Understanding Government Employer Policies and Family Medical Leave Options to Financially Prepare  

If you need to take time off to have a baby or care for a sick family member, the Family Medical Leave Act (FMLA) may protect your job, but it doesn’t require your employer to pay you during your time off. If you don’t work for one of the 21 percent of American companies that offers paid family leave, you may need to cobble together vacation days and sick days to get you through. You may even go without pay for some, if not all, of your time off if you don’t plan ahead. Whatever the reason for your leave, the last thing you want to worry about is your paycheck. An increasing number of employers, state governments and even Congress are seeking ways to help employees who need to take time off to care for their families, but you need to financially prepare yourself as well.

In 2002, California passed the first paid family leave legislation in the United States. Funded by employee payroll contributions (similar to Social Security), the paid family leave component of the state disability insurance program currently pays up to 55 percent of eligible workers’ weekly wages for six weeks a year if they need to take time off to bond with newborns and adopted or foster children or to care for sick family members, including spouses, domestic partners, children, parents, siblings and more. In 2018, the maximum payout will increase to 70 percent.

Following California’s lead in establishing paid leave legislation, five more states have enacted similar policies, and nearly 20 more are in progress. Congress in 2015 introduced the Family and Medical Insurance Leave (FAMILY) Act, which mirrors California’s plan on the federal level but stalled in committee.

While some income is certainly better than none, many employees who take family and medical leave still face financial challenges. Even taking just a few weeks off may reduce your ability to pay bills, save for retirement and grow in your career.

The Department of Labor found that more than 60 percent of workers who received partial or no pay for their leave found it somewhat or very difficult to cover everyday expenses. Many also encountered new or increased costs for things like medical care and prescriptions or diapers and formula, thus reducing their income even more.

Taking leave may also decrease your retirement savings if you choose to suspend or reduce 401(k) contributions to cover the income gap and potential career growth if you lose focus or productivity or need to take additional days off after you return. If you have more than one child or face a recurring illness, repeating this cycle could result in months of lost income and savings.

Whether you are anticipating taking leave, such as for the birth or adoption of a child, or it comes up unexpectedly, you’ll want to prepare yourself by understanding what your employer and state government provide for you and what you’ll have to contribute yourself. Take these three steps to make sure you aren’t caught off guard, without an income, when the time comes for you to step away from work and focus on your family.

• Know Your State’s Position. Find out if you live in a state that has a paid leave policy in place or has one in the works. Research what percentage of your income will be paid to you and when you will receive it. Understand in advance how you can apply for benefits, whom you need to contact to start the process or to ask questions, and what paperwork you need to submit. 

• Know What Your Employer Will Cover. Whether you have worked for the same company for years or are searching for something new, ask about the family and medical leave policy to understand what types of events are covered, when coverage begins and for how long you are covered. Find out whether the policy simply protects your job or if it is in fact paid leave. Ask about ways you can close the income gap, such as with short-term disability benefits or sick leave donation programs, in which colleagues can donate their unused sick leave for you to use. Outside of your employer’s benefits, you may want to purchase supplemental disability income insurance to protect your income if you become sick or injured. When the time comes to prepare for your leave, talk to your manager about his or her expectations for what you need to do before, during and after your time off. 

• Cover Yourself With Emergency Savings. Chances are your income will not be 100 percent protected when you take family and medical leave, and your emergency savings are a good way to make up the difference. If you anticipate taking leave in the near future, try to increase your savings while you are still receiving your full paycheck. The key thing is to do whatever you can in advance to prepare yourself for expected and unexpected leave. 

Paid leave is gaining traction with both employers and the government, and some are even offering paid paternity leave. Whether you are planning to have a baby or unexpectedly become sick or injured, all workers can benefit from planning ahead. By understanding what benefits you are entitled to and also building up your emergency savings and insurance protection, you won’t have to wonder what will happen to your income when you take time off.