There is an interesting idea related to paid family leave floating around out there. The idea, first proposed by Kristin Shapiro of the Independent Women’s Forum, proposes giving people paid family leave in exchange for delaying future Social Security benefits. Despite the potential pitfalls of such a plan, it is getting some serious consideration.
The proposal calls for creating a federal paid family leave program open to all qualifying workers in the U.S. Workers wanting to take advantage of the program would agree to delay Social Security payments based on the number of weeks of paid leave taken. A worker might agree to delay Social Security for 25 weeks in exchange for 12 weeks of paid family leave.
Of course, the delayed benefits would not be an issue until the person reaches retirement age. This makes the program a voluntary trade-off that allows workers to access some of their benefits now with a cost of doing so attached to it. The question is whether the benefit would be worth it or not.
Unpaid Family Leave Already Required
Under the Family and Medical Leave Act of 1993 (FMLA) employers are already required to provide unpaid leave for qualifying medical and family reasons. Employees can take up to 12 weeks of unpaid leave per year with the guarantee that their jobs will be waiting for them when they return.
Unpaid family leave is viewed as a necessity for dealing with things like health issues, adoption, or caring for a newborn child. Yet taking unpaid leave can create a significant financial strain on families. As such, a number of states have already enacted measures to guarantee paid leave instead. The Independent Women’s Forum proposal looks to do what those states have done without creating another unsustainable entitlement.
Perhaps a good compromise would be to allow workers to choose either unpaid leave under the FMLA or paid leave in exchange for delayed Social Security benefits. This is an attractive option, especially in light of a part of the proposal that suggests workers who take paid leave could temporarily increase their payroll deductions upon returning to work in order to make up for the lost Social Security benefits. Increasing payroll taxes would completely restore the delayed benefits.
What It Would Mean to Payroll
While workers may look at the proposal from the standpoint of having more freedom to take time off without losing pay, employers are looking at it from an entirely different perspective. They have to consider the proposal in light of what it would mean to payroll.
Whether a company handles payroll in-house or contracts it to an online payroll service provider like BenefitMall, managing a paid family leave program adds yet another layer of complexity to payroll processing and benefits administration. Things get even more complicated when employees choose to pay higher payroll taxes in exchange for taking paid leave.
Like just about everything else government does, mandating paid family leave would make payroll processing more complicated than it already is. More data would have to be tracked, more money would have to be withheld and reported, pay stubs and W-2 forms would have to be changed, and on and on.
A federally mandated paid family leave program may indeed have some benefits that both workers and employers appreciate. But it will not come without a cost. Law makers have to think long and hard about how such an entitlement would impact workers, payroll departments, and the economy as a whole. This is not an idea that should be hastily embraced just because it sounds good.