Monday, March 27, 2006

What Do You Do When Your Employee Becomes Disabled?

What Do You Do When Your Employee Becomes Disabled???
Who is going to pay the bills for your long time employee,  the one who just found out they have a major illness, and can't come back to work for several months.  You talk with them in the hospital, and you tell them that everything will be all right, but you look at your own situation, and you realize that without an income, things wouldn't be all right at your house, either.  You have some decisions to make... will you just go ahead and pay the employee their salary for the remaining time they are out?  Can you actually afford to pay that expense?  What if another employee goes out on disability, can you afford to set a precedence?  What if they are out indefinitely?  How long can you afford to cover them?  Can everyone else in your organization keep doing the work of the disabled person?  At some point you will need to hire a person to replace them.  This problem can happen to anybody and at any time.   But this is not the time to be doing this sole searching.  Many employers think that having a good health plan is all they need to make sure their employees are happy, and well taken care of, but what about the other needs that may come up? 
Now you realize you can't afford a lot more expense for your business, so how can you offer more benefits?  Obviously, if you are contemplating paying for this salary, the cost of insurance would have been cheaper.  Realistically speaking, you offer health insurance, life insurance, and maybe even dental and vision, you can't possibly do it all!!  No one expects you to pay for everything!
Most people recommend that you do not pay for all of your employees disability benefits. The perfect balance is to pay just enough to make them able to pay for the rest of it.  The portion that you pay is usually the portion that becomes taxed when they receive the benefit, so it defeats the purpose if you pay too much of it, anyway.  The surprising thing about it, is that disability is not much more expensive than dental insurance, in most cases.  Small business owners tend to think the cost will be out of range for them.  Employees perceive dental insurance to be more important, but the worst case scenario with forgoing dental insurance, is not nearly as devastating as forgoing disability insurance.  In other words, the highest payout of most dental insurance companies, is $1000.00 per person in any given year.  The largest payout with a disability insurance company, is going to be 50% or more of the employees income for the duration you purchased.  This is a much better use of the benefit money that you are paying out.
So what happens when you offer disability and some of your employees decline to get the coverage?  Then what do you do if they become disabled?  Well, you do the same thing that you would do if they had a cavity and chose not to take dental insurance.  You get a good night sleep knowing that you have made it available, and if they chose not to take it, then they made that decision.  Most employees look to their boss to make available the insurances that they need.  As the boss, you have a great influence over the benefit choices your employees make.  If you strongly encourage disability, then you will have a greater number of people participate in the plan.  You have to ask them how they will cover their house and car payments, and maybe even college expenses if they are not able to come to work everyday.  Make sure they realize that as a business, you can not afford to pay their salary for longer than their sick days.  When they realize that the responsibility is theirs, they can make a good decision.  If you don't get actively involved in the process, your employees will not think it is important.

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