FMLA and Short-Term Disability: Running Them Together Without Double-Counting

9/13/2026

Short-term disability and FMLA answer different questions. Short-term disability (STD) answers "will I be paid while I can't work?" FMLA answers "will my job and my health coverage still be there when I come back?" An employee recovering from surgery usually needs both answers, and the employer usually wants both programs to run on the same calendar.

They only do that if the employer makes them. STD approval from the insurer does not designate anything under FMLA, and FMLA designation does not start STD benefits. Employers who treat the STD claim as "the leave" and forget the FMLA paperwork routinely discover, at week 12 of an STD claim, that the FMLA clock never started and the employee still has 12 weeks of job-protected leave left. That is the double-count this guide is about, along with the payroll and tax mechanics that sit underneath a concurrent STD and FMLA absence.

What Each Program Does

	FMLA	Short-term disability
Source	Federal statute, 29 CFR Part 825	Employer plan or insurance policy; in some states, a state program
Provides	Up to 12 workweeks of job-protected leave; continued group health coverage	Partial wage replacement for a covered disability
Pay	Unpaid (paid leave can be substituted in some cases)	Paid, usually a percentage of pre-disability earnings, after any waiting period
Eligibility	Covered employer; 12 months' employment, 1,250 hours, 50 employees within 75 miles	Set by the plan or state law
Job protection	Yes	None by itself
Decides the claim	Employer	Insurer or plan administrator (or state agency)

 

The combination that matters most is the overlap: an employee who is FMLA-eligible, has a serious health condition that prevents them from working, and qualifies for STD benefits. For that employee, the regulations are explicit about how the two interact.

The Core Rule: Designate STD Leave as FMLA Leave

Under 29 CFR 825.207(d), leave taken under a disability leave plan is FMLA leave for a serious health condition and counted against the entitlement if it meets the FMLA criteria. The regulation says the employer may designate it as FMLA leave and count it.

"May" is about the employer's power; the employer's duty to designate comes from 29 CFR 825.300(d), which makes the employer responsible in all circumstances for designating FMLA-qualifying leave and giving notice within five business days once it has enough information. The Department of Labor has also said, in opinion letter FMLA2019-1-A, that an employer may not delay designating FMLA-qualifying leave. Put together: when an STD claim is for a condition that qualifies under FMLA, the employer should run the FMLA process in parallel from the first day.

The parallel process

1. Employee reports the absence. That report, not the STD claim form, usually starts the FMLA clock. The employer must send the eligibility and rights and responsibilities notice (Form WH-381 or equivalent) within five business days of learning the leave may qualify.
2. The rights and responsibilities notice addresses STD. It should say that leave covered by the disability plan will be counted as FMLA leave if it qualifies, and explain how health premiums will be paid while the employee is not receiving wages through payroll.
3. The employer may request FMLA certification (Form WH-380-E) on the normal timeline. Under 825.306(c), an employer may also request additional information required by a disability plan, but must tell the employee that the additional information is needed only for the plan benefits; failing to supply it does not affect the right to unpaid FMLA leave. Information received under the plan may be considered in deciding FMLA entitlement.
4. Once the employer has enough information, it sends the designation notice (Form WH-382 or equivalent). Under 825.300(d)(1), if paid leave taken under an existing leave plan will be counted as FMLA leave, the employer must inform the employee at the time of designation.
5. Track both clocks. STD benefit dates and FMLA hours go in separate columns of the leave tracker; one does not stand in for the other.

The STD carrier's approval or denial does not decide FMLA status. An STD claim can be denied for a plan reason (a pre-existing condition exclusion, a missed filing deadline) while the absence is plainly FMLA-qualifying, and the employer still owes FMLA protection.

Why You Cannot Require PTO Substitution During STD

FMLA leave is unpaid by default, and 29 CFR 825.207(a) lets the employer require, or the employee elect, that accrued paid leave run concurrently with it. That is "substitution." Section 825.207(d) carves out disability plan leave:

Because leave pursuant to a disability benefit plan is not unpaid, the provision for substitution of the employee's accrued paid leave is inapplicable, and neither the employee nor the employer may require the substitution of paid leave.

The same rule applies to workers' compensation absences under 825.207(e). In opinion letter FMLA2025-01-A, the Wage and Hour Division applied the same reasoning to state paid family and medical leave benefits.

What the regulation does allow is supplementing by agreement. Employers and employees may agree, where state law permits, to have paid leave supplement the disability benefit, the regulation's example being a plan that replaces only two-thirds of salary. Three practical points:

• It has to be an agreement, not a unilateral policy requirement. Write the option into the leave policy as an election the employee makes, and document the election.
• Check the plan. Some STD policies reduce benefits by other income, including employer-paid salary continuation. If the PTO top-up triggers an offset, the employee gains nothing and the insurer may seek an overpayment back.
• Check state law. Some state disability and paid leave programs have their own rules on supplementing benefits with employer pay.

The waiting period

Most STD plans have an elimination or waiting period before benefits begin. During that period the plan is not paying, so the reasoning in 825.207(d) (that disability plan leave is "not unpaid") does not obviously apply. Many employers treat waiting-period days as ordinary unpaid FMLA leave to which the normal substitution rules apply, and require PTO or sick leave for them under their written policy. If you do that, say so in the rights and responsibilities notice and confirm the approach with counsel, because the regulation does not address the waiting period in terms.

The Double-Counting Problem, Both Ways

"Double-counting" in this area can mean two opposite errors.

Granting leave twice. The employer approves 12 weeks of STD, never designates FMLA, and when the employee is ready to return on week 13, the employee (or their lawyer) points out that FMLA was never designated. Retroactive designation under 825.301(d) is possible only if the late designation did not harm the employee. If the employee can show harm, the employer may owe additional protected leave or damages. The fix is process: FMLA notice and designation run alongside every STD claim from day one.

Charging leave twice. The opposite error: charging the employee's FMLA entitlement for STD days and then charging it again for the PTO the employee used to supplement those same days. Supplementing pay does not create additional leave. A day of STD-plus-PTO top-up is one day of FMLA leave, not two. Make sure the timekeeping codes for "PTO supplement" do not also post to the FMLA usage bucket.

A related tracking error: STD benefits are often paid on calendar days, FMLA is counted in workweeks (converted to the employee's normally scheduled hours). A 40-hour employee on continuous STD for six weeks has used six weeks, or 240 hours, of FMLA, whatever number of days the carrier paid. For partial or graduated returns, where the employee works a reduced schedule while receiving a partial STD benefit, only the hours not worked count against FMLA, in proportion to the normal schedule. Our guide to intermittent FMLA payroll covers reduced-schedule counting in detail.

Health Benefits During a Concurrent Absence

FMLA requires the employer to maintain group health coverage on the same terms as if the employee had kept working (29 CFR 825.209). The employee still owes their share of the premium (825.210).

The payroll problem is that an employee on STD is often paid by the insurer, not through payroll, so there are no wages to deduct from. The employer must give advance written notice of how the employee will pay (this belongs in the rights and responsibilities notice). Under 825.210(c), the options include paying on the same schedule as payroll deductions, on the COBRA schedule, by prepayment through a cafeteria plan at the employee's option, under existing leave-without-pay rules (which may not require prepayment before leave begins), or under another arrangement the employee voluntarily agrees to. No administrative surcharge may be added.

Where STD is paid through payroll (self-insured plans often run benefits through the employer's own payroll), deductions can continue normally. Either way, if the employee's share is not collected, recovering it later from wages needs proper authorization; see our voluntary deduction authorization guide.

Other benefits (life, disability, retirement accruals) follow the employer's rules for employees on other types of leave without pay. Under 825.220(c), an employee on unpaid FMLA leave must get the same benefits as an employee on other comparable unpaid leave.

When STD and FMLA End on Different Dates

STD and FMLA rarely end on the same day.

FMLA runs out first. A 12-week FMLA entitlement can expire while STD benefits continue. FMLA job protection ends, but that is not the end of the analysis. If the condition is a disability under the ADA, additional leave may be a reasonable accommodation unless it causes undue hardship (29 CFR 825.702(b)), and a fixed "terminate at end of FMLA" practice is a known ADA risk. Engage in the interactive process before acting.

STD runs out first. If the STD plan's benefit period ends but the employee still has FMLA entitlement and cannot return, the remaining FMLA leave is unpaid, and the normal substitution rules apply again: the employee may elect, or the employer may require, accrued paid leave under the policy.

Employee not FMLA-eligible. A new hire may qualify for STD but not FMLA. There is no FMLA job protection, but other laws may still apply. Under 825.702(f), Title VII as amended by the Pregnancy Discrimination Act requires that pregnant employees receive the same benefits as other employees with short-term disabilities, regardless of FMLA eligibility. The ADA and state leave laws may also apply.

Tax and Reporting: STD Is Sick Pay

STD benefits are "sick pay" for employment tax purposes, and the rules in IRS Publication 15-A apply. The details are covered in our third-party sick pay reporting guide; the points that affect a concurrent leave are:

Who funded the premiums decides taxability. Benefits attributable to employee contributions made with after-tax dollars are not subject to income tax withholding or Social Security, Medicare and FUTA taxes. Premiums paid with pre-tax salary reduction through a cafeteria plan are treated as employer contributions, so benefits from them are taxable. Where both contributed under a group policy, the taxable share is based on the employer's share of the policy cost for the three policy years before the year of payment.

Social Security, Medicare and FUTA stop after six months. Those taxes do not apply to sick pay paid more than six calendar months after the last calendar month in which the employee worked. Income tax still applies.

Who pays decides the withholding rules. Sick pay paid by the employer or its agent is subject to mandatory income tax withholding. Sick pay paid by a third party that is not the employer's agent (typically an insurer bearing the risk) is subject to income tax withholding only if the employee requests it on Form W-4S.

Liability for the employer share of FICA and FUTA. A third-party insurer is liable for it unless it transfers the liability to the employer by withholding and depositing the employee share and notifying the employer in time. When that notice arrives, payroll owes the employer share and must report the sick pay. Form 8922 reconciles third-party sick pay where the liability has shifted.

Year-end. The sick pay must appear on Form W-2 (by the employer or the third party, depending on the arrangement). Get the carrier's year-end sick pay statement early; it is a common cause of late W-2 corrections. See our W-2 preparation guide.

Workers' comp is different. Benefits paid under a workers' compensation law are not sick pay and are not subject to employment taxes. If you are deciding which program covers an absence, our short-term disability vs. workers' comp guide covers the line between them.

State programs. In states with statutory disability or paid family and medical leave programs (California, New Jersey, New York, Rhode Island and Hawaii among them), the state-mandated benefit runs alongside FMLA under its own rules and contributions. See our state paid family leave roundup.

A Concurrent-Leave Checklist

• [ ] Every STD claim triggers an FMLA eligibility review within five business days
• [ ] Rights and responsibilities notice states that disability-plan leave will count as FMLA leave
• [ ] Notice explains how health premiums are paid while STD is paid outside payroll
• [ ] Designation notice sent once enough information is available, stating that STD leave counts as FMLA
• [ ] No PTO substitution required while STD benefits are paid; top-ups only by documented employee election, after checking plan offsets and state law
• [ ] Waiting-period treatment written into policy
• [ ] FMLA usage tracked in hours of the normal schedule, separately from STD benefit days
• [ ] PTO supplement codes do not post to the FMLA bucket
• [ ] Calendar reminder before FMLA exhaustion to start the ADA interactive process
• [ ] Carrier set up to notify payroll of third-party sick pay; taxability split by premium source; six-month FICA cutoff tracked

Frequently Asked Questions

Does short-term disability run concurrently with FMLA?

It can, and usually should. Under 29 CFR 825.207(d), leave under a disability plan counts as FMLA leave if the condition is a serious health condition, and the employer may designate it and count it against the 12-week entitlement. Because the employer is responsible for designating qualifying leave and must do so within five business days of having enough information, the practical rule is to run the FMLA notice and designation process alongside every STD claim from the first day of absence.

Can an employer make an employee use PTO while on short-term disability?

No, not as an FMLA substitution. The regulations say leave under a disability benefit plan is not unpaid, so neither the employer nor the employee can require substitution of accrued paid leave during it. The employer and employee may agree, where state law permits, to use PTO to supplement a partial STD benefit. Check whether the STD policy offsets other income first, since a top-up can reduce the benefit or create an overpayment.

What happens when FMLA ends but the employee is still on short-term disability?

FMLA job protection ends when the 12-week entitlement is exhausted, but STD benefits may continue under the plan. Before taking any employment action, consider whether the employee has a disability under the ADA; additional leave can be a reasonable accommodation unless it causes undue hardship. Start the ADA interactive process before FMLA runs out, and avoid automatic termination at the end of FMLA.

Do I have to keep health insurance going during short-term disability?

If the absence is designated as FMLA leave, yes: the employer must maintain group health coverage on the same terms as if the employee were working, and the employee pays their usual share. Because STD benefits are often paid outside payroll, give the employee advance written notice of how to pay, using one of the methods the regulations allow. After FMLA ends, coverage follows plan terms, COBRA and any ADA accommodation obligations.

Are short-term disability benefits taxable?

It depends on who paid the premiums. Benefits attributable to employee after-tax premiums are not taxable. Benefits attributable to employer-paid premiums, including premiums paid pre-tax through a cafeteria plan, are taxable sick pay. Social Security, Medicare and FUTA taxes generally do not apply to sick pay paid more than six calendar months after the last month the employee worked. Third-party insurers withhold income tax only if the employee files Form W-4S.

Can an employee get short-term disability without being FMLA-eligible?

Yes. STD eligibility is set by the plan, and a new hire can be covered by the plan without meeting FMLA's 12-month and 1,250-hour tests. That employee receives the plan benefit without FMLA job protection. Other laws may still protect the job: the Pregnancy Discrimination Act requires equal treatment of pregnancy-related disabilities, the ADA may require leave as an accommodation, and state leave laws may have shorter eligibility periods.

Training for Concurrent Leave Administration

Concurrent leave is where federal, state, plan and payroll rules all meet, which is why it generates so many errors. The Leave Management Compliance Suite is designed for teams that administer those layers together. For staff who manage disability claims and return to work, the Certified Professional in Disability Management (CPDM) program is the related credential.

Designate FMLA alongside every qualifying STD claim, never require substitution while benefits are paid, keep the two clocks in separate columns, and get the carrier's sick pay data into payroll before year-end.