When an employee faces an illness or injury, work stops, but the bills don’t. In the U.S., short-term disability (STD) replaces a portion of pay for a set period of time so team members can recover without worrying about finances. For employers, a clear STD plan gives your People team a consistent playbook for eligibility, documentation, and timelines.
In this article, you’ll learn what qualifies for short-term disability and how coverage works. We’ll cover real examples, processes, and employer responsibilities to help align your teams, from People Ops to payroll.
What is short-term disability?
STD insurance replaces a portion of an employee’s pay when a non-work-related illness, injury, or recognized medical condition keeps someone off the job for a limited time.
Most plans pay a weekly percentage of pre-disability earnings, about half to two-thirds of weekly pay. Benefits stop when the employee returns or the benefit period ends. STD insurance is the policy that funds these payments, and employers can sponsor it, employees can contribute, or both.
In the workplace, STD supports employee health and well-being during recovery, gives HR a consistent process, and supports a timely return to work plan. It’s different from employer-sponsored health insurance, which covers medical bills rather than lost wages.
It also differs from other leaves from work. STD provides income replacement, while job-protected leave, like the Family and Medical Leave Act (FMLA), is unpaid. Many employers coordinate the two so employees have income support and job protection.
STD is distinct from long-term disability, covering different timelines and afflictions. Here’s a quick comparison of the two:
What does short-term disability cover?
STD generally covers non-work medical conditions that stop employees from performing their jobs for a fixed period. Here are a few examples.
Serious illness
Conditions that require time away from work to treat and recover, such as pneumonia, severe migraines, or digestive disorders, typically qualify. Providers must confirm functional limits and a return to work date to clarify eligibility.
For example, an employee’s doctor orders two weeks off for pneumonia, followed by reduced hours. The worker notifies the company, asks their doctor to fill out the appropriate documentation, then submits the forms to the People team for approval.
Injuries from accidents
Non-work accidents often qualify once a clinician verifies you cannot perform your job duties. Suppose a warehouse associate fractures an ankle during a hike. They can no longer stand for extended periods, which is required for their role, so the company approves STD to support their recovery.
Pregnancy and childbirth recovery
This recovery is covered when a doctor confirms an employee is unable to work due to pregnancy or childbirth. This often includes C-section recovery and postpartum care. Keep in mind that some plans exclude pre-existing pregnancy at the time of enrollment.
Mental health conditions
As mental health awareness grows, more employees seek coverage for conditions that affect their work. Policies often cover acute, medically certified behavioral health conditions, including depression and anxiety, when symptoms prevent you from working. This generally requires thorough documentation, so the employee’s doctor will need to provide regular updates and detailed records to confirm coverage.
What does not qualify for short-term disability?
While short-term disability requirements depend on the policy, the following are commonly excluded from plans.
Substance abuse misuse without prescribed treatment
The use of non-prescription drugs or illegal substances are typically excluded. Insurers will usually deny benefits for substance misuse unless the employee has a formal, medically directed treatment plan.
Self-inflicted injuries
Self-inflicted harm is a standard policy exclusion and generally doesn’t qualify for short-term disability benefits. The carrier reviews documentation to confirm the injury was accidental, including witness statements and medical records, and denies the claim when it isn’t.
Workplace injuries covered by workers’ compensation
If the injury or illness happened on the job, it usually belongs under workers’ compensation and not STD. Clearly define the differences and requirements in your company policies to encourage consistent support and compliance.
Stress without a medical diagnosis
Time off for stress without medical documentation is commonly denied for insufficient evidence.
While policies may cover behavioral health, it’s unlikely unless a clinician documents the diagnosis and confirms an employee’s inability to work.
Pre-existing conditions
Many plans exclude conditions that existed before coverage began. Depending on the policy, this can include pre-existing physical and mental afflictions, such as chronic back pain and depression. Keep in mind that pregnancy may be excluded if conception occurred before enrollment.
How does short-term disability work?
Policies differ by carrier and state rules, but the basic elements are the same. Here’s the typical process.
Eligibility requirements
Employees become eligible when a non-work-related illness or injury prevents them from doing their job, and a clinician documents the condition and an expected return to work date. Many plans require active employment and minimum tenure, and clearly define exclusions.
Waiting (elimination period)
Most plans include a waiting period after the disability date and before the first payment. This gap is short—often about a week or two—though some pay sooner depending on the accident.
Benefit amounts
Approved claims pay a portion of pre-disability earnings each week. Plans replace roughly 50–70% of pay, and may have a monthly maximum. They may use a staggered payment system, issuing a larger percentage at the beginning of the term and less towards the end.
Coverage duration
Coverage is temporary, and the common benefit period runs for several weeks or months. This can end sooner if the employee returns to work, the policy maximum is reached, or the claim no longer meets the plan's definition of disability.
Filing a claim
Employees submit forms including the dates of disability and pay details, plus a provider statement with diagnosis and functional limits. The insurance company reviews documentation, applies the plan rules and exclusions, and issues weekly payments while the claim is active and within the benefit window.
Legal considerations and employer responsibilities
Here's what employers need to know to offer supportive, compliant STD benefits.
Federal and state requirements
Some areas require disability coverage or state-run programs, so make sure to coordinate plan rules accordingly. While most states make STD voluntary, a handful of jurisdictions mandate it, including CA, HI, NY, RI, and NJ. Align your processes and documentation with those local laws and clarify how they interact with job-protected leave like FMLA.
Employer contributions and funding
Decide how you’ll fund premiums and disclose the model clearly, whether you choose shared cost, employer paid, or employee paid (via payroll deduction). Policies commonly replace about half of earnings, so plan your premium strategy around the benefits you promise.
Documentation and reporting obligations
Establish your plan’s requirements, including employee claim timelines, necessary provider statements, and submitted wage and job data. Maintain records for audits and enforce exclusions consistently to reduce risk and prevent policy abuse. If you use a carrier or state program, follow their filing windows and evidence standards.
Advantages of short-term disability insurance
STD insurance offers advantages for both employees and employers, providing financial protections and a smoother recovery process. Here are some of the benefits:
- Income protection during recovery: Employees receive partial wage replacement while they recover from a covered illness or injury. This helps them maintain financial stability when expenses continue, but regular paychecks stop.
- Reduced financial stress: With income support in place, employees can focus on treatment and recovery rather than worrying about bills. This lowers anxiety and strengthens overall well-being.
- Stronger employee retention and morale: Offering STD coverage as part of your employee benefits package signals your organization values its people. That builds trust and makes it easier to attract and retain talent.
- Legal and compliance risk reduction: A defined disability policy ensures consistency for employee time off and prevents inequitable decisions that could lead to legal disputes. It also keeps People Ops aligned with federal and state leave requirements.
Protect your team globally with Oyster
When life takes an unexpected turn, STD coverage shows companies care about employee health and financial well-being. It protects income during recovery, reduces stress, and ensures consistency in how your company handles absences.
With Oyster’s Total Rewards solution, you can design compliant and localized benefit packages that include disability coverage where required. Our platform simplifies global benefits administration, helping you support teams in any country and build a more resilient people-first workforce.
Manage your team effortlessly with Oyster.
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About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
