Virtual HR Department

Compensation and Benefits

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Short-Term Disability Plans

Short-term disability (STD) programs provide a percentage of base salary or wages (up to 100%) to employees that may become temporarily disabled, meaning that they are not able to work for a short period of time due to sickness or injury. Workplace injury may not be covered by STD plans if the employer has a requirement to provide WSIB (Workplace Safety and Insurance Board) coverage.

Typically, an STD plan provides benefits in the case of workplace absences that are longer than a few days, or the period covered by sick-days policies. STD plans may provide benefits for periods of up to six months. Longer absences usually have to qualify for long-term disability benefits under a separate program in order for employees to continue receiving benefits.

Many insurance providers offer STD plans. Some organizations choose to offer their own, self-insured plan. This is essentially offering salary or wage continuation in the case of a substantiated absence, instead of having benefits being provided by an insurance provider. There are financial and tax implications of the decision whether to self-insure, use an external provider or offer an STD plan at all. Many employers choose only to provide WSIB coverage to workers to cover workplace accidents, not providing income-continuation coverage for other accidents and illness.

Whether self-insured or via a third-party provider, absences generally need to be substantiated through employees providing documentation from their physician. It is here that there can be a challenge for those organizations that choose to self-insure. Medical information is very sensitive and confidential, and may require a professional opinion from another physician as to whether an employee's condition justifies them being off work. Many organizations that choose to self-insure will establish a relationship with a physician or other third-party provider to act on their behalf to receive and evaluate medical information. If an organization is requesting that an employee submit medical information directly to them, it can lead to issues such as wrongful dismissal or human rights complaints if the employee is later terminated. It provides an opportunity for the terminated employee to challenge the basis on which they were terminated and claim that it had to do with their medical condition.

Long-Term Disability Plans

Many insurance providers offer long-term disability (LTD) plans. It would be highly unusual for an organization to offer a self-insured LTD plan, as LTD benefits can be payable through to the disabled employee reaching age 65 or qualifying for other private or government plans.

LTD plans typically start providing benefits to employees after any STD-plan benefits are exhausted and only if the employee meets the qualification criteria, which can be more stringent than with STD plans.

LTD plans often define "disability" as either:

The standard for many LTD plans is total disability; that is, not being able to work at all, in any capacity.

LTD premiums are generally paid 100% by employees. The main reason for this is that if the employer pays the premiums, benefits paid to the employee in the case of disability would be taxable. When the employee pays the premiums, any benefits received are tax-free. While employers may think that paying the premiums for employees is a nice thing to do, saving the employee money, it could cost them a lot of money in the long run if they ever need to collect benefits from the program.

Spousal-Income Continuation and Life Insurance

As part of some life insurance plans, there is optional coverage that provides ongoing benefits to the spouse of an employee in addition to any lump-sum benefit paid in the event of the death of an employee. For many families, the loss of the income of the employee who dies could have disastrous consequences.

Depending on the amount of life insurance that the employee had through employer benefit programs and/or private coverage, the benefits may not be enough to maintain a comparable lifestyle after the employee's death. This can mean having to significantly alter the lives of the employee's children with respect to schooling and leisure activities.

Many employers provide and pay 100% of premiums of life insurance coverage for employees equal to one times their annual base salary or wages. This coverage can be extended to higher multiples of annual salary or wages based on years of service or the level of the employee (i.e., non-management, management or executive). Most plans also feature the option for employees to purchase additional coverage at preferred rates at their cost.

Not all insurance providers offer spousal-income-continuation plans. Premiums associated with these plans are typically paid by the employee.