Why You Need a Leave Management Program

This Benefits Insight discuses the critical nature of leave and strategies for managing it.

Employees are the lifeblood of your organization. From the entry-level assistant to the CEO, nearly everyone is entitled to time off for vacation, illness, bereavement, parental leave, or other company-specific designations. But understanding and tracking your employees' time off is essential not only for accuracy or program mandates, but for your bottom line. Leave management is critical.

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It turns out that vacation can be good for your career. In a study published in the Harvard Business Review, a sample of over 5,600 working adults revealed that those taking less than 10 days vacation a year were only 35% likely to get a raise or bonus. Those who took more than 11 days of vacation were over 65% likely to get a raise or bonus.

But unfortunately, most people are not taking their Paid Time Off (PTO). More than half of Americans (55%) opted not to use all of their paid time off in 2018, equating to an estimated 658 million unused vacation days. Studies also showed that unless those vacations were planned well, it did not relieve the stress that employees incur in the workplace.

The answer? Encourage your employees to take vacation days while planning ahead, so they can be refreshed when they return. You can also include vacation mandates through a well-designed and communicated PTO policy.


PTO Liabilities

Companies must understand the impact of unused vacation time since it creates a financial liability. If your veteran employee has been carrying a significant PTO balance, when it comes time to pay them, you must pay it out to them upon termination at the current rate of pay. For those employees you hired at $10 per hour who are now making $40 per hour, you may end up paying for PTO at four times the rate that it was initially earned.

Employers should design their leave programs that take into account legal, financial, and cultural implications. Programs should include PTO caps, provisions for employers to mandate that employees take PTO, and address the company's culture impact of the policy. 


Family and Parental Leave

The Family Medical Leave Act (FMLA) is the only federal program that provides leave while protecting an employee's job, but does not guarantee an income to the employee. FMLA management is a complex arena that HR and Benefits professionals must closely track and monitor. Employees must meet eligibility rules that include 12 months of working a total of more than 1,250 hours. As a result of this criteria, less than 60% of US employees have access to FMLA.

There are a few states that address maternity and family leave, which often run concurrent with FMLA leave. Only four states have publicly funded maternity leave: California, New Jersey, Massachusetts, and Rhode Island. Other states allow for maternity leave, but do not require employers to pay for that leave.

Employers who design their employee benefit programs to include parental and maternity benefits can attract not only top talent, but loyal talent, while maintaining a healthy bottom line. A 2011 study by the California's Center for Economic and Policy Research showed that employer-paid family leave had a 91% positive or neutral impact on their profitability, but no detrimental impact. 

Other studies consistently show that paid parental leave has a significantly positive impact on child health, including healthier births, reduced child abuse, and parent-child bonding. The studies point to a single fact: If an employee's job is protected, their children will be healthier.

Child-related health issues and care have a significant impact on business productivity. Organizational leave policies, especially for parental leave, contribute to healthier children and more productive employees. When well coordinated, leave policies can attract not only top workers, but productive employees with healthier families.


Disability Leave Can Be Paired with Leave Options

Short-Term Disability (STD) and Long-Term Disability (LTD) plans are designed to provide employees with a reduced percentage of their pay in the event of accident, illness, pregnancy and delivery, or injury. According to the BLS, approximately 42% of workers have access to STD and 36% to LTD plans.

Employers can offer this relatively low-cost option to attract and retain employees who require an income during their leave. Coordinating these offerings with a leave program will provide employees with assurance that they can take time off and get paid, even if their PTO runs out.


Your Leave Management Program

Once your program is implemented, you'll need software programs in place that accurately track PTO, FMLA, and other employer or state programs. Your payroll program may include PTO tracking but might not include FMLA or other leave programs. You should also consider reporting features that include PTO accruals for financial reports and statistics required by federal and state agencies.

Your Leave Management Program can be a complex offering of PTO, federal and state mandated programs, employer-specific programs, and insurance offerings that provide income in lieu of salary. Understanding the financial, legal, and tax implications of these programs requires that you work with professionals to achieve your goals of attracting and retaining talent while managing your bottom line.


Your Employee Benefits Partner

Woodruff Sawyer works closely with our clients to help them create effective programs, including navigating their options for outsourcing leave management as well as access to experts in state leave laws. Our Account Teams strive to ensure results that improve employee engagement while delivering bottom-line results. For more information, your Woodruff Sawyer Employee Benefits team is available to answer your benefit questions.



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