Understanding the real cost of employee leave
Starting January 1, 2026, eligible employees can take up to 12 weeks for personal medical leave and up to 12 weeks for family leave, with a maximum of 20 weeks combined per benefit year. The state program provides wage replacement ranging from 55% to 90% of the employee’s average weekly wage, funded through a 0.88% payroll tax split between employers and employees.
But here’s what many business owners miss: the state benefit covers the employee’s income replacement, not your costs to keep operations running. You still need a plan to cover their work, and that’s where financial preparation becomes critical.
Funding strategies: planned versus emergency coverage
When you know leave is coming (parental bonding, scheduled surgery), you have time to plan. Consider using:
- Credit cards for immediate deposits on temp agency fees or upfront external firm contracts
- Lines of credit to bridge overlapping wages when you’re paying both leave benefits and replacement costs, or to fund extended coverage requiring 90-day minimum contracts
Emergency medical leave is different. You need faster decisions and immediate funding access for same-day temp placements, rush contractor agreements, or emergency overtime authorization for your remaining team. Make sure your funding sources can handle both the state-mandated benefits and your replacement costs without creating cash flow conflicts.
Budgeting for different coverage scenarios
Your coverage strategy will vary by role and situation. When you redistribute work internally, budget for 15 to 25% overtime increases, cross-training investments of $2,000 to $5,000 per employee, and a temporary 20% productivity drop for four to six weeks.
External coverage costs more. Temp staffing typically runs 180 to 200% of base salary for equivalent coverage. Professional services firms charge $8,000 to $20,000 monthly depending on the role level, plus placement and integration fees.
The choice between internal absorption and external hiring isn’t always about cost alone. It depends on role complexity, client relationship sensitivity, existing team capacity, and how long the leave will last.
Break-even analysis: when does your strategy need to change?
For a standard 12-week leave, internal absorption usually makes financial sense. If a senior accountant takes maternity leave, internal overtime and training might cost $11,000 total, compared to $27,000 for a temp CPA or $36,000 for an accounting firm.
But if the leave extends beyond 16 to 18 weeks, internal overtime stress often requires switching to external help. Model different return timelines (4 weeks, 8 weeks, 6+ months) so you know your break-even points and can make informed decisions without scrambling.
Forecasting for 2026 and beyond
The most prepared businesses will:
- Establish coverage decision criteria based on role level and advance notice
- Pre-negotiate rates with temp agencies and professional service firms before you need them
- Create an internal cross-training matrix identifying who can cover what
- Set up dedicated funding sources for both planned and emergency scenarios
- Document coverage strategies to ensure consistent application across all situations
Remember, speed often matters more than perfect cost optimization when someone needs to take leave. Having relationships and decision frameworks in place now means you won’t pay emergency premiums later.
