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Short Term Disability Basics

Understanding short-term disability policies

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What happens if you have an employee that is suddenly injured off the job? They want to know they'll still have income while off the job. That’s when a short term disability program is able to help.

Short term disability is a type of insurance that pays a percentage of an employee’s salary for a specified amount of time, if they are ill or injured, and cannot perform the duties of their job. Coverage usually starts anywhere from one to 14 days after your employee suffers a condition that leaves them unable to work. Many times, employees are required to use sick days before short term disability kicks in, if it’s an illness that keeps them out of work for an extended period of time. This is why there is usually a different policy for short term disability for sickness versus an injury.

Who Pays for Short Term Disability Coverage?

A short term disability policy can be an employer or employee paid benefit. Generally, though, short term disability coverage is employer-paid. Companies do have a choice of having employees pay for coverage, with certain tax implications.

Group coverage for short term disability can be attained in the following ways:

  • Contract agreement through an insurer that covers disability.
  • Through a self-funded plan set aside by the employer directly.

Coverage Terms

As an employer, you can create a policy dictating that employees use sick days before going on short term disability for an extended illness. You can also require documentation from a doctor to prove an illness or injury.

Different short term disability plans dictate different terms for qualifications. The main terms are listed below:

  • Employees need to work for the employer for a certain amount of time before coverage kicks in.
  • Employees need to work full-time, usually 30 hours or more a week.
The following are part of what a short term disability plan benefits package may include:
  • Percentage of weekly salary paid out (typically between 50% - 70% of weekly salary).
  • Duration of short term disability benefits (typically between 10 to 26 weeks).
  • Maximum amount of time covered under this disability program.
It’s also important to know the rules of the states where you have employees. While short term disability is not a requirement in most places, some states such as Hawaii, New Jersey, New York and Rhode Island mandate that short term disability benefits are provided for up to 26 weeks.

You may also want a long term disability program in place once an employee’s short term disability ends. If an employee is still out of work due to illness or injury, a long term disability can help even further.

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