As paid leave offerings become more robust, HR and benefits leaders are facing new challenges when it comes to administering such benefits.

In a survey of 630 U.S. business leaders, Mercer, a business of Marsh, found that compliance with state and local leave mandates and improving leave administration are employers’ top two priorities when it comes to absence and disability management.

“At one time, employers’ main concern regarding time off was the impact on business operations,” says Rich Fuerstenberg, a senior partner in Mercer’s U.S. Health and Benefits practice. “As leave programs have become more complex, that has changed.”

Compliance complexities of paid leave

The rise of paid leave mandates has made compliance a particular focus for leaders, Fuerstenberg says. For employers navigating state and local paid leave mandates, especially those with employees across multiple jurisdictions, Fuerstenberg says, “compliance is critical.”

For instance, employers must meet all statutory requirements, such as sending employee notices and submitting required data for state and local reporting. “With new mandates emerging, existing ones changing and the states in which employers operate change and expand, staying compliant is vital,” he says.

Streamlining administration can fuel compliance, as state mandates often overlap with employer-sponsored leaves such as short-term disability and paid parental leave.

“To deliver a better overall experience for all parties, organizations should consider private plans to replace state-run programs, which can create a disjointed experience for employees and add complexity for employers,” Fuerstenberg says.

Financial considerations cannot be overlooked, he adds. For example, contribution rates set by states for disability, medical and family leave mandates are based on the solvency of the state program.

“Employers with better experience than the state plan can benefit from private plans that enhance the claimant experience and potentially lower costs,” he says. “As contribution rates rise, many employers are finding valuable savings opportunities.”

More time off means tougher leave administration

Apart from compliance challenges, leave administration is another area of increasing concern for employers. The survey found that 66% of employers cited improving leave administration as one of their top three concerns, up from just 41% in 2021.

That finding comes as paid parental leave surges; it’s now offered by 73% of employers, up from just 25% in 2015, Fuerstenberg says.

Also, 32% of employers provide flexible PTO to at least some of their employees, up from 20% in 2021. Under such a policy, sometimes called “unlimited PTO,” employees are permitted to use their discretion in how much time they take off from work, subject to manager approval. Notably, Fuerstenberg says, 11% now offer flexible PTO to all workers, a marked change from prior years when typically only executives or salaried employees enjoyed this benefit.

In addition, employers are recognizing the importance of PTO in helping employees manage traumatic events. While employers have long provided paid bereavement leave to mourn the loss of an immediate family member (95%), they have recently started to offer time for other significant losses, such as for pregnancy loss (62%), the death of an extended family member or close friend (54%) or miscarriage (58%).

The survey also found that there are more fixed company holidays. The percentage of employers, for example, observing Juneteenth as a company holiday jumped from 9% in 2021 to 41% in 2024, while the percentage of those observing Martin Luther King Jr. Day has risen from 55% to 63%. With the addition of these holidays, the median number of fixed holidays offered by employers has risen from nine to 10 days.

“More companies are recognizing the importance of paid leave as a way to communicate their values and priorities to their employees,” Fuerstenberg says. “These initiatives not only benefit employees but also contribute to a stronger sense of community within the organization.”

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