How do we handle payment for benefits when an employee is on leave?
The question of paying for benefits when an employee is on leave is one that has been occurring pretty frequently. Sometimes this is a question that gets asked during events that are planned in advance, for example, maternity leaves. But, unfortunately, there are also plenty of unexpected medical conditions and dreaded accidents where we need to figure out how to handle payment for benefits while an employee is on leave.
As an employer, let us address how you handle the employee’s responsibilities and your responsibilities when it comes to paying for insurance and other employee benefits during a leave of absence.
When an employee is absent, how do we handle paying for their coverage?
This is the easy but sometimes painful part as an employer. Unless your employee has exceeded their Leave of Absence period either mandated by FMLA, local City or State ordinances, or the new COVID Leaves under the Families First Coronavirus Response Act (FFCRA) ...you get to keep paying the bills for the full cost of both the Employer contribution and the Employee’s contribution of the benefit plans elected by the employee or employees in question. However, if an employee has exceeded all allotted time off and is not returning to work, you may terminate coverage and offer COBRA options just like any other terminated employee, thus ending your responsibility.
Sometimes, in a planned event and with a personal conversation about monetary preferences, the employee going out on leave may choose to pre-pay their portion of the benefit programs. This isn’t the most common scenario, but it does happen from time to time.
When an employee is returning, how do we handle their balance due?
When the employees are now returning to work and earnings and they have a balance due for their insurance premiums, it is best for the employer and employee to agree in writing to an affordable repayment schedule.
Each employee likely earns a different rate of pay and their net income is going to be unique. Because of this, it is advised that your company has the flexibility to take each employee’s situation on a case-by-case basis to ensure that the “catch-up” method does not impose a financial hardship on the employee.
For some employees, they may agree to “doubling up” on their benefit premiums for the next few payroll cycles. For others, that may not be affordable, and they may agree to equal payments over the next 8, 10, or 12 pay cycles. The agreed-upon amount should be reasonable and certainly not indefinite.
For example, you may indicate that all payments must be caught up no later than, for example, 12 pay cycles from the date of return to work. But, again, do consider flexibility for low wage earners or those who are working part-time or variable hour schedules. To help document your agreements, ask us for our sample Payroll Authorization Form that you may use for this purpose.
Many states have published guidelines that you should review as well. So, be sure to check our state!
Bret started Generous Benefits in 2019 after 20 years of working inside the Employee Benefits industry with the goal to create a company that focused on improving communities through benefits. And the term Generous was no mistake, as Bret thinks in terms of broad scope ideas, processes, and technologies that can improve a person's life or the community as a whole. With this idea that Generous Benefits weren't just your typical checklist of commonplace insurance or wealth savings plans, but that a benefits package has room to be stretched, tailored, and curated to make a desirable long-term impact.
Bret also spends time coaching other insurance agencies with Q4Intelligence and participates with thought-provoking communities like Health Rosetta and the Free Market Medical Association to help expand his understanding and learn from others.