Friday, March 6, 2015

Women's Money Week 2015: FMLA pays how much?!

It comes as a pretty rude surprise to a lot of people that even if they qualify for FMLA, it's not what they think it is.

FMLA itself is unpaid. Meaning, no paychecks. Meaning, no retirement contributions and no PTO accruing. Meaning also, your employer is not required to pay your non-salary benefits. If they provide health insurance, for example, they are required to keep up the policy but they are not required to pay for it. So, you might get a bill for your portion of the premiums during the twelve weeks that you are also not earning any money. Yes, this is legal. (Most employers simply deduct the amount owed from your paychecks after you return to work - but if  you don't return, you might have to write them a check!).

FMLA is a maximum twelve weeks of leave, which sounds like three months - but if you look at a calendar, it winds up being quite a bit less than three months, at least in the life of a baby. It also means that you're going back to work right around the time your baby stops being a potato and starts being a real person with smiles and coos and everything. During that twelve weeks, you have to recover from giving birth, figure out how to function on the least amount of sleep you've ever gotten in your life, "get your body back" (grrrr), learn how to take care of a baby, and find a daycare, if you weren't ahead of the game and taking care of that while you were still pregnant. And all those late third-trimester nesting urges are well and truly gone, so just forget about organizing the guest room closet and finishing your novel while you're off work.

Sometimes, women get disability pay while they are on maternity leave, but this is an insurance policy, not anything to do with their actual pay from their employer. Disability often works like this: you get 60% of your salary for six weeks (vaginal birth) or eight weeks (c-section), but for the first week of your leave you have to use vacation days or unpaid leave (so you really are getting only five or seven weeks of 60% of your paycheck). Also, that disability pay is taxable - but they won't withhold the taxes on it, so you'll have to pay them at tax time the next year. Luckily your precious new tax deduction will probably even things out, but it still makes doing your taxes kind of a headache, and is not the kind of thing you remember when you are sleep deprived.

Regardless, you've got about two and a half months where you're either getting nothing or about half of what you used to get coming in. How do you manage financially?

In our case, we had already been basing our living expenses off of Peanut's income, and using mine to supplement things like retirement and emergency savings. Dropping down to actually living on one income was scary but showed us that we could in fact manage with me not working if it came down to it (as it ultimately did).

This is my best suggestion for family planning: if you are a two-income household, learn to live on one income (ideally the lowest, but realistically whomever's is least likely to disappear). Use that second income to pay off all consumer debt and build up an emergency fund. Being prepared to lose that second income (even temporarily) makes it a lot less painful.

Another tip: keep an eye on your bank account while you're on leave! Someone in HR forgot to notify payroll that I was on unpaid leave, so I kept getting paid - and it took several weeks for me to notice it. I let them know and had to repay it, and they had to send corrected information to the IRS and my retirement account holder, and ultimately it was fine but something I really didn't need to be dealing with.

1 comment:

  1. You make this sound terrible. I've had two kids with two different employers. With the first one, I received full pay for 6 weeks. With the second one, I received full pay for 6 weeks and 60% for another 4 plus I received all my regular commission so I actually net more than I would have if I was working. I think that most large employers have something and its one more thing that completes the benefit package.


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