Designing an equitable paid family leave program
A patchwork of state laws
Across the country, more employers are realizing that to compete for talent, they must provide top-tier benefits. Over the years, many more companies have started offering paid bonding leave for new parents.
At the federal level, the U.S. does not have any paid family leave law that applies nation-wide. In the absence of a federal law, a growing number of states have passed laws to create paid leave insurance programs, funded by state taxes, that will compensate employees while they take time away from work to bond with a newly born or adopted child.
To complicate matters, each state’s paid family leave law is unique. Each one provides for a different amount of time off, under different circumstances, and has different employee eligibility and employer coverage thresholds. The variety in these laws can make compliance a difficult – if not impossible – task for employers and their HR departments.
The problem with multi-state madness
Unfortunately, the complicated patchwork of state laws has had the ironic effect of making it more difficult for multi-state employers to administer paid leave policies in different jurisdictions. Employers must make sure their policies comply with each state’s law. Or, employers must modify their policies to conform to requirements in different states.
Providing equitable leave pay is an especially difficult subject. The varying rules for leave insurance in different states make it even more difficult for employers to pay employees equitably. For example, each state has different rules regarding:
When an employee is eligible for leave insurance payments
How to calculate the rate at which the employee will be paid while on leave
The length of time during which the employee will be compensated
The qualifying reasons why an employee can use paid leave
The varying rules can create problems for employers that want to pay employees fairly across multiple states.
An example
For example, imagine an employer has an employee in Illinois and another in New York. Aside from their locations of work, the employees are otherwise exactly the same: they earn the same salary, have both worked for the same tenure, and are both pregnant. They both have their babies and start their bonding leave on the exact same day.
Employees in New York who have a baby can receive payments from the state’s paid family leave program. Illinois has no such program.
So, if the employer wanted to provide paid family leave and kept compensating these two employees with their usual salary during the course of their time off, the net result would be inequitable: the Illinois employee would take home her usual compensation. But the New York employee could be overpaid if she receives her full pay from her employer and wage replacement payments from New York’s paid leave insurance program.
Although well-designed paid family leave programs can promote workplace inclusion and equity for new parents, the multi-state madness and varying rules for leave insurance payments from different states can foster unfairness and compliance headaches for employers.
Finding solutions
Employers can – and should – administer paid family leave programs for their employees. But the programs must be carefully designed to avoid unequal pay structures.
There are a few steps employers can take to promote multi-state fairness in their leave pay programs:
Keep a close watch on the complicated and quickly developing area of paid leave laws.
Understand how different states calculate paid family leave.
Run calculations to determine how much a particular employee will earn from a state while on paid family leave, and then determine what the employer should pay to equitably supplement that leave insurance compensation.
Compliance isn’t easy, but with a robust compliance program, it is possible to cut through the multi-state madness and to pay employees fairly and equitably.
EquiLeave helps employers administer their paid family leave programs by assisting with the process of calculating supplemental leave payments. For more information, click here.
