The Costs Related to FMLA

Construction jobs can be highly prone to injuries due to the work duties.

From an employer perspective, any time an employee takes time off it is a cost to the employer on a mathematical basis. Even if the employee is not paid for the time off, productivity for that position is not happening. So, not surprisingly, some employers cringe when they think about costs associated with the Family and Medical Leave Act (FMLA).

FMLA Defined

In 1993 the Family and Medical Leave Act was enacted by Congress and the President. This legislation was enacted with the goal to make sure that employees in working positions always had the ability to take time off for certified medical conditions, of their own or for immediate family, without ramification at work. This was intended to prevent labor abuse where employees would get punished for taking off too much time being sick or caring for a sick family member. FMLA is commonly used for maternity leave, serious medical conditions, sick children and other similar medical needs. Companies with more than 50 employees are required to honor the law's requirements.

Impetus Behind FMLA And Effect

FMLA was designed to provide a balance between serious medical needs and a career without the consequence affecting one's livelihood.

However, by guaranteeing employees protected time off from work, the Act created a direct impact to companies' productivity. It meant that specific positions would be vacant, sometimes at the cost of salary, without any replacement in the meantime. These situations add to the operating expenses of a company without producing any profit to the bottom line.

Losses Counted

The actual cost of FMLA tends to be anecdotal because actual cost studies are few and far between. When quantified, the cost of the Act tends to be in ranges since companies come in different sizes and performance. Roughly speaking, every 100 working employees will result in something close to 40 vacant workdays of FMLA leave. On average, this same expense ranges anywhere from $50 to almost $200 per employee per year when spread out over an entire company population.

Cost Drivers

In 2004, a study was produced and distributed by the Employment Policy Foundation. This report was one of the first comprehensive studies of FMLA cost impacts. It concluded that cost factors could be attributed not to just the temporary loss of the employee but also to an inability to plan for the loss. Half of the employees studied provided less than 24 hours notice of leave need. A third of that population provided notice after already being absent from work. This study arrived at the conclusions after pulling data from more than 100 businesses and population of half a million employees.

Reaction to the report was aggressive because the report came out at a time when the U.S. Department of Labor (DOL) was considering proposing changes to the FMLA. Many labor groups opposed the report, arguing it was one-sided and DOL should ignore it.

Changes Desired

Employers would prefer to see at least two changes be implemented into FMLA framework. First, the scope that allows what conditions guarantee at least 10 days off work should be restricted. It is suggested that many outpatient procedures and surgeries can be performed in less time. Second, the floor allowed for intermittent leave shouldn't be less than four hours. This avoids abuse with taking an hour here and two hours there, which occurs frequently.

Ways of Keeping Costs Down

Despite the desire for changes legislatively, there are steps employers can take to reduce costs within existing law. First, keep good records on what and who is eligible for FMLA and when. Document all approvals and what they are for; different FMLA approvals are needed for separate medical reasons. Second, accurately track leave hours taken. FMLA only provides a limited number of hours in a year. Finally, track FMLA use with disability claims. This utilizes FMLA up front, so it can't be taken later, extending the time lost unnecessarily.

References

• Inc Magazine: FMLA Costs Hit $21 Billion in 2004
• HR-News: Adding Up the Costs of FMLA
• National Center for Policy Analysis: Workplace Flexibility vs. Unpaid Leave

Resources

• Rapid Learning Institute: How to Use New FMLA Regulations to Cut Abuse and Costs
• AllBusiness: Tracking Keeps FMLA Costs Down
• BNET: The Economic Costs of Expanding the FMLA to Small Business