Extra Pay: Sick Leave Payout Reform Has Been Ignored, Sidestepped, and Undermined  

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What are sick leave payouts?

Sick leave is an important benefit for employees to use when they're ill. Employees can stay home, get better, and still get paid.  
However, many New Jersey towns pay public employees for unused sick days at the end of the year or agree to pay them at the end of their career. 
This can be costly to taxpayers – and it is often against the law. 

How we got here:

In 2007 and 2010, the New Jersey Legislature passed laws limiting when sick leave payments may be made, how much can be paid, and to which employees. 
Their goal was to lower property taxes by prohibiting extra payments of hundreds of thousands of dollars to a single public employee. 
OSC, the state's independent watchdog agency, surveyed 60 towns in NJ to see if they follow the law. 

What does the law say?

  • All employees hired after May 2010 can’t receive more than $15,000 for their unused sick leave 
  • Employees can only receive that $15,000 at retirement – notwhen they resign, change jobs, or as an annual payout 
  • Employees can’t carry over more than a year’s worth of vacation time 
  • In addition, after 2007, certain senior local government employees cannot receive more than $15,000 for their unused sick leave 

Very few towns are following the law on sick leave payouts

OSC found that the vast majority of the 60 towns we sampled have policies that still allow hefty sick leave payouts that violate the reform laws.  
The result today?  Local public employees in NJ get large payments for their unused sick days that are basically yearly bonuses. Bottom line: Taxpayer funds are being wasted. At least a majority – and likely more – of towns we surveyed have wasted taxpayer funds on payments that violate the law, creating a financial liability of many millions of dollars for taxpayers.   
The result tomorrow? Tens and hundreds of thousands of dollars per employee could be wasted by towns decades into the future. This is exactly what the 2007 and 2010 laws were supposed to prevent. 

Explore the map below to see whether or not your town is making unlawful sick leave payments.


  • Other than Retirement: Town gives sick leave payments when an employee resigns or switches jobs 
  • Over the Cap: Town pays more than $15,000 for unused sick leave 
  • Terminal Leave: A sick leave payment in disguise when towns give employees sometimes months' worth of time off before retirement  
  • Annual Sick Leave: Town has agreed to sick leave payments every year  
  • Sick Leave Incentive Program: Town gives monetary incentives to employees for unused sick leave 
  • Vacation Accrual over 1 Year: Employees can roll over more than 1 year of vacation time 

OSC's findings at a glance

“Year after year, towns spend taxpayer money to fund costly, wasteful year-end bonuses for public employees that are hidden from taxpayers. The laws on sick leave payments are being ignored by a lot of towns, and this is putting a financial strain on taxpayers. Mayors and council members who want to lower property taxes are missing an opportunity to do so.”   – Acting State Comptroller Kevin D. Walsh
"OSC’s review found that, to a startling degree, the laws have been ignored, sidestepped, and undermined in almost all of the municipalities reviewed. OSC determined that 57 of the 60 municipalities failed to fully comply with the laws, leading to both actual waste and abuse of public funds, as well as substantial future liabilities for these municipalities." – OSC's report, "A Review of Sick and Vacation Leave Policies in New Jersey Municipalities"

In Context

Palisades Park

A 2021 OSC investigation found that the Borough of Palisades Park was granting unlawful sick leave payments annually, paying employees at resignation, and making payments at retirement to its employees. 
For example, the Borough's Business Administrator collected unlawful sick leave payouts of nearly $10,000 in 2018 and 2019 and was entitled to a $360,000 payout when he retired – including a $160,000 in unlawful sick and vacation leave payouts.  This is the waste and abuse the sick leave reforms are supposed to prevent.     

Submit a Tip to OSC

Some of OSC's most impactful reports have started as tips from the general public or conscientious public employees. 
If you have information about unlawful sick leave payouts, or other forms of government waste, fraud, and abuse, contact OSC now.