Paid Leave: Five Considerations for a Second COVID Wave and Beyond  

Aug 20 2020

As we’ve watched COVID-19 cases rise, fall and rise again in areas across the US, it's increasingly clear that we need to capitalize on the time we have before the next, potentially larger, peak. What are the lessons learned from employers’ initial reaction to rising case numbers? With hindsight, what could we have done better?

At the outset of the pandemic, managing or expanding leave programs was at the forefront of employers’ response. A number of US employers have voluntarily expanded their paid sick leave offerings, including many who have implemented paid emergency leave related to COVID-19 absences. Mercer's COVID-19 survey shows that nearly half (49%) of employers are adjusting sick leave policies to specifically incorporate provisions for those who test positive for COVID-19. 

The pandemic has heightened existing challenges associated with leave and paid time off programs. Both before the pandemic and in response to it, many states, cities and counties have passed their own paid sick leave mandates or expanded statutory disability and paid family leave benefits. For larger employers with employees in multiple states, maintaining compliance with a patchwork of mandates adds significant administrative and communication burdens. But one thing that the pandemic hasn't changed is our belief that employers can turn the compliance burden of state regulations into an opportunity. As you review your leave and paid time-off programs for pandemic-readiness – drawing on what we’ve learned these past six months -- consider these five ways to optimize their performance:

Enhance coordination between employer and state leave policies – Most employers will need to make some changes to their leave policies to incorporate new state requirements. How can those changes optimize the way that employer and state policies work together? Do the employer’s leave policies detail how they coordinate with state benefits? Should the employer’s benefits change to improve coordination? Are there benefits, like paid parental leave, that have been under consideration in the past that now become cost effective when the cost is reduced by state-mandated benefits?

Streamline the employee experience – Between employer benefits, state benefits and federal leave mandates, any single employee event could trigger a myriad of leave entitlements. How many different places does an employee need to go to file for all these benefits? Some states allow the employer to increase their involvement in the delivery of state-mandated benefits by filing for a private plan. But as the employer gets more involved, what’s the trade-off between streamlining the employee experience and the ultimate cost to the employer?

Revisit emergency leave – Many employers implemented emergency leave policies or expanded paid sick leave when the pandemic first hit, to encourage employees to quarantine if they or a family member were exposed to COVID-19. But most of those policies only allowed employees to take a single leave. What happens if a second wave creates the need for a second or third quarantine? Many emergency leave policies only run to the end of the year -- what if the need to quarantine extends into 2021? Consider whether you need to update an existing emergency leave policy as circumstances change – or, if you’re implementing emergency leave for the first time, think through these additional considerations.

Take another look at unlimited PTO – For nearly every employer, the pandemic has stress-tested existing leave policies, exposing cracks and flaws in many of them. As a result, we’ve seen employers make changes ranging from minor tweaks and clarifications to major philosophical overhauls. One concept that’s getting renewed attention is unlimited or untracked paid time off (PTO), for two main reasons. First, in plans with accrual-based paid time off, PTO balances have grown to historical highs as employees simply haven’t taken time off. With unlimited PTO, there is no accrual and thus no need to decide how to manage PTO balances, especially at year end. Second, fixed accrual policies make it difficult for employers to adapt and be flexible without making fundamental, structural changes to their leave policies. For example, if an employer wants to allow additional paid time off for employees who need to quarantine, they may need a new policy or add to existing accruals by increasing the paid time off allowance. With an unlimited PTO policy, the employer can work within the boundaries of that policy to be flexible without increasing time off allowances or implementing a new policy to administer.

Reduce employer costs –For businesses feeling the economic impact of the pandemic, cost management will be a priority for the foreseeable future. Whether paid leave benefits are staying the same or changing, employers have lots of opportunities to reduce the cost of paid leave. Shifting to unlimited PTO or changing rollover rules for accrued paid time off can reduce the cost of excess accruals. Because most employers provide paid leave benefits will run concurrent with state disability and family leave benefits, optimizing how those benefits coordinate can reduce employer costs. For example, state disability or medical leave will usually run concurrent with the employer’s short-term disability plan. How an employer structures the interaction of these plans will have a direct impact on the employer’s ultimate cost. With the need to expand paid leave to deal with the unique demands of the current health crisis, this type of coordination becomes even more important to cost management efforts.

As it becomes increasingly clear that we’ll be living with the pandemic well into 2021 -- and that it will likely have a lasting impact on how we work and live -- it’s time to think beyond stop-gap measures and seize the opportunities for positive change. Leave programs have been in flux in recent years. If your program needed updating before COVID, the time is right to consider changes that will not only get your organization through the pandemic, but leave you with a more effective, sustainable program.  

-Written by: Simon Camaj & Rich Fuerstenberg

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