Centralization Simplifies Leave of Absence Administration

December 11, 2008 (PLANSPONSOR.com) - A new survey by Hewitt Associates reveals that, in an effort to simplify the leave of absence process, more employers are shifting the administration of their absence management programs to internal, dedicated groups or to an outsourcing partner.

Hewitt’s survey of 225 large and mid-size companies found that three-quarters do not feel they are administering leaves of absence well, and only about a quarter (26%) said their leave of absence policy is followed all of the time, according to a press release.

To address these challenges, four-in-ten employers surveyed (42%) have completely centralized their absence administration, and 30% have outsourced their leave of absence program management, an increase of 13% in the last five years.

In addition, about 30% of employers indicated they now offer a total absence management program, the press release said. Among those companies that outsourced their leave of absence administration, 93% said their administration was more consistent and 76% reported that the distribution of required notifications was more timely.

According to Hewitt, the lack of consistent administration and ineffective program management is potentially costing companies millions of dollars every year in payroll expenses. A majority of employers (69%) have never even attempted to calculate the costs generated by employee absences.

Most companies responding to Hewitt's study have tailored their leave of absence programs to meet the Family and Medical Leave Act (FMLA) eligibility requirements for length of service (96%), minimum hours (93%), and covered relationships (88%), since the legislation was enacted.

However, employers report that the newly announced FMLA regulations (See DoL to Publish Final FMLA Regs ) are imposing a tremendous burden, as companies must begin following the revised rules effective January 16, 2009, giving them little time to make the necessary administrative changes.

Hewitt's survey showed that 83% of employers that centralized leave of absence administration noted improved compliance with laws and regulations, and 87% who outsourced the function saw improvement with compliance as well.

"The speed at which the new FMLA regulations take effect add another layer of complexity to an already difficult process, and employers will have to work diligently to ensure their absentee programs comply with the latest rules. However, employers that have already taken steps to streamline their absence management programs through centralization and/or outsourcing are one step ahead in getting a handle on the complexities of the legislation and acting accordingly," noted Kim Stattner, a leader in Hewitt Associate's absence management practice, in the press release.