Short-term disability. Personal time off (PTO). Sick leave.
How do these programs fit together? And who's accountable for helping the employer make sure their sick pay programs coordinate? You might be surprised to hear my answer: It's you.
Yes, creating a comprehensive sick pay program is in the employer's court. But as their advisor, you can help ensure your clients' short-term disability benefits align with their objectives and fit within their overall plan. This is important, because when not structured properly benefits may overlap, and that limits the value they're intended to provide.
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Whether it's PTO or vacation and sick leave, most employers — 95 percent1 — offer some form of sick pay. Yet more than 40 percent of short-term disability plans currently in place provide benefits that start on the first day. That means an employer may be paying more premium than is necessary to provide coordinated coverage.
Asking the right questions
This is where you can step up and bring the big picture into focus. Use these questions with your clients to get the conversation started:
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What are your goals and objectives for your time off programs?
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If it's a PTO plan, how much PTO do you expect employees to use before short-term disability kicks in, if any?
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Is sick pay coordinated with your short-term disability benefits?
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For sick pay plans, are your employees expected to exhaust all of their sick leave before the short-term disability kicks in, or just a set number of days?
Considering elements of policy design
Your expertise lies in applying what you know about a client's internal paid time off policies to determine the best design for the short-term disability benefit. Consider these two important factors.
When benefits begin — Employers that offer PTO typically expect employees to use some but probably not all of it when they're sick. And employers that offer sick leave instead of PTO may want employees to use it all before the short-term disability benefits kick in. How the employer has it set up will essentially determine the elimination period.
Income from other sources — Income received from other sources such as PTO and sick pay may reduce an employee's short-term disability. If the employer's goal is to allow their employees to use accumulated PTO or sick leave to get their pay back to 100 percent, the policy should be set up to not offset.
Because there's no hard and fast rule and sick leave policies will vary from employer to employer, it's important to assess the needs of each client individually to ensure the elimination period and coordination with income from other sources align with the employer's paid time off polices.
Flexibility is key. Recommend carriers that offer a range of alternatives, including quoting and cost. And continue to think about disability in a different way, as just one element of a client's sick pay plan. Being a trusted advisor means providing the broad view, helping clients build each chapter into a fully integrated benefits story.
1 2015 Employee Benefits: A Research Report by the Society for Human Resource Management (SHRM); March 2015; available for SHRM members at www.shrm.org/research/surveyfindings/articles/pages/2015surveyfindings.aspx; viewed April 22, 2016.
EC4609 | 05/2016
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