Leave management ranks among HR's most challenging tasks since it requires balancing employees' needs with a complex web of legal regulations.
As organizations continue to add new types of leave and the leave management process grows more daunting, more HR departments are choosing to outsource parts of the process to third-party administrators. Providers of software-as-a-service (SaaS) platforms can remove much of the compliance and leave tracking burden. Application programming interfaces (APIs) make it easier and more reliable to integrate third-party leave software with existing human resource information systems (HRIS) and payroll systems.
But not all leave management software vendors are created equal. Experts suggest using a comprehensive set of criteria when evaluating and choosing an SaaS partner.
Advantages of Outsourcing
Leave management software vendors can automate leave workflows and required employee communications; automatically update HR leaders when new federal, state or local leave regulations are passed; and handle complex tasks like leave-related payroll calculations.
Studies show organizations are placing a new strategic focus on absence management by creating more formal programs and policies around the issue. Gallagher's 2021 Workforce Trends Report on physical and emotional well-being found the number of companies that will apply a structured approach to absence management is expected to grow from 50 percent to 63 percent within two years.
The Gallagher study found that most HR priorities regarding leave management are still centered around complying with federal, state and municipal regulations, with 55 percent of survey respondents citing such compliance as a top priority. The impact of absence on productivity was another significant concern, with 40 percent of respondents listing it as a top priority. A third concern was educating line managers on available leave types and requirements related to complying with regulations.
Experts say one of the biggest advantages of third-party software providers is they help HR more efficiently track all aspects of employee leave and take many routine tasks off their plates. The software can track employees who take a variety of leave types, monitor return-to-work dates, send deadline notifications, integrate with centralized team calendars and also educate employees, in plain language, about how leave works.
"The best platforms allow HR to track all employees who are on leave in detail and report back easily to managers," said Rich Fuerstenberg, a senior partner with research and advisory firm Mercer. "You no longer have to use ad hoc reporting methods or spreadsheets for that purpose."
Software vendors also can help HR stay abreast of ever-evolving federal, state and municipal regulations tied to administering leave, Fuerstenberg said.
"Most providers update changes to federal or state regulations around leave automatically in their systems," he said. "You may know New York law like the back of your hand but aren't as clear about the law in California, Washington or Massachusetts. The top vendors will keep you updated and push out any changes to those regulations automatically."
Jackie Reinberg, a senior director of the absence, disability management and life practice at Willis Towers Watson, said leave management software platforms can help HR create consistent, custom and real-time leave communications, documentation and audit trails.
"These platforms also allow HR to create customized reporting and analytics," Reinberg said. "Many also offer intuitive employee and employer portals to manage leaves and help organizations measure the employee experience."
Fuerstenberg said employee portals in particular can help create a better leave experience for workers. Many have features that explain complex leave policies to employees in understandable terms and have a variety of self-service features.
"Employees also can use the portals to see if a current leave request has been approved and for how long or to report intermittent leave like taking a family member to the doctor under the FMLA," Fuerstenberg said. "Some portals also allow employees to upload relevant information if their condition changes, like medical documents or notes from doctors."
Other features are systems that combine human and machine talent to perform leave-related payroll calculations.
"We account for all of the qualifying factors that determine an employee's payout scenario while they are on leave," said Jennifer Henderson, founder and CEO of TiLT, a leave management technology platform in Fort Collins, Colo. "That includes the amount as well as duration of pay as well as factoring in various pay inputs." Those inputs might include states that have passed paid-leave legislation, information from other third-party administrators related to short- or long-term disability leave, or data from the client company itself, she said.
"That jigsaw puzzle of pay can be complex to manage and open to human error if it's not properly automated," Henderson said. "What we do is allow machines to do what machines do best for HR clients and for people to do what people do best."
Improved APIs Ease Integration Concerns
One reason HR leaders have been reluctant to outsource leave administration is a concern about giving up control of payroll cycles or HR data to third-party providers. Employee leave touches multiple computer systems and, in the past, outsourcing required setting up reverse file feeds with external providers to existing payroll or HRIS platforms, which can be a time-consuming and costly process.
But Fuerstenberg said more vendors are now using advanced APIs that more easily integrate disparate technology platforms and make most of those old concerns moot.
"Third-party software vendors have invested much more in API connectivity," he said. "For employers who've been reluctant to outsource, these technology improvements make system interoperability much smoother than in the past, and data updates now happen in real time, not as overnight batch files."
How to Evaluate Leave Management Vendors
Experts suggest using a number of key criteria when choosing a leave management technology provider. General criteria to help differentiate SaaS providers should include ability and experience interfacing with a client's HRIS, payroll and time and attendance systems; real-time eligibility determination and implementation support; employee training; and embedded compliance features.
Reinberg also recommends using these specific criteria when evaluating leave software vendors:
- Ability to effectively communicate with employees throughout the leave process. "That includes the ability to e-mail, two-way texting and customizing communications to meet the unique needs of the organization," Reinberg said.
- Bidirectional data feeds or modern APIs that allow the leave software provider to easily integrate with an existing payroll or HRIS platform. "In addition, you want the provider to be able to interface with other leave programs that an employer may outsource, like short-term disability and workers' compensation where appropriate," Reinberg said.
- Artificial intelligence that allows for variable or personalized distribution of e-mail, correspondence and data storage. Vendors are increasingly using AI for tasks like reviewing claim notes to look for clinical opportunities that claim managers may miss, experts say.
- Scope of technology issues. Assess any limits a vendor may have on the number and type of leaves, ability to capture organizational structure details, and customization of letter suites and automated processes, Reinberg said.
Dave Zielinski is a freelance business writer and editor in Minneapolis.