Many companies allow employees a variety of ways to receive time off from work, including paid time off, vacation, sick days, and unpaid leave. Unpaid leave for full-time, salaried employees is unique in that it results in an actual deduction of pay from an employee’s paycheck; consequently, it’s extremely important that HR and payroll departments know how to accurately calculate how much should be deducted for periods of unpaid leave. Under ACA, special unpaid leave must be used in your measurement calculations.
Calculating Unpaid Leave
The process to calculate unpaid leave is slightly varied for salaried employees versus hourly workers.
- For Salaried Employees: After verifying the employee’s annual pre-tax salary, you must convert that into a weekly salary amount and then a daily pay. This daily pay is then multiplied by the number of unpaid days that your employee used throughout the year. This is the amount that should be deducted from their payroll through your automated payroll software.
- For Hourly Employees: For hourly employees, since they are not working during their leave, they are not receiving paychecks for this time. However, this unpaid leave must be tracked in order to determine their eligibility for health care benefits. Also, the employer is responsible for determining the number of any special unpaid leave hours. Special unpaid leave is any leave under FMLA, Military Leave, or Jury Duty. These hours should be credited while calculating average weekly hours worked to determine health care eligibility.
- Note: Under the lookback method, special unpaid leave cannot prevent an employee from returning to work as a full-time employee. The employee may return to full-time status as long as they took this unpaid leave within 13 consecutive weeks (26 weeks for an educational organization).
ACA Reporting
There are numerous laws and regulations that govern employment status, employee time off, and the coinciding health care benefits. For accurate Affordable Care Act reporting, it’s important to keep track of employee hours and full-time status.
Need help with the ACA? Benefitfocus offers an end-to-end ACA Compliance & Reporting solution. Have questions or would like to learn more? Contact Us.
The information provided does not, and is not intended to, constitute legal advice; instead, all information and content herein is provided for general informational purposes only and may not constitute the most up-to-date legal or other information.
