Paying for Paid Family Leave


In April, New York became the fourth state to require paid family leave. San Francisco likely is to become the first city to do so.  

While such laws are not widespread in the U.S., the state laws and measures under consideration in San Francisco and the District of Columbia illustrate funding models other jurisdictions may consider if they adopt similar requirements.

Understanding these models may help employers know what to expect if other states and cities require paid family leave.

Employee-Funded State Model

New York joined California, New Jersey and Rhode Island in providing paid family leave to employees caring for sick family members or bonding with a new child. Like the other three states, New York plans to fold the paid family leave into the state disability insurance.

When the paid leave is phased in in 2018, it is to be funded by a tax on employees withheld from payroll, like in the other states. New York employees on family leave are to be paid a percentage of their average weekly wages, capped at the statewide average, a policy similar to the other three states.

Under the state laws, employers do not contribute to the paid family-leave fund, but would shoulder the costs of covering for an absent employee.

Employer-Funded City Model

A San Francisco ordinance and a District proposal outlined two employer-funded approaches to family leave.

An ordinance approved by the San Francisco Board of Supervisors offered a template that cities in states that require paid leave might follow.

Like New York, California covers a percentage of employees’ wages while they are on family leave. San Francisco’s ordinance would require employers to cover the rest.

Instead of taxing employers to cover the remaining cost of family leave, the city would require employers to continue paying employees partial salaries while they take up to six weeks to bond with a new child. Employers would be able to use up to two weeks of accrued vacation leave to pay for the family leave.

A draft proposal being considered by the District of Columbia Council would require 12 weeks of paid family leave for employees caring for sick relatives or new child.

Like the San Francisco measure, the proposal released in February would require employers to fund the family leave. However, employers would pay a tax based on the salaries received by covered employees, similar to how unemployment insurance operates.

Under the current version of the proposal, employees with higher wages would trigger a higher tax rate for employers, with 1 percent of an employee’s annual salary as the upper limit of the rate.

The proposal was discussed at a D.C.  Council meeting in February. The measure is under consideration by the council.

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