Outdated worker leave practices may be costing employers money

“Overall, the study shows that recent shifts in employer attitudes have triggered many employers to align their leave policies with the needs of their workforce, corporate values and peer standards,” Trapenasso said. “Administering employee leaves can be complex, particularly if required to comply with multiple state leave regulations. But there are ways to streamline policies to make them efficient and compliant at the same time.”

Updating worker leave practices

Employers using outdated worker leave management practices may be leaving money on the table.

“Despite efforts to ensure compliance, many employers are finding it a challenge to create comprehensive leave policies,” said Maria Trapenasso, Human Capital Solutions national practice leader for NFP, a leading benefits consultant. “Hybrid, remote and dispersed workforces have only added to the challenges. With HR leaders taking on more and more within their organizations, it can be difficult to stay on top of regulatory complexities, avoid missed financial opportunities and provide the support employees need.”

Related: FMLA: A 30-year celebration (and a call to Congress for paid family and medical leave)

The 2023 NFP Leave Benchmarking Study offers guidance for HR practice leaders on leave policy best practices and compliance as workforce dynamics continue to evolve. Among the key findings:

• 77% of employers offer the same amount of paid time off to exempt and non-exempt employees
• Although roughly half of employers offer maternity and parental leave, three-fourths of them still do not offer family caregiver leave
• Three-fourths of parental leaves do not differentiate between primary and secondary caregivers
• One-fourth of employers provide paid bereavement leave for miscarriages and failed IVF attempts
• 6 in 10 employers provide more than 5 paid sick days each year

The report encourages employers to take a closer look at benefit policies in several areas:

• Maternity. Employers be may spending more than necessary if they are not coordinating their maternity leave offerings with short-term disability (42% do not) and state-provided medical leave benefits (63% do not). The state is the first payer (where applicable in states with medical leave laws) and then the short-term disability plan will cover the benefit up to a certain percentage (most commonly 60% up to a weekly maximum). This then allows the employer to provide salary continuation, which will “top up” the benefits the employee already is receiving from short-term disability and/or state-provided benefits (if they chose to do so). It is only in cases where the organization does not offer its employees a short-term disability benefit (or is not eligible for any state-provided medical benefits) that the employer would need to consider paying 100% of its maternity leave benefit.
• Parental leave. Parental leave is most prevalent for the birth of a child, and employers have the autonomy to craft their own policies. The best practice is to provide parental leave for all three types of leave (birth, adoption and fostering) equally under one policy to allow new parents to bond with a child. Creating equitable policies for all employees that are in line with federal and state guidelines provides fairness and ease of administration for employers. On average, 23% of employers offer between seven and 12 weeks of paid parental leave to bond with a newborn, adopted or fostered child.
• Family caregiver. There has been a 26% increase over the past two years in the number of employers who offer family caregiver leave to their employees. Fifty-seven percent of them offer less than six weeks with full pay. About 48 million people in the United States, a majority with full-time or part-time jobs, provide unpaid care to older or disabled adults. Permitting employees to take time intermittently is a best practice, because it allows employees to take time off to attend doctor’s appointments and needed medical treatments for their loved ones.
• Vacation, PTO and sick time. A traditional vacation policy offers time off strictly for vacation, while a PTO policy is typically “one bucket” of time for sick, personal, vacation and other reasons as designated by the employer. PTO plans are easier to administer, because the employee typically does not need to provide the reason for taking time off. Employers may want to exercise more control over the use of paid time off rather than providing one bucket of time for all employees. Unlimited PTO plans are not as common, because studies have indicated that employees actually tend to take less time off when they are offered an unlimited amount of paid time off. For sick leave, the best practice is to research the maximum state-required leave that an employer must provide and create a policy that either meets or surpasses that amount of required sick pay, if feasible for the company. Frontloading paid sick time also is permitted in most cases. That way, employers can bypass using varying accrual methods by providing paid sick time upfront at the beginning of the plan year.

“Overall, the study shows that recent shifts in employer attitudes have triggered many employers to align their leave policies with the needs of their workforce, corporate values and peer standards,” Trapenasso said. “Administering employee leaves can be complex, particularly if required to comply with multiple state leave regulations. But there are ways to streamline policies to make them efficient and compliant at the same time.”