Reproduced with permission from Benefits Magazine, Volume 60 No. 2, March/April 2023, pages 36-40, published by the International Foundation of Employee Benefit Plans (www.ifebh.org), Brookfield, Wis. All rights reserved. Statements or opinions expressed in this article are those of the author and do not necessarily represent the views or positions of the International Foundation, its officers, directors or staff. No further transmission or electronic distribution of this material is permitted.
Paid parental leave has been a hot topic over the past few years and for good reason. Proponents of such programs point out that the United States is the only industrialized nation that does not provide federal paid parental leave. This means that some parents who take time off for the birth of a child or to bond with a baby, foster child or adopted child (referred to as “parental leave”) do not have a guaranteed source of pay covering their leave. While President Joe Biden proposed paid family leave as part of his Build Back Better Act, that legislation stalled in the Senate at the end of 2021 and never turned into a reality. Accordingly, the question remains—What sources of pay currently exist for employees who take time off for parental leave?
This article describes the types of paid and unpaid leave options that employees may use to cover parental leave in addition to discussing how employers may help employees understand and access these options.
For employers that do not offer a paid family leave program, providing leave navigation assistance to their employees may be one way of building goodwill and retaining employees.
Understanding Job-Protected Leave vs. Paid Leave
Employees navigating the legal landscape of taking a parental leave need to understand the difference between job-protected leave and paid leave. Employees often mix the two concepts when planning their time off. The federal Family and Medical Leave Act (FMLA) has been in existence since 1993 and provides up to 12 weeks of job-protected leave that is unpaid. Employees on FMLA leave are entitled to time off from work and to be restored to their job or to an equivalent position when they return to work, but they are not entitled to any pay during their time off under FMLA.
Since FMLA does not provide paid leave, employees taking FMLA leave must look elsewhere if they want to get paid during parental leave. However, they are often unaware or uncertain of what types of pay they can use to cover their unpaid FMLA leave. This creates an opportunity for human resources (HR) and benefit professionals to discuss what resources are available with employees.
If an employer does not offer its own internal paid parental leave program, there are a number of other options that HR and benefit professionals can communicate with employees. The availability and amount of pay will differ from employee to employee, based on a number of factors, including the state program offered where the employee works and the employee’s accrual of vacation and sick leave. Employees may need assistance uncovering and coordinating resources. Once the employer knows an employee plans to take FMLA leave, setting up a meeting to discuss paid leave options is an important first step. This will help employees avoid losing out on available paid leave options as they welcome a new child into their family.
Without such options, unpaid parental leave can create a financial hardship for employees. According to a survey conducted by the Urban Institute, there are significant disparities in paid leave access for part-time employees, employees with lower incomes and employees without college degrees. <1> In addition, Hispanic/Latinx and Black workers are less likely to have access to paid leave than white workers.
Following is a look various sources of pay during parental leave that may be available to employees.
Vacation and Sick Leave
One of the most common sources of pay during parental leave is an employee’s own accrued vacation, sick leave or paid time off (PTO). The FMLA regulations permit employees to use their own accrued paid leave during unpaid FMLA leave in some circumstances.<2> If an employee chooses not to use available accrued leave voluntarily, the employer may require the employee to substitute paid accrued leave for unpaid FMLA leave. It is important to note that an employee who uses paid accrued leave during unpaid FMLA leave must use a type of paid accrued leave that the employer’s applicable leave policies permit. This means that the employee must satisfy the requirements of the employer’s normal leave policy before substituting in their paid leave for unpaid FMLA leave.
For example, employees often use vacation or PTO to cover pay during parental leave because most employer policies do not place conditions on when vacation and PTO can be used. However, some employer sick leave policies allow employees to use sick leave only under certain circumstances, such as when the employee or a family member has an illness, disease or medical condition or needs to attend a doctor’s appointment for treatment or preventive care. In many situations, such policies do not apply sick leave for time off to bond with a child when there is no pending illness, disease or medical condition. HR and benefit professionals should ensure that employees going on parental leave understand what the employer’s leave policies allow and do not allow.
Since vacation, PTO and sick leave are commonly used to cover pay, HR and benefit professionals should make sure that employees understand that the employees themselves fully fund these benefits. They have to earn, accrue and save their own paid leave entitlements to use them during unpaid parental leave. HR and benefit professionals should communicate how much accrued and available vacation, PTO and sick leave an employee has before the employee begins parental leave. Not all employees have enough accrued vacation and sick leave available to cover the entire duration of their parental leave, and they should be aware of that in advance. Furthermore, not all employers offer vacation and sick leave benefits to begin with. Only 16 states, the District of Columbia, and a handful of cities require employers to offer sick leave. No state requires employers to provide vacation.
State Paid Family Leave Programs
State paid family leave programs serve as another source of pay for some employees. These programs cover leave for a range of reasons including the birth of a child and to bond with a baby or a foster or adopted child. Some states fund these programs solely with employee payroll deductions, while other states use funding from a combination of employee and employer deductions. Seven states and the District of Columbia currently offer paid family leave programs to eligible employees (California, Connecticut, Massachusetts, New Jersey, New York, Rhode Island, Washington and the District of Columbia). There are also four states that have enacted paid family leave programs that will go into effect in the next few years (Oregon, Colorado, Maryland, and Delaware). While more states are introducing legislation for state paid leave programs, the majority of states do not have such programs.
If an employee works in a state that offers a state paid family leave program, the employer should be aware of its state’s requirements for notifying the employee about how to apply for it. Some states, such as California, require employers to provide an informational brochure to employees about paid family leave when employees request leave to bond with a new child. These programs set their own eligibility requirements, including minimum lengths of employment and employee and/or employer contributions into the program. These programs also may not be available to every employee in the state, including federal employees, public agency employees, employees of businesses located on tribal land and self-employed individuals. For example, in California, public sector employees are often not eligible for California’s Paid Family Leave Program because public agencies and their employees are not required to participate and many do not pay into the program.
Each of the state paid family leave programs provides partial wage replacements, which means that they cover less than 100% of the employee’s wages. As a result, an employer and employee should coordinate state paid family leave benefits with other paid leave resources when they are available. This means that the employer and employee, with the state paid family leave program administrator, should communicate about the weekly benefit amount the employee receives from the state to determine what other sources (if available) will make up the remaining portion of the employee’s wage amount.
The Federal Employee Paid Leave Act
Federal government employees receive paid family leave through the Federal Employee Paid Leave Act (FEPLA) in connection with the birth of a child or the placement of a child with an employee for adoption or foster care. FEPLA provides up to 12 weeks of paid family (parental) leave to covered federal employees. Federal government employers should ensure their employees taking parental leave are aware of this option.
Practical Difficulties in Administering Paid Parental Leave Benefits
Even after an employee understands what sources of pay cover their time off, HR and benefit professionals are left with the difficult task of monitoring several different pay sources. Further complicating leave administration is the confusion that can arise when assessing which sources of pay apply during which weeks of parental leave, which sources are only partial wage replacements, and what sources of pay fill in for the rest of the employee’s wages.
One of the most common administrative disconnects is transitioning sources of pay when an employee is on leave for giving birth. For example, the employee will begin leave with a period of pregnancy disability. After the employee recovers from pregnancy disability (as certified by a doctor or medical professional), the employee will then have the opportunity to take additional time off for purposes of baby bonding. The pregnancy disability period and the baby bonding period are both covered under the 12 weeks of job-protected FMLA leave, but the sources of pay can differ. State or employer-provided disability insurance and the employee’s paid sick leave may provide pay during the pregnancy disability period. However, once the pregnancy disability period ends and the employee transitions to the baby bonding period, the sources of pay change because the employee no longer has a disability. During baby bonding, state-provided paid family leave and the employee’s vacation or PTO may cover pay.
It is crucial for HR and benefit professionals to communicate with payroll staff during leave and particularly during the transition from pregnancy disability to baby bonding. Payroll staff may not be aware and may not be tracking when an employee’s pregnancy disability ends and may not know when to switch from one pay source to another. This can result in payroll deducting an employee’s paid sick leave during the entirety of the employee’s parental leave even though an employer policy may not allow sick leave for baby bonding purposes. The practical reality is that this leaves employees with the impression that they can use sick leave to cover the baby bonding phase of their parental leave, even when it conflicts with the employer’s policy and intent. To avoid this situation, HR and benefit professionals should regularly report to payroll staff when there are changes to an employee’s parental leave status, such as when an employee ends the pregnancy disability period and enters the baby bonding phase.
Conclusion
It can be a daunting lifestyle change to bring a new baby into the world or welcome an adopted or foster child into a family. The entire purpose of parental leave is to help employees with this transition. However, there is no one-size-fits-all resource to cover wages for the U.S. workforce during parental leave. With assistance from HR and benefit professionals, employees can gain knowledge about the types of pay resources specifically available to them during unpaid FMLA leave, which allows employees to move forward with planning their time off and entering this exciting stage in life.
Endnotes
<1>https://www.urban.org/research/publication/access-paid-leave-lowest-among-workers-greatest-needs
<2>29 CFR Section 825.207(a).)