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Outsource Your Leave Management This Year

It is becoming increasingly challenging for human resources departments to keep up with tracking, verifying and administering leaves of absence. Beyond that, if you are non-compliant, you could be facing enormous financial penalties.

More and more employers are looking for solutions and ways to outsource this function because the cost of mismanagement has become too large of a risk to take. Here are three of the top reasons why outsourcing leave management is a growing trend for employers large and small:

  • The laws are piling up.

    There are eleven states and the District of Columbia that have adopted Paid family leave policies, and many others are in the process of passing such programs in the near term. With these new laws going into effect, it has become increasingly difficult to ensure compliance while simultaneously tracking these local laws and paid leave alongside the Federal FMLA provisions. By outsourcing leave administration, you can be sure that you are kept abreast of the new requirements and minimize the impact that they may have on your business. With so many laws and increasing complications, it can be tempting to approve every leave request that comes across the desk, but it is extremely important to continue to treat each leave fairly, equally, and validate leaves to avoid abuse.

  • Leaves are becoming increasingly complicated to track and administer.

    A recent SHRM study showed that about 40% of HR professionals reported approving FMLA requests that they believed were not legitimate. The reasons they cited were related to the administration and timing of intermittent leaves and the validity of documentation/medical certification. With an increasing number of leave laws across the country, and often multiple leave laws in the same state, the complexity of administering these benefits can be overwhelming. A recent study done by Guardian showed the top challenges that employers face in managing leaves are coordinating different types of absences, interpreting federal and state leave laws, keeping track of intermittent FMLA leaves, ensuring fitness for duty before returning employees to work and applying the ADA (American with Disabilities Act). The good news is, outsourcing your leave management can not only alleviate the burden that is being placed on your HR department, but it can also prove to have some serious return on investment. The 2021 Guardian Absence Management Study showed that employers who outsourced their leave administration reported to have reduced their costs overall, provided a better employee experience, increased compliance, and improved return to work rates.

  • The cost of mismanagement is enormous.

    In 2019, 51.64% of investigations were initiated independently by the Department of Labor, resulting in over $334 million in back wages for more than 313,941 workers. Furthermore, the number of ADA or FMLA related lawsuits has climbed steadily over the past 10 years. According to EEOC statistics, the average cost of defending an FMLA lawsuit is $78,000, and if you’re found guilty of wrongful termination, damages can range from $87,500 to $450,000. Aside from the obvious cost of investigation and legal action, there are several hidden costs of mismanaging your absences. The first is a reduction in productivity. The average cost to employers of employee absence is more than 6% of payroll. By better managing the process and getting employees back to work sooner, you can reduce this burden. The second cost is misuse or abuse of the law. Companies who self-administer family and medical leaves have significantly higher rates of misuse because it is very challenging for employers to manage intermittent leaves and thoroughly validate the reasons that an employee may need to take leave. Using a third party to manage this process will not only ensure that the leaves are valid, but that they are handled fairly and non-discriminatorily every time.

The changing legal landscape coupled with the steep cost of handling family and medical leaves incorrectly or inconsistently has made outsourcing solutions shift from a “nice to have” part of the benefits program to a necessity. The good news is, more and more insurers and third-party administrators are making these services available at very affordable prices to organizations that have as few as 50 full time employees. The peace of mind in knowing that you are in compliance and not at risk of paying a penalty is well worth the dollars spent.

For more information, watch the recent on-demand session Leave of Absence Management: FMLA and Beyond.

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