans, evidenced by their response last night, would be disinclined to move forward on entitlement programs or cost shifting to small employers.”

Having universal access to retirement programs is also part of the many proposals Obama has addressed which would open 401(k) programs to part-time employees, says Alison Borland, a retirement expert with Aon Hewitt.

Most large organizations already offer 401(k) plans, she notes. Obama’s proposals would close the gap for the part-time employees who don’t have access to an employer-sponsored retirement program.

Also see: Retirement plan proposal being re-introduced in State of the Union draws advance criticism

“At the end of the day, it wouldn’t [be] a significant change, but it would be meaningful to part-time employees,” she says. “If you don’t have access to a plan, you don’t even have a chance.”

Another proposal that’s been floating around a number of years would be requiring employers that don’t offer 401(k) plans to auto enroll employees into an IRA.

“It’s one that keeps popping up,” says Borland. “There is a real cost to it, because those defaulted contributions are tax-deductible, so there is a cost. It is an idea that has historically received support, [but] there is a price tag.”