Although the Family and Medical Leave Act (FMLA) provides up to 12 weeks of conditional job protection for long-term employees dealing with an illness, injury, or caretaking responsibilities, this leave period is unpaid. When employers seek to support employees in the event of an accident, injury, illness, or for pregnancy/maternity leave, short-term disability is a viable option that provides employees partial wage replacement for absences lasting less than one year. Short-term disability protects employees from financial hardship resulting from lost wages, helps employers sustain productivity, and ensures that high-performing employees are incentivized to return to work after their short-term absence.
Here we’ll explore all of the key components of short-term disability, including policy variations, short term disability duration, who qualifies for coverage, how it differs from long-term disability, and how employers can utilize short-term disability to attract top talent, improve employee retention and strengthen company culture.
Understanding Short-Term Disability Insurance
Short-term disability provides employees an income replacement benefit (typically ranging from 40-70% of their weekly wages) in the event of illness, injury, an accident, or pregnancy/maternity leave. Income is drawn from pre-disability earnings on a weekly basis and is generally limited to periods under one year – whether it’s 13 weeks, 26 weeks, or less. Since short-term disability usually covers off-site illnesses or accidents, it can provide additional benefits and coverage not always provided by workers’ compensation.
Whereas long-term disability is paid on a monthly basis and can continue for years – until reaching age 65 or Social Security normal retirement age, for instance – short-term disability is provided weekly as a benefit and has an established, limited duration. The most common conditions or reasons for short-term disability claims include injury, illness, pregnancy/maternity leave, or accidents. Generally speaking, a qualifying medical condition can not be job- or workplace-related; otherwise, it’s more likely to qualify for a workers’ compensation claim.
Short Term Disability Policy
Short-term disability policies vary greatly based on employer benefits preferences and any local or state requirements that apply within the business’ jurisdiction(s). When selecting a traditional policy, the employer pays the full insurance premium, while with a contribution-based policy, employees and employer each contribute to the overall benefit cost. Although a voluntary short-term disability plan allows employees to pay for benefits by themselves, this is less common, even compared to a core buy-up policy, where employees are able to purchase additional coverage as desired.
In terms of concrete short term disability benefits for employees, plan enrollment provides employees with a sizable portion of their weekly wages in the event that they become disabled. Although a maximum monthly benefit applies in some plans, most employees will receive wage replacement ranging from 40 to 70% of their weekly income – sometimes even up to 90-100% of their normal wages.
Duration of Short-Term Disability Leave
Like policy types, the length of short term disability leave can vary considerably based on the provider, the specifics of a given policy, the severity of a medical condition, and a number of other factors. Of course, short-term disability is meant to provide temporary benefits, which is why the maximum benefits duration usually lasts for 10 weeks, 13 weeks, 26 weeks, or 52 weeks, and rarely (though occasionally) exceeding one calendar year.
Terms of Benefits
Although an employee may receive their short-term disability payments on the first day that an accident is quoted, payments usually begin the eighth day after a filed claim. Benefits can end before the conclusion of the maximum benefit period in the event that an employee is no longer disabled, is unable to provide evidence/certification of disability, or qualifies for long-term disability due to a change in their condition.
In some instances, it’s possible for employees to continue to receive short-term disability if they are partially disabled and able to work part-time. Similarly, many insurance providers and policies encourage (or sometimes require) employees to work with vocational rehabilitation services to formulate concrete return-to-work plans. Whether it’s providing additional accommodations or making temporary alterations to job responsibilities, these measures are meant to encourage a gradual return to work without compromising an employee’s mental or physical health.
Eligibility and Coverage for Employees
Most short-term disability policies consider an employee disabled when they are unable to perform key job responsibilities. In some cases, providers will only provide benefits if an employee is unable to perform any job within the organization that is commensurate with their skills, education, and past work experience.
Although short-term disability covers accidents, illness, injury, and pregnancy/maternity leave, it can also provide benefits for certain mental health conditions, as well as specific medical scenarios like rehabilitation from surgery or disability due to a serious automobile accident.
Policies vary in terms of willingness to offer benefits to those with preexisting conditions, certain exempt disabilities, drug/alcohol addiction, or the need for long-term care services. For these and other reasons, it’s imperative for employers and employees to familiarize themselves with the specific terms & requirements of any policy they choose before enrolling.
FAQs: Short Term Disability
What does disability insurance do?
Short-term disability insurance provides protection to employees if they are unable to perform key job functions due to an accident, illness, injury, pregnancy/maternity leave, or other qualifying conditions. If an illness, injury or other qualifying event occurs, employees with access to short-term disability insurance can file a claim using their disability insurance provider to receive a significant portion of their standard weekly income, based on the terms of the specific policy.
What is the difference between short term and long-term benefits periods?
Generally speaking, short-term disability is designed to be provided as a temporary benefit, paid weekly and usually lasting between 10 and 52 weeks (rarely beyond one calendar year). In contrast, long-term disability can last for multiple years or even until the employee’s qualifying retirement age (65 or otherwise).
What is the elimination period for short-term disability?
The elimination period is a waiting period between the beginning of a short-term disability and the start of tangible employee benefits/payments following a submitted claim. Typically, the elimination period is 7 or 8 days, but sometimes it can take up to 30 days before benefits take effect. In the case of accidents, the elimination period is usually 0 days (immediate initiation of benefits).
Navigating Short-Term Disability as Employers: Benefits & Compliance
Choosing to offer a short-term disability policy to employees can improve employee retention, employee satisfaction, long-term productivity, and talent acquisition. Especially when up-front enrollment costs are manageable for the employer and employees, short-term disability insurance provides lasting financial stability and peace of mind to current and prospective employees while establishing an ethical framework for return-to-work plans in the event of employee illness, injury, accident, or other qualifying situations.
With the Social Security Administration (SSA) reporting that nearly 30% of 20-year-olds will experience some disability before reaching retirement age, short-term disability insurance is an increasingly sought-after benefit among job seekers and employees, which is why more employers are offering this benefit to ensure employee satisfaction and protection from financial difficulties resulting from unexpected life events.
Ensure Employee Satisfaction and Peace of Mind
Whether it’s navigating labor law compliance, providing pay-as-you-go workers’ compensation, or choosing the best disability policies for your employees, these processes are overwhelming and time-consuming without professional guidance and the right tools at your disposal.
Need more guidance on short-term disability policies? Contact us for expert advice and tailored solutions that support employee well-being and the ongoing growth of your business and company culture.