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Absence Management: Which Way is Up?

Three Essential Considerations to Evaluate When Selecting Your Leave of Absence Administrator

Buried in paperwork, endless research of new legislative changes, improving processes, reviewing company policies and administering leave of absence (LOA) requests, HR professionals seem to have very little time and minimal resources to understand which way is up, relative to absence management.

As a result of HR professionals facing an endless supply of challenges and obstacles in the area of absence management, statistics show that there is an emerging trend for employers to consider outsourcing this complex function. While outsourcing the LOA function may shift the HR burden from internal to external responsibilities, there are still a number of important issues to consider when evaluating the most suitable and effective solutions.

Below are the top 3 strategic considerations HR professionals and employers should evaluate when selecting the right company to administer your LOAs:

    1. Insurance-Based vs. Non-Insurance-Based LOA Administrators

      Which option is best for you and your organization? There are several group life and disability insurance companies who are offering LOA administration to be bundled with group insurance plans. Among prominent insurance companies, the potential benefits in a bundled LOA and group insurance program might include discounted LOA administration prices, primarily due to the revenue and business gained via insurance premiums.

      Additionally, insurance companies that offer the bundled program will tout their integrated disability claims management along with LOA administration which certainly sounds attractive. However, HR professionals and employers should cautiously consider some potential challenges in such an arrangement. For example, employers should consider the possibility of receiving extraordinarily high group insurance renewals from the same carriers who are administering their LOAs. If that were to happen, you could be facing a tough decision to possibly un-bundle these services resulting in the restructuring of the LOA function as well as changing group insurance options due to a large renewal increase.

      On the other hand, non-insurance-based LOA administrators will not have the problem of future insurance renewals being intertwined with the LOA services but most of these administrators typically charge higher fees primarily due to the fact that there is not additional revenue gained from insurance premiums. That said, the emerging demand of LOA outsourced services in today’s marketplace has resulted in a growing and competitive LOA administration industry where employers should be able to capitalize on selecting an unbundled LOA administrator with high service quality at a competitive price.

    2. LOA Policy Reviews, Updates and Development

      How long has it been since your company reviewed your LOA policy, and are you confident your policy has been updated with the most recent changes? If your answer is like many employers, it might be time to conduct a comprehensive review of your LOA policy. With that in mind, you should consider selecting an LOA administrator that has the resources to provide you with guidance and best practices for a comprehensive review. In addition to the Family Medical Leave Act (FMLA), there are numerous statutory compliance requirements nationwide in this area.

      Almost every year, there appears to be new legislation either at the Federal or State level, so it is imperative that your administrator has the resources to keep up with these changes. Moreover, if your company is doing business in multiple states, there is added pressure to ensure you are meeting compliance requirements, or you could be facing significant penalties, and could be subject to potential liability related to lawsuits.

      According to the Society for Human Resource Management (SHRM), the average cost to defend an FMLA lawsuit is $78,000, regardless of the outcome. Employees who successfully sued for wrongful termination based on FMLA Absence received on average between $87,500-$450,000 in damages (Source: EEOC).

    3. The “Interactive Process” of Absence Management

      The most effective LOA administrators are truly business partners with their clients. HR professionals and employers should evaluate the communication strategies offered by LOA administrators, and consider the LOA team who will be responsible for interacting and communicating directly with your employees. Keep in mind that when you decide to outsource this important function, you are also deciding to allow the selected LOA administrator to represent your company and your HR department.

      If you select an administrator that is poorly communicating and educating your employees about their options during their LOA process, this experience could reflect badly on your company and your department. Remember that employees who are requesting LOA are typically discussing some of the most sensitive and personal topics you can imagine.

      Your LOA administrator should have experienced professionals who are qualified, professional and empathetic to your employee’s needs. If you’re not careful and in a worst-case scenario, you could have an employee that might build resentment with your company resulting in a lawsuit largely due to the fact that their experience was perceived as uncaring and erroneous.

      In addition to the ability to effectively communicate employee options, your LOA administrator should provide regular communications to your HR department regarding your group’s LOA activity. Systematic communications between your HR department and your LOA administrator is a critical component to a successful partnership.

Capitalizing on emerging trends such as outsourcing absence management, when applying thoughtful and careful analysis, can greatly benefit your HR department and your company. Without a doubt, the complexity of FMLA and all of the various LOA laws can create such a workload that HR professionals feel buried with paperwork. However, if you are able to partner with the right LOA administrator, you will have a better chance of figuring out which way is up!

Contact your OneDigital Consultant to find out more about outsourcing your leave management strategy. Want to learn more? Register for the upcoming [Webinar] Trending: How Companies are Affected by Leaves of Absence in 2019.

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