Just in case you missed it: Effective January 1, 2018, New York is requiring employers to provide Paid Family Leave (PFL), which will cover up to 8 weeks of paid leave, increasing with time, and may be used alongside the Family Medical Leave Act (FMLA) benefit. While this is great news for employees, the change is causing uncertainty among employers who are not always sure how to remain compliant or how to manage employee absences on top of other benefits like FMLA, Short-Term Disability (STD) and Long-Term Disability (LTD).
It might be tempting to say, “We’re not a New York based organization, so this doesn’t matter to us.” But that’s not correct. If you have an employee who works in New York for more than 30 days, this law applies to you. And even if this law doesn’t apply to you right now, the popularity of paid family leave is growing. According to Pew Research Center, Americans largely support paid leave for workers. So, it makes good business sense to watch this trend.
A Brief Summary on Paid Family Leave Trends
While this most recent news is specific to New York, it’s reflective of a broader trend organizations need to monitor. One aspect of the paid family leave trend that’s worth noticing is that all PFL laws are not the same. In fact, there are four different types of paid leave options currently found in the workplace.
- Accrued Paid Leave: This is a state law where the employer is not mandated to provide any paid leave but if the employer does provide paid leave, these laws require the employer to allow the employee to take it for enumerated reasons and it must be job protected. Presently, eight states (CA, GA, IL, ME, MD, MN, OR, WA) have such laws in place, although GA’s law does not provide job protection.
- Paid Family Leave Insurance: This is a benefit administered by the state or through an insurance contract in some instances which provides income replacement to an employee who needs to miss work to attend to covered family events. Typically, the employee pays for all or part of these benefits through payroll deduction and then files for benefits with the state or the insurance company. It may or may not provide job protection. Currently, California, New Jersey, and Rhode Island have this benefit in place. New York added this type of law on January 1st when the NY PFL becames effective. Washington and Washington, DC will add Paid Family Leave Insurance laws in 2020.
- Employer Mandated Paid Leave: These are laws passed by states, counties, or municipalities that mandate that employers provide paid leave to employees for enumerated reasons. Eight states (CA, OR, MA, CT, VT, AZ, WA, RI) and Washington, DC have some version of these laws in place or have recently passed such laws. In addition, over 30 cities and municipalities have passed their own paid leave laws. Typically, employees accrue time under these laws based on how many hours they work in the state or municipality, regardless of where their office may be.
- Voluntary Employer-Provided Leave: Employers choose to provide paid leave to employees when not legally required (i.e. paid parental and/or caregiver leave.) Since 2015, at least three dozen large employers have announced paid family leave programs including Microsoft, Amazon, Dow Chemical, JPMorgan Chase, and Proctor and Gamble.
Employers need to understand the advantages and challenges of paid family leave so they can make strategic decisions about what’s best for their workforce. For example, over 50 Unum customers are offering Paid Family Leave benefits so they can provide their employees with best-in-class benefits.
The Pros and Pitfalls of Paid Family Leave
The biggest challenge with any type of paid leave legislation is the impact it has on other laws. There are several types of paid leave mentioned in this article. Employers need to understand what laws impact them, when they take effect, and how they overlap existing laws. Internal policies and procedures will have to be modified to reflect the requirements of the law.
Another pitfall that organizations need to recognize is that many state and municipal paid leave laws don’t require the employee to be headquartered in the state. So, for example, if an employee spends time in a city with an Employer Mandated Paid Leave Law, they may be accruing paid leave even if they are headquartered in a state without paid leave laws. Additionally, the employee may only be allowed to use the paid leave when they are working in the city in which they accrued it.
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The good news is that a 2014 report from the President’s Council of Economic Advisers indicated that 90% of employers affected by California’s paid family leave initiative reported either positive or no noticeable effect on profitability, turnover, and morale. The key is developing a strategy for managing leave benefits.
Strategies for Managing Leave Benefits
Regardless of whether you’re in a state with paid leave benefits, there are a few strategies to consider for effective leave benefit management.
- Stay current with legislation. A piece of legislation could be introduced at any moment that would preempt mandates and change legislation. The Society for Human Resource Management’s Policy Action Center monitors key legislation on a federal and state level. You can sign up to receive calls to action so you don’t miss important opportunities to express your point of view.
- Evaluate the organization’s administrative burden. In a survey from The Workforce Institute, it can cost organizations as much as $100K each time a federal, state, or local law is created or changed. Organizations don’t often have time for managing a lot of minutia. They want direct answers to questions like, “How do I coordinate this with salary or paid parental leave?” Many employers don’t know all of the administrative requirements and that there are technology solutions that can help them with compliance.
- Assess the impact of leave benefits on the organization. Many paid leave laws have provisions that allow employees to use their existing Paid Time Off (PTO) or sick leave policies to satisfy the requirements of the state or municipal paid sick leave law but, unfortunately, a lot of employers don’t understand that there is more to these laws than providing the leave and job protections. Many laws also have strict administrative requirements that employers must meet. For example, the company may be providing employees with adequate time off and job protection, but they need to make sure they also comply with administrative requirements such as providing employees a summary of their available paid leave balances within a certain timeframe.
- Learn who the players are. We’ve seen with health care that, due to the complexity of the law and implications to business operations, some providers have backed out of bidding for the business. Organizations will want to know that the provider they choose, especially if it is a single source, is committed to delivering valuable support to clients and their employees.
- Consider a strategic partnership. There are companies like Unum, that work with employers to help them understand the law, reduce the compliance burden, integrate employee benefits administration, and provide access to legal support. For organizations that want to focus on business goals and objectives, it is possible to work with a one-stop-shop they can count on.
Paid Leave Benefits: It’s Not a Question of “If” But “When”
Even if your organization isn’t headquartered in New York, at some point, the issue of paid family leave is likely to surface. It could be because employees are leaving the organization and going to other companies that offer the benefit. It might come up in an employee engagement survey as a benefit that employees value.
Or it could be introduced as a law. Five states have current laws providing paid family leave, though the Washington state law doesn’t begin providing benefits until 2020. Many others are considering it. Meanwhile, President Trump’s proposed 2018 budget includes a requirement that states provide up to 6 weeks parental leave. What’s important is understanding the complexities of paid family leave so your organization can make the right decisions for its current and future workforce.