The Family and Medical Leave Act and the Americans with Disabilities Act have been around for decades, but today’s employers continue to struggle with managing employee leave.
That’s why, in response to overlapping state and federal laws and expanded mandates for disability leave coverage, more employers are outsourcing their paid leave plans by a rate of double digits in the last two years. This was the finding of the 2016 DMEC Employer Leave Management Survey, a study of more than 1,100 employers of various-sized American businesses. The study was sponsored by the Disability Management Employer Coalition, and was conducted by Spring Consulting Group.
Among U.S. employers with 50 to 999 employees, the number that outsourced their state family and medical leaves to third-party administrators was 31% in 2016, compared to 26% in 2015. The numbers for federal FMLA were 34% last year versus 25% in 2015.
For employers with more than 1,000 employees, the adoption rates were higher: 41% outsourced state family and medical leaves in 2016 while only 36% did so in 2015. Also, these larger firms outsourced federal FMLA at the rate of 45% in 2016 while 35% did so in 2015.
“Although FMLA has been around since 1993 and employers pretty much know what they have to do, there’s a lot of perceived activity around compliance and ensuring that they can meet all of their compliance requirements under FMLA,” says Terri Rhodes, CEO of Disability Management Employer Coalition.
Employers also are looking to technology to manage paid leave in greater numbers.
When it comes to managing FMLA procedures, 22% of firms use a home-grown system, 43% use an externally-developed system that is run internally or outsourced and 33% perform this task manually. Three percent did not know the answer to this technology question.
For managing state family and medical leaves, the numbers diminish compared to FMLA technology implementations. DMEC found that 19% reply on a home-grown system, 38% rely on an externally developed system, run internally and outsourced, and 29% run manual system. Fifteen percent did not know the answer to this question.
DEMC noticed that smaller employers are eager to adopt outsourcing. “Employers that have 50 [to] 250 employees are looking for solutions, and so they’re looking for ways in which they can outsource,” says Rhodes.
With amendments to the ADA since its passage in 1990 — which expanded the definition of a disability and required employers to determine whether leave should be a form of accommodation — the burden on executives to manage this, plus FMLA, increases.
“Those two laws just in and of themselves require a lot of employee interaction,” Rhodes says. “They drain resources, especially the human resource part of human resources, and employers are very concerned about compliance because of the Department of Labor strategic enforcement activities.”
These laws and enforcement of U.S. workplaces have had a sharp impact on multi-state employers as they attempt to manage the mandates from one state to another. In the early days of the paid leave laws enactment, Rhodes says business owners offered two weeks paid leave, a week of sick leave and sometimes a day off for the employee’s birthday. They soon discovered that this might have been legal in one state but illegal in another.
With the new state laws and mandates, “it’s been very difficult for those employers who were already providing a sick leave to keep up with all the various requirements in each of the states. Our survey found that employers are just saying, ‘Okay, what’s the top threshold that I need to be compliant with? I’m just going to give everybody that,’” she says.
“They say, ‘I can’t program my payroll system and my time and attendance system with all of these various requirements,’” Rhode says.
Employers are becoming aware that the DOL is taking a look at their family leave and ADA procedures and documentation. In the previous presidential administration, Rhodes says the DOL conducted specific strategic enforcement that targeted large and small employers alike, according to Rhodes. “They were knocking on employers doors and it didn't matter what size. They said, ‘I want to see all your leave of absences that you've been managing for the last two years’ as well as workman compensation claims.
“This has provided some impetus for employers to say, ‘we need to get our act together here,’ she says.
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