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Is ‘Paid Leave Oregon’ Too Good to be True?

On Jan. 1, Oregon’s “Paid Leave Oregon” program went into effect. Employers and employees began contributing 1% of wages up to $132,900 into the Paid Leave Oregon fund. Employees contribute 60% of the 1% and employers contribute 40% of the 1%.

Eligible employees will be able to take up to 12 weeks of paid leave per 52-week period beginning Sep. 3, 2023. This paid leave will cover three main types of life events:

  • Family Leave: to care for a family member with a serious illness or injury, or to bond with a new child after birth, adoption or foster care placement.
  • Medical Leave: during your own serious health condition.
  • Safe Leave: for survivors of sexual assault, domestic violence, harassment, or stalking.

Most Oregon employers with at least one employee are required to participate in the program unless the business creates an equivalent plan.

Employers with 25 or more employees are required to contribute 40% of the set rate now at 1% of wages. Small employers can elect to contribute 40% share, which qualifies them for grants to cover cost of finding replacement workers.

Employers must protect the jobs of those out on paid leave. The program rules give this example for employees of a large company:

“For example, a delivery driver must be returned to the same route, at the same rate of pay and benefits, driving the same type of truck, delivering the same type of goods, on the same shift, and working from the same location as when the driver started PFMLI leave.”

Contribution and Benefit Calculations

Let’s assume a full-time $25/hour worker earns $1,000/week and $52,000/year (based on 40-hour work week). The employee would contribute $6/week or $312/year. The employer would contribute $4/week or $208/year. The total 1% contributed is $10/week, $520/year.

This worker files for and receives paid family leave benefits. The benefit received would be $1,000/week or $12,000 for 12 weeks of benefits.

How can an employee/employer pay in $10/week and receive $1,000/week in benefits? This is a 100 to 1 return on investment. One reason is that the employee needs to contribute for 40 weeks to take 12 weeks off – but the main reason is that not all employees will take paid leave each year.

Philip Hudspeth is a Program Analyst for Paid Leave Oregon. At a webinar hosted by the Grants Pass Chamber last month, he said, “Similar programs in other states had a 7% utilization rate.” That means for every 100 employees who paid into the program, only seven went on paid leave.

Employees earning up to the State Average Weekly Wage (SAWW) will receive 100% of weekly wages. Those earning more than the SAWW will receive 65% of the SAWW (now $1,224.82) plus 50% of wages above the SAWW.

Challenges for Small Businesses

Large companies and government departments often have multiple people doing the same job. If one employee goes out on leave others can pick up the slack while a temporary employee is hired and trained.

Small companies often have just one person in key positions. Examples include a small restaurant with one cook and small retailers with one bookkeeper who pays the bills, handles payroll and makes the daily deposits. These companies would be challenged to keep things running if these key employees took paid leave.

The problem is compounded because paid leave can be taken one day at a time or by the week. Paid leave normally must be applied for 30 days in advance. Yet emergency paid leave can be granted upon 24 hours’ notice. If the cook takes one day of leave per week for 52 weeks, it might be impossible to hire a replacement cook.

[The Eagle reached out to Paid Leave Oregon with these examples and asked whether any small business hardship exceptions would be available. No response was received by press time.]

Social Security Redux?

Only time will tell how many Oregon employees take advantage of this new program. If utilization exceeds projections, then the fund will run out of money. Benefits would need to be reduced or the legislature would need to vote for higher tax contributions.

The history of Social Security provides some clues to what may happen.

The program was signed into law in 1935 by President Franklin D. Roosevelt. Employees and Employers each contributed 1% of wages up to $3,000/year. Benefits were paid out beginning in 1940.

Retired Legal Secretary Ida May Fuller received the first monthly retirement check on Jan. 31, 1940, in the amount of $22.54. She was 65 years old at the time and had paid in $24.75 in total Social Security taxes. Ida May lived to be 100 years old and collected in total $22,888.92 in benefits.

In 2023, employees and employers each contribute 6.2% of wages up to a maximum of $160,200. The total contributed by employee and employer would be $19,865 for an employee earning $160,200. That means that since Social Security began 88 years ago, the percentage contributed by American workers and employers has skyrocketed by 520% – from 1% to 6.2%

Increasing the Paid Leave Oregon contribution rate above 1% would require a bill to be passed by the Oregon Legislature and be signed into law by the governor.

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Richard Emmons is the Publisher and Editor of the Josephine County Eagle.