Coronavirus-related paid employer leave could top $23 billion

Analysis from the Integrated Benefits Institute finds the staggering cost of sick leave and short-term disability as a result of the pandemic.
By: | April 7, 2020 • 2 min read

Lost time from work due to COVID-19 could cost employers more than $23 billion in benefits for absent workers, impacting up to 5.6 million employees, new research finds.

The staggering figure comes from the Integrated Benefits Institute, which assessed potential sick leave wages, short-term disability payments and spending on employee benefits for absent workers. IBI used employment, wage and leave benefit data from the US Bureau of Labor Statistics and lost workday experiences contained in IBI’s dataset of employer-sponsored STD claims to model lost work time impacts for low-, mid- and high-range scenarios depending on the total COVID-19 cases across the country.

In terms of the costs of COVID-19 absences, “what we might see play out are the implications of employers’ decisions about emphasizing care management and support for healthy lifestyles as part of their overall benefits strategies,” says Brian Gifford, research and analytics director for IBI. “That could turn out to be important not only for leave payments, but for some people the difference between whether or not they needed scarce resources such as ventilators in order to pull through. We may not know the answer to that until we are able to get a look at employees from different companies with different benefits policies and see how they fared during and after the pandemic.”

Read all of HRE’s coronavirus coverage here.

Up to 5.6 million employees could be impacted by coronavirus-related leave, IBI notes, with nearly 3 million workers at firms with fewer than 500 employees entitled to paid leave per the Families First Coronavirus Response Act that went into effect April 1.

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“One of the most important things to keep in mind is that this analysis assumes a pretty low rate of very serious, ICU cases—about 8% of the total. That keeps absence durations relatively short,” Gifford says. “But at least for younger workers, those serious cases are driven by complications such as cardiovascular conditions and diabetes—things that unfortunately are not uncommon in the workforce, and which impose productivity burdens under the best of circumstances.”

IBI’s analysis follows other research that indicates the significant cost COVID-19 is having on benefits. Willis Towers Watson, for instance, recently found that employer healthcare costs could increase up to 7% this year due to coronavirus treatment and testing costs—on top of the 5% increase companies had already projected before the pandemic. That analysis finds that a 30% infection rate could increase medical and prescription drug costs between 4% and 7%, depending on how sick COVID-19 patients become.

Related: Here’s how much employer healthcare costs could increase due to coronavirus

“Despite employers and employees taking the right precautions at this perilous time, the coronavirus continues to spread and place enormous pressure on our nation’s healthcare system,” says Trevis Parson, chief actuary at Willis Towers Watson. “This spike in the demand for care is likely to lead to a significant jump in employer healthcare costs beyond previous expectations.”

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Gifford adds that the best benefits cost control strategy for employers is “minimizing exposure to infections by enforcing social distance policies where possible and operating safely when the work has to continue for essential services.”

Kathryn Mayer is HRE’s benefits editor and chair of the Health & Benefits Leadership Conference. She has covered benefits for the better part of a decade, and her stories have won multiple awards, including a Jesse H. Neal Award and honors from the American Society of Business Publication Editors and the National Federation of Press Women. She holds bachelor’s and master’s degrees from the University of Denver. She can be reached at kmayer@lrp.com.