Key takeaways:
Overlapping employee leave regulations create challenges, with 73% of employers citing compliance as a significant challenge.1
Basic tracking tools — spreadsheets and payroll software — only record time off but don't handle the connected journey of benefit eligibility determination across multiple programs.
Poor leave management costs businesses an average of $4,080 per full-time employee annually in unplanned absenteeism, plus potential Department of Labor (DOL) fines, legal penalties, and back wages.2
Three solution approaches exist: self-manage (high effort), implement dedicated software (moderate effort), or outsource to third-party providers (low effort).
In order to simplify the employer and employee experience, complete leave systems should integrate compliance monitoring, eligibility determination, claims management, automated communication, and employee self-service portals.
For small businesses, supporting an employee on leave may seem straightforward — until you consider the regulatory environment: there’s a complex web of federal and state regulations to navigate, plus internal company policy.
From the employee’s perspective, leave is a single journey; but in terms of administration that journey often spans multiple programs: federal laws like the Family and Medical Leave Act (FMLA), state-specific Paid Family and Medical Leave (PFML), internal PTO, and disability policies. Each may have different eligibility rules and timelines that can be difficult to navigate. And yet, leave management is often relegated to internal HR teams who also handle a number of other important company functions.
To stay compliant and provide a supportive experience, a growing number of small businesses are investing in connected software solutions or outsourcing leave management altogether. Read on to learn more about the challenges involved, and specific solutions that can simplify the employee leave journey.
Leave management and the connected leave experience
Leave management is about much more than managing employee attendance. It’s a systematic process designed to support employees during extended absences, help businesses stay compliant with labor laws, ensure staffing coverage, and analyze trends. While the process has traditionally been handled in-house (usually by human resources), outsourcing has become more popular in recent years. For a very small company, it may be as straightforward as a basic tracking spreadsheet and some internal documentation; for others — even some companies under 50 employees — it can be complex enough to require dedicated HR hires or outsourced professionals.
The fact is, managing leave requires serious consideration and effort; anything less can result in a disjointed employee experience, as well as the potential for lost productivity and risk of violating labor regulations.
Navigating the complete leave journey across multiple programs
The complexity of leave for large and small businesses is largely due to overlapping rules and regulations on the state, federal, and local levels. Employers must navigate regulations from:
Family and Medical Leave Act — Federal, applies broadly, protects leave, but doesn’t require pay.
Paid Family and Medical Leave — State-level, applies to 13 states (plus DC) that have their own programs.
Americans with Disabilities Act — Federal, applies broadly; can impact situations where an otherwise healthy employee has a temporary disabling condition that needs accommodation.
Local city/county laws — A growing number of localities, especially in California, have local ordinances that impact leave.
Company leave and disability policies — Your own company’s rules must also be factored in.
In many circumstances, a single life event can trigger entitlements from multiple programs at once. For example, an employee in a state with its own paid leave law could qualify for state Paid Family and Medical Leave and federal FMLA protections, as well as short-term disability, all at the same time. These programs could (and often do) have different notice requirements, specific protections, timelines, and eligibility requirements to navigate.
The effects of this complexity are widely felt. In a recent Guardian survey, 73% of employers surveyed said maintaining compliance with state and local laws was a significant challenge.3
Why basic tracking misses the big picture
Some companies use basic time/attendance tracking solutions, such as payroll software or point of sale systems. These are useful tools, but they do not represent a comprehensive, connected leave solution for small business.
Why? Because managing a leave journey includes dealing with regulatory compliance, employee benefits coordination, claims handling, and more. Time tracking software for small business is simply not designed to handle these complex HR functions.
For example, say an employee requests extended leave due to a medical emergency. Basic software may check accrued sick time, but it generally would not check compliance with FMLA rules, state medical leave laws, or internal company short-term disability programs. Employers need a system that considers:
Does this employee meet the FMLA threshold?
Does the event qualify under FMLA (or a state PFML)?
If so, should FMLA and state PFML run concurrently?
How is the employee paid? What portion is covered by state/federal benefits versus the employer?
How are absences tracked across programs in an interconnected way?
Does the employee have job-protected status under FMLA, PFML, or both?
Are there any conflicts between FMLA/PFML eligibility?
The bandwidth paradox: Finding a unified solution
Small business workforce management can be complicated enough without manually piecing together discrete leave policies. Small businesses have essentially three options for dealing with leave:
Self-manage: The business owner or HR team establishes policies, monitors regulatory changes, and manually pieces together overlapping programs.
High effort, low potential for increased efficiency.
Software: The business invests in a leave management software solution. It requires moderate-to-significant internal HR resources to configure and may still fall short on complex compliance adjudication when multiple programs overlap.
Moderate effort, moderate potential for increased efficiency.
Outsource: The business outsources the entire leave journey to a professional partner, where dedicated specialists handle configuration, ongoing management, and compliance across all programs.
Low effort, moderate to high potential for increased efficiency.
An all-in-one connected leave solution
Working with an outsourced leave and absence management solution can help businesses reduce costs, ensure compliance, and streamline operations. These services use proprietary software and professional support to connect all aspects of the employee leave journey. Outsourced services typically provide a single point of contact for employers and employees. Automated eligibility checks across all applicable leave types and disability benefits help reduce compliance risk.
Leave and absence management solutions compared
Pros | Cons | |
|---|---|---|
Self-manage | Lowest upfront financial investment. Complete internal control over policies and processes. No dependency on external vendors or service agreements. | Requires significant ongoing time and effort from business owners or HR staff who already handle multiple functions. High risk of compliance errors when navigating overlapping federal, state, and local regulations. Difficult to keep pace with changing labor laws across multiple jurisdictions, particularly as states frequently amend paid leave programs. No specialized knowledge to handle complex eligibility determinations across multiple benefit types. |
Software solution | Automates routine tasks like tracking absences and managing employee leave requests. Moderate effort compared to fully manual processes. Provides centralized system for recordkeeping and documentation. | Moderate to high implementation and licensing costs. Still requires internal HR resources to configure, maintain, and interpret the software. Software alone may not keep up with changing labor regulations, particularly frequent state-level amendments. Falls short on complex compliance adjudication when multiple programs (FMLA, state PFML, disability benefits) overlap. Requires ongoing monitoring and manual updates to ensure compliance. |
Outsource | Lowest ongoing effort for business owners and HR teams. Dedicated specialists handle compliance monitoring, eliminating risk of missing regulatory changes. Provides single point of contact and automated eligibility checks across all leave types and disability benefits. Improves employee experience through streamlined processes and self-service portals, which increases retention. Onboarding teams ease the transition and implementation process. | Moderate to high ongoing service costs. Requires sharing employee data and internal policies with external provider. Initial setup requires compiling employee data and policy information. Potential loss of control over some day-to-day leave administration processes. |
The benefits of a seamless leave experience
Creating a connected leave experience helps a business’s bottom line by saving direct financial costs and mitigating compliance risk. Mistakes in self-managed strategies can result in:
Financial losses due to decreased productivity.
Fines and penalties from federal and state labor regulators.
Investigations by the US Department of Labor.
Legal action by regulators or employees.
Direct financial impacts include overtime, temporary staffing, and productivity loss. According to an analysis by Forbes, the average annual cost of unplanned absenteeism is $4,080 per full-time employee.4 Compliance risk is also costly: In 2025, there were 301 compliance actions with violations from the DOL, resulting in $1,029,463 of back wages paid.5
Beyond the financials, fragmented leave policies negatively impact employees, eroding trust and satisfaction. A connected, supportive leave experience is a hallmark of a fair workplace.
What a complete leave solution includes
A leave management system should centralize the entire journey and be easy to use. It should encompass:
Compliance monitoring to ensure compliance with federal and state labor regulations.
Eligibility determination for FMLA and state programs — including determination across overlapping leave types.
Claims management for filing, tracking, and closing out claims.
Employer/employee communication to automate routine notices.
Employee portal to enable employees to self-manage their leave journey.
Regular updates to ensure ongoing compliance with changing labor laws.
Increasingly, employers are investing in improving employee leave experiences. A 2024 report from Guardian found that workers who report a smooth, positive leave experience are more likely than others to stay with their current employer in the next year.6
Does the solution integrate disability and leave management?
Having a single solution for both streamlines HR operations while supporting employees with a better experience.
Does the solution automatically monitor regulatory changes?
Systems must routinely update to stay compliant.
How long does it take to implement the solution?
It’s important to choose a provider that has an onboarding team in place to ease the transition.
Is there reliable customer support?
Professional support should be available via support ticket, phone, or email.
Taking the next step
Guardian Absence Management is a comprehensive, connected leave solution for small and medium businesses. It uses proprietary software and industry expertise to help you navigate complex regulations and streamline leave administration while supporting your employees' well-being.
Let’s connect
Guardian can help you take a closer look at how your absence management efforts are serving your employees, and your business. Reach out to us today.
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