Short-term disability vs. FMLA: Key differences and tips for HR management

Understanding the differences between short-term disability (STD) and the Family and Medical Leave Act (FMLA) is essential for organizations and their HR managers. Both are employee leave benefits that provide support to workers facing health or family challenges. However, they serve specific purposes and require employers to comply with different obligations. 

Short-term disability provides paid benefits, offering a percentage of the employee's earned income during the disability period. FMLA, on the other hand, offers eligible employees unpaid, job-protected leave for specified family and medical reasons.

Misunderstanding these differences can lead to compliance issues, legal repercussions, and missed opportunities to support valued employees. By understanding the eligibility criteria, duration, and benefits of each kind of leave, your organization can design comprehensive leave policies that meet the needs of your business and its workforce. 

This article will examine the key differences and similarities between short-term disability and FMLA. We’ll learn what they are, the eligibility rules, and best practices for compliance. These practical insights will help you fine-tune your benefits management strategies.

What is short-term disability?

Short-term disability insurance is a benefit program that provides employees with a portion of their income if they are temporarily unable to work due to non-work-related illnesses, surgeries, injuries from accidents, mental health conditions, and childbirth. But how does short-term disability work? This type of insurance policy acts as a financial safety net, helping employees maintain stability during unexpected health challenges. It does not guarantee job protection unless combined with FMLA.

STD benefits are meant to cover a short period, typically ranging from a few weeks to up to six months, depending on the policy. During this period, employees receive a percentage of their regular income, usually between 50% and 70%, to help cover living expenses until they can return to work. Medical documentation is often required to qualify for coverage.

By offering STD insurance, employers can ensure that their employees have financial support during short-term health issues, which means less stress for both the employee and the employer. This helps them recover and return to work more quickly, while providing a supportive work environment that can boost morale and productivity.

Employers can choose to fully sponsor STD insurance, have employees pay through payroll deductions, or share the cost, making it a flexible option. Short-term disability also boosts your benefits package's overall appeal, helping attract and retain top talent.

What is the Family and Medical Leave Act (FMLA)?

The Family and Medical Leave Act is a US federal law that provides eligible employees with up to 12 workweeks of unpaid, job-protected leave in each 12-month period. Employees can take an unpaid leave of absence under the FMLA for specific family and medical reasons, including:

• Serious health conditions
• Caring for an immediate family member with a serious medical condition
• Birth of a child
• Placement of a child for adoption or foster care
• Caring for a family member on leave from the military after being injured on active duty

Not all employees are eligible for FMLA leave. The main requirement for eligibility is working for a covered employer. The Department of Labor (DOL) defines a covered employer as a private sector employer that has had 50 or more employees within a 75-mile radius for at least 20 workweeks in the current or preceding calendar year. All public agencies (federal, state, and local governments) and educational institutions (private and public schools and school boards) are also considered covered employers. Remote employees are eligible for FMLA leave on the same basis as onsite employees, with eligibility determined by the worksite location.

Coverage doesn’t kick in right away. Under the FMLA, eligibility to take a medical leave of absence requires that the employee has worked at least 1,250 hours during the 12-month period preceding the leave. To take military leave under the FMLA, the employee must be an active or inactive member of the US military and provide written or verbal notice to their employer.

Short-term disability vs. FMLA: 6 key differences 

Both short-term disability and the Family and Medical Leave Act provide support during health-related absences, but as we’ve seen, they serve different purposes. Many employers coordinate short-term disability benefits with FMLA leave to provide income assistance and job security, providing employees with comprehensive support during significant life events. Understanding these key differences between FMLA and short-term disability coverage will help you manage leave requests more effectively and ensure compliance with company policies and federal and state legal requirements.

1. Applicability

Short-term disability insurance is a benefit that employers can offer voluntarily, although some states, like California, mandate it. In contrast, FMLA is a legal obligation for covered employers, typically those with 50 or more employees. This means that while STD is optional in most cases, FMLA is legally required for eligible employers. 

2. Pay

Short-term disability provides income replacement, typically paying a portion of the employee's salary during their absence. On the other hand, FMLA offers unpaid leave but ensures job security, allowing employees to return to their positions after the leave period.

3. Duration of coverage

Short-term disability benefits typically last up to six months, depending on the policy. In contrast, FMLA provides up to 12 workweeks of leave within a 12-month period. FMLA also includes certain military family leave entitlements. Eligible employees may take FMLA leave for specified reasons related to certain military deployments of their family members. In addition, they may take up to 26 workweeks of FMLA leave in a single 12-month period to care for a covered servicemember with a serious injury or illness.

4. Covered situations

What qualifies for short-term disability and FMLA? Depending on the policy, short-term disability covers non-work-related health conditions, such as recovery from surgery or severe illnesses that prevent employees from performing their job duties. FMLA, however, covers a broader range of situations, including the employee's serious health condition, caring for an immediate family member, or the birth or adoption of a child.

5. Eligibility criteria

For short-term disability, eligibility often depends on the employer's policy terms and may require a certain length of employment or medical documentation. Some states mandate STD and have their own specific terms. FMLA eligibility is based on the employer's size (50+ employees) and the employee's work history (at least 1,250 hours worked in the past 12 months).

6. Job protection

While short-term disability does not inherently guarantee job protection, FMLA ensures that employees can return to the same or an equivalent position after their leave. Employers often coordinate STD benefits with FMLA to provide both income support and job security.

Short-term disability vs. FMLA: Eligibility

In order to support employees during health-related absences, employers may need to navigate between short-term disability insurance and the Family and Medical Leave Act. While STD provides financial support for temporary medical leave, FMLA offers job protection for designated family and medical circumstances. Understanding when to apply STD, FMLA, or both is essential for both employers and their workforce. Here are some typical scenarios:

1. An employee recovering from surgery or managing a high-risk pregnancy

In a situation where an employee requires time to recover from surgery or to manage a high-risk pregnancy, short-term disability insurance is usually the best option. STD insurance provides a portion of the employee's wages during their recovery. This typically lasts up to six months, depending on the policy. If the employee also needs job protection, coordinating STD with FMLA can ensure financial support and ensure they can return to their job.

2. An employee taking time off to care for a sick family member

When an employee needs to care for a family member with a serious health condition, FMLA is the appropriate option. It provides up to 12 weeks of unpaid, job-protected leave, ensuring the employee can focus on their family without fear of job loss. However, because FMLA does not offer income replacement, employees may need to use paid time off (PTO), employer-provided caregiver benefits, or state-specific paid family leave programs if available.

3. An employee taking time off to bond with a newborn

For employees taking time off to bond with a newborn, FMLA is the best option, providing up to 12 weeks of unpaid, job-protected leave. However, for birth mothers who need time to physically recover from childbirth, short-term disability may provide partial income replacement during the medically necessary recovery period, generally up to eight weeks, depending on the type of delivery and the terms of the policy. Another option in this situation is to coordinate STD and FMLA to provide financial support and job protection. Parental leave may be mandated by state law or provided as an employee benefit.

4. An employee dealing with a mental health condition

When an employee needs time off due to a mental health condition, short-term disability can offer income support during their medically necessary leave, as long as they meet the policy’s requirements. If the condition is severe and requires extended time off, FMLA may also apply, offering up to 12 weeks of job-protected leave. Employers should ensure proper documentation is available, as both STD and FMLA usually require medical certification.

Short-term disability vs. FMLA: Employer responsibilities

As an employer, you’re responsible for managing both short-term disability and FMLA leave properly to stay compliant and support your employees. Knowing your responsibilities for each program ensures a smooth leave process and helps you avoid legal risks.

Short-term disability responsibilities

• Adhering to state laws mandating STD coverage: Employers must comply with state-specific regulations regarding short-term disability insurance. As of 2024, California, Hawaii, New Jersey, New York, and Rhode Island require employers to provide STD coverage, either through state-sponsored programs or private insurance. Puerto Rico also has a mandated temporary disability insurance program. 
• Offering coverage through an insurance provider: In most states, employers can purchase STD insurance from private carriers to provide employees with financial support during short-term disability leave.
• Ensuring proper documentation and compliance with insurance requirements: Employers must make sure that employees provide necessary medical documentation to qualify for short-term disability benefits. This includes verifying the employee's inability to work due to a covered condition and other relevant paperwork.
• Communicating benefits to employees: Employers should clearly communicate the availability and terms of STD coverage to their workforce and ensure that employees understand how to access these benefits when needed. 

FMLA responsibilities

• Tracking employee eligibility and leave usage: Employers must determine if an employee is eligible for FMLA leave by verifying their employment duration and hours worked. You must also track how much leave an employee has taken within a 12-month period to prevent them from exceeding entitlements. Tracking eligibility and leave usage is critical for FMLA compliance and ensures adherence to legal requirements.
• Ensuring job protection and continuation of group health benefits during leave: Employers are required to protect an employee's job and maintain their health benefits during FMLA leave. This ensures employees can return to their position or an equivalent one upon their return. 
• Properly notifying employees of their rights under FMLA: Employers are required to provide employees with timely and accurate information about their FMLA rights and responsibilities. This includes displaying an FMLA poster where employees can see it. Employers must also inform employees of eligibility, rights, and responsibilities within five business days of receiving a leave request.
• Maintaining accurate records: Employers must keep detailed records of FMLA leave, including dates taken and any disputes related to leave, for at least three years.

Short-term disability vs. FMLA: which is best for your business?

Short-term disability and FMLA are two common ways that businesses aid their employees during medical or family-related leaves. Both provide essential support, but as we’ve seen, they serve different purposes and offer distinct benefits. FMLA is mandatory for many organizations, and some states have STD mandates as well. Which is best? It depends on your situation and location. However, there are some factors to consider: 

1. Business needs

Evaluate your organization’s specific needs and the types of leaves your employees want. STD provides partial income replacement for specific circumstances, whereas FMLA's broader coverage might be more suitable for your workforce. 

2. Legal requirements

As we mentioned, you need to understand the legal obligations surrounding both options. FMLA is mandatory for covered employers with 50 or more employees. Short-term disability, on the other hand, is not federally required but is mandated in several states, including California. Non-covered employers can create their own family and medical leave policies that mirror the FMLA's provisions. But, to avoid potential legal issues, it is advisable not to use the term FMLA in the policy. 

3. Budget

Evaluate the financial implications of each option. Short-term disability involves costs associated with providing partial income replacement, which can be more expensive than FMLA, which is unpaid. However, FMLA is mandatory for covered employers. 

4. Employee retention and satisfaction

Look at how coverage impacts employee retention and satisfaction. Offering short-term disability along with FMLA can enhance your company's attractiveness to potential talent while helping to retain valuable employees and reduce turnover costs. 

Short-term disability vs. FMLA: 4 tips

Short-term disability offers paid benefits for temporary medical conditions, while FMLA provides unpaid, job-protected leave for specific family and medical reasons. Here's how HR managers can effectively manage these benefits for their employees:

1. Create a clear leave policy

Developing a clear and comprehensive leave policy is essential for your company. The policy should outline the eligibility criteria, duration, and benefits for short-term disability, FMLA, and other types of leave. This will give your employees a clear understanding of their entitlements and the procedures for taking leave.

2. Maintain accurate records

Accurate record-keeping is critical for regulatory compliance and making sure that your employees receive the correct benefits. HR managers should maintain detailed records of employee leave, including dates, reasons for leave, supporting medical documentation, and any other information required by the FMLA and your STD insurance provider. In the case of FMLA, you must keep the data for three years.

3. Rely on HR software for compliance

Utilizing HR software like Rippling can streamline the management of short-term disability and FMLA. These tools help automate processes, ensure compliance with regulations, and provide employees with easy access to their leave information and benefits details.

4. Communicate proactively with employees

Proactive communication helps set clear expectations for employees and facilitates a smooth transition during leave. You should regularly update employees about their leave options, eligibility, and any changes in policies or procedures. This approach minimizes confusion and provides support to employees when needed.

Streamline your business leave management with Rippling 

Rippling Time & Attendance automates and simplifies time tracking and business leave management without manual data entry, costly errors, or frustrating syncing issues. Say goodbye to compliance worries. Rippling automatically enforces overtime, sick leave, meal breaks, and other federal, state, and local labor laws, ensuring your company is never at risk of non-compliance penalties. 

With Rippling, you can fully integrate T&A with other systems. Approved hours sync seamlessly to payroll, and calculations for paid time off (PTO) or any benefits deductions are done automatically. No CSV imports, spreadsheets, or headaches.

You can also set up automations to send payroll-related reminders to employees and managers, create custom alerts and pre-built policies to ensure compliance with labor and tax laws, and more. 

Rippling Time & Attendance not only automates time tracking and payroll, but also ensures you stay compliant and make better decisions on managing your workforce with real-time visibility into your labor and productivity metrics.

Short-term disability vs. FMLA FAQs

Can an employee use both STD and FMLA at the same time?

Yes, employees can use FMLA and short-term disability insurance concurrently. When an employee is eligible for both, these benefits typically run together. STD provides income protection, while FMLA offers job protection and continued health benefits. 

Is STD mandatory for employers to provide?

Short-term disability insurance plans are generally a voluntary benefit. This means US employers aren’t required to provide it unless mandated by state law. A few states require employers to provide their employees with short-term disability benefits. These include:

• California
• Hawaii
• New Jersey
• New York
• Rhode Island

Puerto Rico also requires employers to provide short-term disability benefits under the Disability Benefits Act (DBA). Employers who fail to comply with short-term disability insurance mandates in these jurisdictions may face legal penalties. Note that California and several other states have paid sick leave laws, which are separate from short-term disability benefits  

In states where STA coverage is voluntary, offering these benefits can give an employer a strategic advantage in attracting and retaining top talent.

What pays more, FMLA or disability?

FMLA does not provide pay. It offers up to 12 weeks of unpaid, job-protected leave. Short-term disability claims generally pay a percentage of the employee's income, usually between 50% and 70%, during the disability claim period. 

What happens if an employee exhausts FMLA but still needs leave?

Employees who use up their FMLA leave can still use other forms of leave if they need additional time off. These include vacation or unpaid sick leave. However, this depends on your company policy and applicable state law. Your organization can also offer additional paid or unpaid sick time. Some employees might be eligible for accommodations under the Americans with Disabilities Act if their condition qualifies as a disability. Long-term disability and Social Security Disability Insurance (SSDI) coverage also provide assistance to eligible employees.

Is short-term disability taxable?

Short-term disability income may be taxable, depending on how the premiums for the disability insurance were paid. Typically, contributions made with after-tax dollars are not taxed.

Can FMLA be denied?

Yes. FMLA leave can be denied if an employee does not meet the eligibility requirements. However, if an employee is eligible and the request is for a qualifying reason, denying FMLA leave could lead to legal repercussions for the employer.

This blog is based on information available to Rippling as of February 11, 2025.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.