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Do you Know How to Coordinate Parental Leave Benefits?

How would you handle a situation like this: 

An excited employee sends you an email saying that she’s expecting a child soon. The state she works in recently implemented family leave benefits.  They also require sick and safe leave. And your company has a disability policy in place with an insurance company. And lastly, your company just put a paid leave policy in place a few months back. 

Scenarios like this are common, but they often leave business leaders scratching their heads. Many don’t know where to begin. Business leaders then find themselves trying to play referee between employees, state benefits agencies, private insurance carriers, and the company itself.

Here are some best practices that will help your company maximize employee benefits while minimizing employee confusion:

Understanding State-Funded Benefits

Nine U.S. states plus the District of Columbia offer or will soon offer some form of paid family leave benefits. These states are California, Colorado, Connecticut, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Washington.

If you have employee these states you should determine whether they’re eligible for benefits. It may be that only birthing parents are covered for disability coverage after they give birth. Or non-birthing parents may eligible for family leave, but not disability. In addition to the states listed above, there are many more with proposed parental leave bills in the pipeline.

Each state has its own system and process for applying for state benefits. For example, most employees who give birth cannot submit a claim for disability until the date of birth or date of adoption. However, some states will provide disability prior to a birth date with a letter from a licensed physician.

Utilizing Private Short-Term Disability Insurance

In addition to state-funded benefits many employers offer private short-term disability insurance (STD) as an employee benefit. These policies cover a percentage of an employee’s wages during a period of disability.  The coverage often comes at a relatively low premium cost to the employer and/or employee. However, disability benefits are only available to birthing parents and typically cover 6-8 weeks after birth.  

Most private short-term disability (STD) policies require employees to apply for available state-funded benefits before the policy will pay out a benefit.

STD benefits are then “offset”, or reduced, by the amount of the state benefit so that the employee doesn’t receive more in payment than the coverage total during the period of disability. 

Many private STD insurers allow employees to submit claims in advance of the due date. We encourage employees to submit their claims in advance of their child’s birth to avoid delays in processing. 

Employees should note when insurance payments are made (e.g. lump sum, weekly, monthly) and whether they’re paid via check or direct deposit.

Tying it all together

After state benefits and private insurance benefits, there’s one more category of benefits available to employees. Those are whatever benefits the company offers.

Companies may allow – or even require – employees to use accrued sick leave or other Paid Time Off to supplement state benefits and/or STD insurance. However, employees should never receive more than 100% of their regular weekly wages when you combine these sources of income.  Consider including a policy in your employee handbook to address this. 

Companies should give payroll a heads up we in advance of an employee’s leave. This will allow the payroll team to make sure the employee isn’t underpaid or overpaid while they’re on leave. Consider creating a calendar with the employee that outlines due date, payment date(s), paid time off dates, coverage by state laws, and leave eligibility under federal/state laws.

Note that paid leave benefits are separate from FMLA or state analogs.  FMLA and similar state laws provide job protection during a period of family or medical leave but do not require payment during that leave.

Lastly, we recommend that employees gather and become familiar with any required forms and paperwork well in advance of their due or adoption date. If the employer has resources available, they can assist their employees with this process.

The next time you’re confronted with an employee needing parental leave reach out to the team at Suitless.  Our Core HR service provides insight and advice into specific leave scenarios We can also work directly with insurers and state agencies to make sure companies and employees optimize parental leave benefits.

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