Effectively managing paid leave complexities increases the cultural value of polices and enhances the employee experience.

Authors: Mary Armstrong-Flippo Chuck Lamonica Ron Witthohn


Paid leave policies are central to strong cultural values and a compelling employee experience. In a period of constant change and complex legal requirements, effectively managing employees on leave has become a critical predictor of competitive success.

When the right policies (not more policies) are in place, and they're fully integrated, managing absence and engaging employees gets easier. Employers that recognize the potential advantage of investing in better leave policies, such as paid parental leave or paid family leave, set certain priorities. They understand the importance of addressing diverse workforce needs, capitalizing on technology and using compliance tools. Also important is applying these policies to other employee benefits, which may include behavioral health coaching, hospital indemnity coverage or other options.

For many people, news about the global pandemic has become a side story. What may not be apparent is evidence that its disruptive arrival heavily influenced positive change in response to unprecedented challenges. Employers have focused more intently on meeting employees' evolving needs. Even today, they're looking to reevaluate traditional policies to satisfy changing demands, and research shows that 67% are revising or adding new time-away programs.1

2 in 3 employers are revising or adding new time-away programs.

Interest in flexible paid leave that supports different circumstances and the needs they create is on the upswing for the purposes of illness, caregiving and mental health, among others. By adapting policies to these priorities, employers show a genuine commitment to the overall wellbeing of their employees. For many reasons, this investment in higher morale, a better culture and stronger loyalty can be the right thing to do. For example, paid parental leave and paid family leave often boost health and social wellbeing, improving productivity and retention. While only 4% of organizations have expanded diversity, equity and inclusion (DEI) practices, 25% are considering a stronger emphasis to support absence management and productivity.2

Evidence of a sharper focus on the value of paid leave policies is also seen in new and revised statutory paid family leave and disability benefits. Employers must stay current on state-required changes and adjust their policies accordingly, so they can remain compliant. Awareness of state-specific regulations is necessary, and the details often vary by eligibility criteria, duration and the extent of benefits for paid employee leaves.

Increasingly, employers are assuming an active role as stewards of leave programs with these benefits becoming more important to employees and more complex to manage. Strategic conversations about health and retirement among the organization's absence management decision-makers are essential because key considerations are interconnected. Disability must be well-managed for medical claims to be well-managed. And combining voluntary benefits with medical and leave programs significantly boosts employee satisfaction with these programs.

Evolving paid parental leave and paid family leave

Both statutory and voluntary considerations apply to paid parental leave. Offering parents paid time off (PTO) following a birth or an adoption, and in some instances when taking in a foster child, is recognized more frequently as a vital employee benefit. Practically speaking, it's also a necessary aspect of supporting work-life integration that promotes gender equity and enhances employee retention.

State-mandated paid family leave programs are becoming more common across the nation as well, allowing more employees to care for a family member with a serious health condition, without the stress of lost income. It's essential for organizations to recognize how they operate, what their funding mechanisms are, and how they're used with other leave policies like company-provided caregiver leave and the federal Family and Medical Leave Act (FMLA).

Outsourcing statutory and company-provided paid parental leave and paid family leave administration to licensed vendors is trending among employers of all sizes. In many states where paid leave is mandatory, the employer must choose whether to have the state or a vendor of their choice administer the plan.

Similar to current disability coverage, programs are also established that provide a private marketplace for voluntary paid family leave, and administration is outsourced through a bid system rather than kept in-house. Voluntary private employers in the state may then opt into a program by purchasing a plan from the state-contracted insurer, which may include the potential for tax incentives. Most programs have provisions that allow individual employees to participate if they're not covered by an employer plan.3

Surprisingly, only 1% of employers rank caregiver solutions among their top five strategic priorities in 2024.2 And this oversight is a significant missed opportunity, especially for employers with a focus on inclusion and an expanded definition of family. High regard for the importance of offering this support expresses an appreciation for the nuances of paid family leave — including how this benefit intersects with other leaves.

1% of employers rank caregiver solutions among their top five strategic priorities.

Considering remote work and other compliance factors

The Americans with Disabilities Act Amendments Act (ADAAA) of 2008 broadened the definition of disability under the former Americans with Disabilities Act, requiring employers to provide reasonable accommodations to all qualified employees. Proactively understanding these requirements supports compliant leave solutions.

New considerations for compliance with the FMLA and ADAAA arose with the prevalence of remote work. Correctly interpreting and applying relevant laws and definitions helps to ensure that employees receive the same leave considerations and accommodations as those in traditional work settings. An often-overlooked aspect is the potential overlap of workers' compensation and the FMLA. If a work-related injury or illness is considered a serious health condition under the FMLA, both laws apply simultaneously. Awareness of this intersection is crucial for legally compliant and effective absence management.

Paid sick days, which generally receive less attention, are a relatively complex aspect of company-provided and state-mandated paid leave policies. Interpreting the intricacies of applicable laws is challenging because they can vary significantly by state and locality. A clear and compliant sick leave policy considers the impact on both employee wellbeing and organizational operations.

Beyond these standard leave types, organizations are exploring other PTO benefits to enhance their employee value proposition (EVP), such as sabbaticals, mental health days and volunteer days. Determining how PTO fits into the leave policy framework and aligns with other options, such as disability and family medical leave, is key to creating an attractive benefits package. A holistic approach is essential to providing a comprehensive selection that addresses different employee needs. For employers, the return value is often enhanced employee satisfaction and retention.

Navigating compliance challenges across states

Compliance with state laws poses a challenge due to varied statutory requirements. Paid leave policies need to meet federal standards while providing enough flexibility to accommodate nuanced requirements. Complexity in managing paid leave, for different states with local regulations, can be decoded with the help of experienced advisors. Insights into best practices and innovative solutions allow organizations to develop compliant policies that align with organizational needs. Through regular audits and policy updates, ongoing compliance and a reduced risk of legal complications is more likely.

Changes in generational and cultural expectations

Shifts in cultural and generational preferences continually influence employees' paid leave expectations. Employers can acknowledge the leanings of millennials and Gen Z workers toward work-life integration and mental health by offering more flexible and comprehensive paid leave policies. Beyond being a competitive differentiator, aligning these policies with the evolving expectations of the workforce is becoming a competitive necessity.

Periodic refinement of paid leave programs based on regular benchmarking is a high priority. But research findings shouldn't necessarily have the final say in directing change. Examining benchmarks is part of the process for employers, and so is assessing what's right for their population. Vendor partnerships and consultant relationships are readily available resources, and frequently, vendors can offer tools that help inform decisions on topics such as statutory leave education.

Leveraging technology and effective communication

Managing employee leaves with the support of technology and data analytics is becoming increasingly important. For example, software solutions used internally by HR and leaves teams, along with vendor provided tools, are improving the ability to streamline processes. Through these resources and methods, employers can assess the impact of leave policies on productivity and employee satisfaction — with greater precision. Insights gained may empower continuous policy refinement that improves competitive strength by responding better to employee needs.

Integrating artificial intelligence into leave management approaches has begun to transform how organizations handle employee absences. These technologies offer unprecedented capabilities for streamlining processes, predicting trends and enhancing decision-making, and will continue to shape the future of leave outcomes.

What's more, using the insights gathered from data analysis, employers can craft effective employee communication, featuring messages that are central to strategic leave management. Emphasis on making the workforce fully aware of their leave options and what they offer is integral. Regular training sessions, a detailed employee handbook and responsive HR support are helpful resources. Clear communication and education about leave benefits help employees feel supported and valued, too, leading to increased engagement and productivity.

Preparing for the future of leave management

Paid leave policies should be living documents, regularly reviewed and adapted to changing laws, workforce demographics and organizational objectives. Providing various options including traditional and non-traditional programs caters to a diverse workforce with different needs and preferences. Policies should be designed with total employee wellbeing in mind, offering support for mental as well as physical health.

Paid leave policies should be living documents, regularly reviewed and adapted to changing laws, workforce demographics and organizational objectives.

Improving attraction and retention becomes easier when the influence of paid leave policies is understood and acknowledged. Whether unexpected or planned, the extent of support for PTO needs should verify an organization's cultural values. And encouraging employees to feel comfortable taking leaves, without fear of stigma or career repercussions, is central to sustaining a positive and productive work environment. Creating and applying DEI principles further reinforces fair treatment of all employees through respect for their values.

Time away from work is a revered benefit. Employers consistently demonstrate a commitment to their employees' wellbeing by effectively managing both paid leave and unpaid leave, including adhering to legal requirements. But strategic leave management is more than a compliance issue. It's a vital component of the EVP that can translate into a significant competitive advantage, enhancing employee satisfaction and driving organizational success.

Author Information


1"2023 Fall Health & Benefits Summit," Gallagher, Sep 2023. Unpublished.

2"Organizational Wellbeing Poll: What's Hot in People and Benefits Planning," Gallagher Dec 2023. Unpublished.

3"Statutory Leave Laws: An Evolving Landscape," Gallagher, Oct 2023. Unpublished.


Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its affiliate Gallagher Benefit Services (Canada) Group Inc. Gallagher Benefit Services, Inc. is a licensed insurance agency that does business in California as "Gallagher Benefit Services of California Insurance Services" and in Massachusetts as "Gallagher Benefit Insurance Services." Neither Arthur J. Gallagher & Co., nor its affiliates provide accounting, legal or tax advice.