How Long Is Short Term Disability?

May 8, 2020
How Long Is Short Term Disability?

One common issue many small business owners face at one time or another is the short term disability dilemma — should I offer it? How much time off should I give my employees? How long does short term disability usually last, anyway? What if one of your employees needs a complicated surgery that requires weeks of at-home recovery? It’s to your benefit to think through short term disability.

What is short term disability?

Short term disability is an insurance benefit, often offered by employers to employees, that provides some sort of payment or income for injuries or illnesses sustained off the job that leave an employee unable to work for a certain amount of time. It’s important to note that short term disability is different than long term disability (more on this later), as well as worker’s compensation, which covers injuries sustained at work.

Is offering short term disability mandatory?

Like many important benefits that most employees are accustomed to having, it’s not federally required that employers offer short term disability insurance to their employees. However, things can vary on the state level. California, Hawaii, New Jersey, New York, and Rhode Island as well as Puerto Rico require that employees receive short term disability coverage, so if you’re based in one of those states or Puerto Rico, it’s something you have to comply with. That said, there is an incentive for offering short term disability insurance: a federal tax deduction for companies that do so.

How does short term disability work?

There are 2 main ways that short term disability works. Self-administered short term disability means that you’ll fund the disability program yourself. While that means making a lot of decisions about how you want to (and can) fund and structure the benefit, it does offer maximum control over its parameters. The other option is through insurance. You can choose to work with an insurance provider that offers short term disability benefits to your employees. If you elect to do neither, your employees aren’t out of luck. People have the ability to purchase short term disability insurance for themselves. But as with all insurance that isn’t subsidized by an employer, the costs will be high — roughly 1 to 3% of a person’s yearly earnings depending on the structure of the coverage. A shorter elimination period (essentially a waiting period before the benefit kicks in), for example, means paying more money.

How long is short term disability?

As with most optional benefits (outside of the regulations of states that mandate it), there are no hard rules. Short term disability can range from as short as 30 days to as long as a year. It all depends on what you want to offer, if you’re self-funding it, or what your insurance company offers. One way to start tackling duration is by looking to the medical community and common guidelines for how long various types of recovery take. It’s always an option to work with your individual employee’s doctor’s recommendations if you have the ability to be accommodating.

How does coming back to the office after short term disability work?

While this isn’t typically a formal part of short term disability insurance offerings, it’s a good idea to think about the various ways you can transition employees back into work after being away. There can be various tolls, from emotional to mental issues, that can pop up when coming back to work. Think about if and how you’ll want to keep your employee up to date while they’re out. Or how you’ll get them up to speed in a reasonable way when they return. Even if it seems like everything is the same, it probably isn’t to the person who has been away. Businesses are always evolving — chances are something is different.

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.

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