Set a clear process for premiums while an employee is on unpaid leave.
When pay stops, payroll deductions stop with it. Decide how employees will pay their share, when it is due and what happens if payment is late.
Collecting premiums when an employee is on unpaid leave
An employee on unpaid leave has no paycheck to deduct premiums from, but the plan generally still requires the employee’s share to be paid. Employers need a clear method for collecting it, agreed in writing, before the leave begins.
Typical methods are for the employee to pay each month by check or electronic payment, to prepay for the expected leave period, or to catch up through payroll deductions after returning. Each has a trade-off. Monthly payment is simple but missed payments are common. Prepayment is reliable but costly for the employee. Catch-up deductions leave the employer carrying the cost for a time.
For leave protected by the Family and Medical Leave Act, the employer must generally keep health coverage in place on the same terms as before the leave, and the employee remains responsible for the employee share. Coverage may be ended if the payment is late by more than a set grace period, with written notice, and the employee may then have COBRA rights. The details depend on the facts, so a written policy is important.
We help employers draft a premium collection notice that explains the amount, due date, grace period and consequences, and we align it with the carrier’s rules on when coverage can be terminated. Counsel should review the final wording.
What to decide and where it connects
Group Health During FMLA
What the employer must maintain.
Written Policy Language
Put the process in writing.
Read the Parent Guide
FMLA rules for Michigan employers.
Questions about this topic
How do employees pay premiums on unpaid leave?
Common options are direct payment, prepayment or catch-up through payroll afterward.
Can coverage be cancelled for nonpayment?
Only under the rules that apply to FMLA leave, so confirm with your attorney.
Should this be in writing?
Yes. A written process avoids disputes.
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