Anne Schmitz had a problem familiar to many small-business owners: Her profit margins were so tight that she couldn't afford to pay employees more, and they were leaving one after another.

Her solution was less common among small businesses: she increased fringe benefits. The one perk she said was popular enough to nearly correct her turnover problem was dependent care leave.

She implemented a formal policy allowing the 20 or so staff members of the Nettie Ottenberg Memorial Child Care Center to use their sick leave to stay at home when their children were sick rather than requiring employees to use up their two weeks of annual vacation time.

Workers who needed more time to take care of newborns or sick relatives could take it without pay and were assured their jobs would be held for them until they returned.

The new leave policy not only kept turnover within acceptable limits, Schmitz said, it also saved the company money, to her surprise. "What we've found is that people use their leave less, they feel that it's a resource ... and they can save it for the big one."

"As a child care center, we want to promote family-friendly policies," she said. Keeping high morale -- among the children, parents and staff -- is a top priority. But so is saving money.

The wages she pays are standard for the industry, ranging from about $5.50 to $14 an hour. Retaining workers is important because Schmitz estimated that between the costs of advertising, training and screening applicants, the company spends $1,000 on each new employee.

"I am part of an industry that has a high turnover rate and this was my way of addressing it," Schmitz said.

Many business owners do not agree with Schmitz' compensation program or her economics, saying that abuse of such leave policies would cut deeply into profits or render most small businesses perpetually understaffed.

And through various lobbying organizations, they have impressed the point repeatedly on members of Congress, who will vote on Wednesday on motions to override a presidential veto of legislation that would set national standards for leave policies at all companies with more than 50 employees.

Kavelle Bajaj, who built her Bethesda telecommunications company, I-Net Inc., to $18 million in sales in less than five years, is not as concerned about abuses of such leave policies by her 300 employees as she is with the impact they are likely to have on company profits. She said employees of her company are granted leaves of absence on a case-by-case basis to curtail abuses.

If the law were approved, Bajaj said, she would have to make allowances for it in the company budget, and eventually have that reflected in higher charges to her customers. She opposes the bill on that basis, and because she dislikes any law that tells businesses what to do.

"We're fighting in a time frame where there {are} companies fighting for contracts with shrinking dollars from government. We're trying to cut costs and this doesn't help," Bajaj said. "I can empathize with the person who needs the leave, but who's to say that it won't be misused?"

John C. Smith, vice president of Nationwide Credit Corp., an Alexandria collection agency that employs 60 people, said the bill would hurt his company as well.

"This is where it starts, but where does it wind up?" he asked. "Probably a third of the time people are calling in sick, they really aren't sick," he said, predicting that abuses would be hard to control.

Nationwide has an informal policy of allowing people leave when they need it to take care of a newborn or sick relative.

The company does not guarantee that employees will come back to their original jobs, Smith said, because so much of the work hinges on a client relationship, and work has to be done immediately. "The client doesn't want to hear that that person is gone to have a baby. They want the problem solved then."

But Barbara Blum, president of Adams National Bank, disagreed, saying that with 40 employees it's not hard to spread around work and bring in temporary help to do the work for people on leave.

"We do whatever it takes. It's not impossible," she said.

Blum's view is that the offsetting benefit of committed, productive employees is more important for a company than the added insurance costs and inconvenience involved in with a liberal leave policy.

"It keeps up morale; it makes sure you have continuity of employees," she said. "We want them to be able to enjoy their work and not be worrying about their family responsibilities." Blum said the cost of high employee turnover is "about the biggest expense a company has."

Since most of Adams National Bank's shareholders are women, employees have always been offered leave to take care of newborn and sick children in order to attract and hold on to employees who are "family people," Blum said.

"The policy has always been in place because we're women. We understand it. ... We try to make it so they are family members first and employees of the bank second."