For small companies and organizations with fewer than 50 employees, leave management is often a DIY approach that consists of manually managing paperwork or using a smartphone app for scheduling. (Photo: Shutterstock)
Before the COVID-19 pandemic, leave management was, put simply, more manageable. Today, overwhelmed human resources professionals navigating the pandemic are hard-pressed to find the time to accomplish administrative tasks, track furloughed employees, manage existing leaves of absence, create physically safe work environments, support employee well-being and much more.
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Because of these and many other pressures on their resources, HR professionals are frequently turning to their trusted broker representatives for help to keep up and find integrated solutions associated with the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), as well as any other short-term acts of leave-management legislation designed to aid businesses. FMLA — a valuable benefit that allocates a specific amount of time away from work and provides partial wage replacement up to a designated amount — is perhaps the best known of them all.
For small companies and organizations with fewer than 50 employees, leave management is often a do-it-yourself approach that consists of manually managing paperwork or using a smartphone app for scheduling. As companies grow, a scalable solution may include a combination internal/external approach, known as co-sourcing, according to the Society for Human Resource Management.
For complex or time-consuming tasks, such as payment coordination, medical review and obtaining medical certification, clients may turn to a vendor. When looking for that vendor, brokers are in the best position to offer a recommendation. Brokers who work with an insurance carrier who has extensive disability expertise, married with ready access to a best-in-class third-party leave-management vendor can help create a better overall customer experience.
Outsourcing leave management has become increasingly more popular. Between 2014 and 2018, outsourcing of federal FMLA increased at an average annual rate of 7%. That was 47% for large (1,000+) employers (up from 35% in 2014) and was 31% for small (50+) employers (up from 21% in 2014), according to Disability Management Employer Coalition (DMEC), a not-for-profit.
Here are four reasons why outsourcing absence management to a third party is a good business decision:
1. Outsourcing FMLA may lower cost. Outsourcing frequently produces lower total cost per leave because the administrative skills and legal knowledge of a vendor are their core competencies, according to insurance consultant Skip Simonds. While a vendor's more distant relationship with its client's employees may have disadvantages for accommodations and early return to work, it may have advantages in the vendor's ability to adhere to protocol and consistently approve or deny claims based on established criteria.
2. Outsourcing FMLA offers legal savings. Before the pandemic, 35% of employers had difficulty managing intermittent leaves. Today, layoffs, furloughs, work stoppages and reductions in hours are now part of an upended leave-management landscape. Additionally, changes to FMLA and the implementation of the Families First Coronavirus Response Act (FFCRA) on the FMLA mean there are myriad regulatory issues to be considered.
In such a fluid regulatory and business environment, it's worth taking the time to get things right. According to the U.S. Department of Labor, the cost of defending an FMLA lawsuit — regardless of the outcome — is $78,000. Employees who successfully sued for wrongful termination based on FMLA absence received $87,500 to $450,000 in damages on average.
3. FMLA vendors provide neutrality. FMLA involves a complex arrangement between the employee, their supervisor and their human resources department, as well as a medical professional. And it's sometimes difficult to keep emotions out of leave management. FMLA administration allows for consistent and fair treatment of all employees by taking the personal aspect out of the process.
Vendors know how to navigate the current legal environment, the nuances of health benefits pertaining to coverage, and what is or isn't a qualifying need, as well as what documentation is mandated. They also have access to information and expertise and know the insurance carrier's requirements, which can create a better leave-management experience for both the employer and employee.
4. Your clients can put their focus on people, not product. A May 2020 survey conducted with brokers who do business with OneAmerica indicated that more than 70% of perceived Employee Assistance Programs (EAP) as being the most in-demand service, three times more than the next-highest choice. Allowing an unbiased individual to handle leave administration provides the employer with a chance to reduce their administrative burden and turn to other business needs, such as leveraging EAP to ensure employees are being supported. This is especially relevant due to the ongoing stressors related to the pandemic.
Leave management with integrated short-term disability services that run concurrently with EAP will provide better experiences for your clients and the employees they're trying to help.
Steven Lynch is vice president of employee benefits national sales and service, OneAmerica. None of the organizations mentioned here are affiliates of OneAmerica or its affiliates.
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