When the Family and Medical Leave Act of 1993 (FMLA) was made law, the idea was to protect workers from losing their jobs in the event they had to take time off for the birth of a child or a serious medical condition. The law allowed for states to enact similar regulations that went above and beyond the FMLA. Many states have done so. Based on what we have seen thus far, it could very well be that paid family leave will become the big benefit of the future as more states expand on the FMLA.
Paid family leave is vastly different from the federally mandated family leave provision. Thus, data from the National Council of State Legislatures shows that only three states have paid family leave regulations in place: California, New Jersey and Rhode Island. New York will have its own paid family leave mandate as of 2018.
The Paid Family Leave Difference
The concept of paid family leave should be important to business owners and payroll departments due to its implications for payroll processing and tax reporting. Where simple family leave allows an employee to take time off for work without fear of losing his or her job, federal family leave does not guarantee pay. In other words, any time taken under the federal regulations does not have to be paid time.
Paid family leave in the three states mentioned above is different. It mandates that employees receive at least partial pay, if not full pay, when taking time off for qualifying reasons. Their pay is provided by way of a fund supported through employee payroll taxes. The fund is administered similar to disability funds.
When a worker in California, New Jersey, or Rhode Island takes paid family leave, he or she receives a portion of regular salary as a benefit. What needs to be understood is that the benefit is being paid for through the contributions of all workers rather than just the one collecting benefits. This is what makes paid family leave such a sticky issue from a legislative standpoint.
Paid family leave might be a stronger benefit if it were adopted voluntarily by employers rather than mandated by state regulations and funded through payroll tax contributions. Indeed, that could be where we’re headed in the future. Employers may start offering their own paid family leave as a benefit on par with health insurance and retirement plans.
From a Payroll Perspective
There is little doubt that paid family leave will experience significant growth over the next decade. Whether it remains the domain of state legislatures or employers addressing paid family leave on their own, the expansion of the benefit will have an effect on how payroll is processed. This is yet another reason to consider outsourcing payroll through a qualified company like BenefitMall.
According to BenefitMall representatives, payroll is only getting more complex as time passes. Any introduction of paid family leave, whether mandated or voluntary, adds another layer of complexity to the payroll processing equation. Outsourcing payroll allows the experts to do what they do best so that business owners and executives can channel their company’s resources toward better serving their own customers.
Paid family leave could very well be the most lucrative employee benefit of future. Is your company ready to deal with the possibility? If not, now would be a good time to start making contingency plans in both payroll and human resources. If your company is already working with a payroll outsourcing provider, they are probably already working on it.