April 15, 2015
Whether you or a family member has taken advantage of it or not, you are probably familiar with The Family Medical & Leave Act, or FMLA, which recently turned 21 years old! But what is the connection between the FMLA and compensation? How does the FMLA affect your overall compensation program? Let’s take a closer look at how the FMLA impacts your compensation program in two key areas:
The first compensation decision you will make regarding FMLA is whether an employee is eligible to receive pay when on an FMLA leave. This is important whether the employee has exhausted their short-term disability pay or is on a leave for other than their own medical reason (and will, thus, not receive short-term disability benefits). If your organization decides to allow employees to receive pay while on a FMLA leave, then the next question is: “Where will the pay come from?”Will it come from the employee’s “sick pay” allotment? From their vacation pay? Will you require an employee to use a certain amount – or even all – of their sick time before they can use vacation time? Or will you allow an employee to retain their sick time and immediately debit their vacation time?
This situation also arises when an employee is on an approved FMLA leave for the birth of a child and exhausts their short-term disability benefits but is still able to take more FMLA time up to the maximum of 12 weeks. Once an employee has received their disability benefits, will you allow them to use other paid time for the remaining 12 weeks they can be on leave? Obviously, many different scenarios and possible policy solutions can come into play.
The second compensation decision you will make is how employees who receive commissions, bonuses, or incentives will be paid while on an FMLA leave. The law requires that employees maintain their eligibility for these compensation programs while on an FMLA leave, but how you pay under each type of compensation program may vary. For example, employees on commission programs should be paid according to how your commission plan defines when they earn a commission. If they earn a commission and are subsequently on an FMLA leave before they are paid the commission, you would certainly want to pay the commission while they are away on an approved FMLA leave. If an employee is in a bonus or incentive program, however, you might want different language in those plans about compensation while on an FMLA leave. The language might be different, too, based on compensation plan parameters and whether the measure is an individual or team metric.
Ultimately, because each compensation plan and each of its parameters are unique to your company, it is important that your organization have a policy to address compensation, and that you consistently follow it for all FMLA leaves. If you aren’t sure that your company is on solid ground regarding your compensation plan and the FMLA, contact us today at 317.589.8529.Total Reward Solutions can work with you to customize how you pay employees who are on an approved FMLA leave.