Just to put my 2 pence worth in, my partner works in the Semiconductor industry where if an employee is off sick they lose their shift allowance but not their basic pay.
Also each time they have time off sick they are penalised on a points system (Bradford Index). Can't remember exactly how many points they receive for being off sick but it is the same amount regardless of how many or few days they take off. When they return to work after their period of sickness they receive a Back To Work interview where they are asked if they intend taking any more time off sick (stupid I know), amongst other questions. If their index goes above 100 in a period of a year they are given a warning.......you know how it goes then....verbals, written, out!!
But even this system is prone to abuse and all they guys and gals in his workplace know how to work it.
Staff sickness is something we all have to contend with and we all have to deal with it in whatever way is correct at that time. Personally I won't tolerate unreliability and my (4) staff know this, but I am pretty easy going and I do show them appreciation for their work and they know that if they work hard, stick by me and are loyal when the business is booming (note I said when and not if) they will be rewarded financially. At the moment I can only reward them with works of thanks and appreciation and being their for them as best I can.
They also know that if they need time off, even short notice, I am happy to let them have it as I am now in a position to step in at the last minute.
I make sure I keep all of them informed of what is happening in the business and as long as they and my Clients are happy and contented (which they are at present), everything else is a bonus. I personally think that you have to make yourself approachable to your staff so that they can talk to you about anything......finding that happy medium between being their boss and their friend is hard, but I have managed to do that with the girls I have with me at the moment.
Having said that we are still a 'baby' company and things will ultimately change as and when we get bigger, and I may not always have the time to listen to what they need and want to talk to me about whether good things or bad (but I certainly will try hard to give them the time they need).
Sometimes I wonder if I really want to become a huge multi million company (would be nice to be loaded) but I don't want to 'lose my way' which can so easily happen.
Sorry got off the point a bit there (ha nothing changes)