What Is a Waiting Period for Employee Benefits (Like Health Insurance)?

Businesses, insurance companies, and the government all use waiting periods. If you provide company-sponsored benefits to employees, you might decide to set a waiting period. So, what is it?

Read on to learn what is an employee waiting period, rules for setting the time frame, and how to implement one in your small business.  

What is a waiting period?

A waiting period is a time frame individuals must wait before accessing company, insurance, or unemployment benefits. You may also hear it referred to as a qualifying period or, in the case of a waiting period for health insurance claims, an elimination period. Many businesses set one for new hires to lower employee turnover

So, should you use a qualifying period in your small business? Using one gives you more time between onboarding an employee and doling out company-sponsored benefits, like health insurance or paid time off (PTO). And if you have a history of high turnover rates, especially with new hires, you might opt to use one. 

However, the choice is yours. Some employers choose to use no waiting period for employee benefits. 

Types of benefits a qualifying period could apply to

There are a number of benefits that use a waiting period. And again, employers don’t set all of them. But even if you’re not the one in charge of it, you may need to pass on the information to your employees. 

Here are a few company, insurance, and government benefits that commonly use a qualifying period:

Health insurance PTO Unemployment Disability Health insurance 

Both employers and insurance companies can set waiting periods. 

Employers might make employees wait a certain period of time after their hire date before becoming eligible to sign up for health insurance coverage. 

For example, you could set a:

30-day waiting period for health insurance 60-day waiting period for health insurance 90-day insurance waiting period for new hires

Health insurance companies may set an additional elimination period before policy holders (i.e., your employees) can make a claim and receive benefits. Of course, there is health insurance without waiting period. 

If you offer a group health plan to your team, you need to know about some IRS rules. The waiting period for small business health insurance from employers cannot exceed 90 days. Keep the 90-day waiting period maximum in mind when coming up with your insurance eligibility terms. 

PTO

Paid time off is when an employee receives their regular wages when they take off from work. If you have a paid time off policy, your waiting period can apply to the following:

The time before an employee can accrue PTO The time before an employee can use PTO Both of the above

PTO accrual is when an employee receives (or accrues) paid time off hours as they work. You can calculate accruals based on the number of hours, days, or even weeks worked (e.g., one hour of PTO per 40 hours worked). 

If you set a waiting period for PTO accrual, usage, or both, specify it in your employee handbook. For example, you could say something like: 

Employees accrue one hour of PTO per every 40 hours worked, after 30 days.  Employees can use accrued PTO after 90 days. Unemployment

As an employer, you’re responsible for paying federal and state unemployment taxes on behalf of

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