Short-term disability: What qualifies and how it works

Last updated: 7/27/2026

Short-term disability is an income replacement benefit that can help employees remain financially stable if they become injured or ill and cannot work. Employers are required to sponsor this benefit in a few states, though all businesses should consider it for engagement and retention purposes.

Short-term disability key takeaways:

• Short-term disability provides a percentage of income (40 to 70% of base pay) to employees who are unable to work because of an illness or injury not caused by their job.
• Conditions that may warrant short-term disability benefits include pregnancy, surgical recovery and acute injuries, such as sprains, fractures or strains.
• Depending on the plan, employers may cover the full cost of short-term disability benefits, or they may expect eligible employees to pay a portion of the premiums.
• Some employers also offer long-term disability, which provides continued income replacement to employees who have exhausted their short-term disability benefits.

When employees are unable to work for an extended period of time due to an illness or injury that’s unrelated to their job, it can be detrimental for both them and their employers. The workers experience financial hardship due to lost wages, while the employers suffer lapses in productivity. Worst-case scenario – talented employees who don’t have the support they need never return to work. A solution to this problem is short-term disability benefits.

What is short-term disability insurance?

Short-term disability is an income replacement benefit that provides a percentage of pre-disability earnings on a weekly basis when employees are out of work on a disability claim. It typically covers off-the-job accidents and illnesses that workers’ compensation would not cover.

Short-term disability at a glance

What does it cover?	Illnesses or injuries unrelated to work
What does it not cover?	Conditions that existed prior to enrollment
How much does it pay?	40 to 70% of base pay
How long does it last?	13 to 52 weeks, depending on the plan
Who pays for coverage?	Employers or employees, depending on the plan

Key differences between short-term disability and long-term disability

Short-term and long-term disability insurance serve different phases of an employee’s recovery from illness or injury. Here's how they compare:

• Duration: STD typically covers 13 to 52 weeks. LTD can last several years or until the employee reaches age 65, depending on the policy.
• Elimination period: STD has a shorter waiting period, typically 7 to 30 days. LTD has a longer elimination period, often 90 to 180 days, and commonly begins when STD benefits are exhausted.
• Income replacement: STD generally replaces 40% to 70% of base pay, whereas LTD typically replaces 60% to 80% of base pay.
• Common uses: STD covers temporary conditions, including pregnancy, acute injury or illness, and surgical recovery. LTD covers chronic or serious conditions, such as cancer, heart disease and neurological disorders.

How does short-term disability insurance work?

Short-term disability varies based on the provider and state requirements. Generally, the options are:

• Traditional – employers pays the full premium
• Contributory – both employers and employees contribute to the benefit cost
• Core buy-up – employees have the option to purchase more coverage
• Voluntary – employees alone pay for disability benefits

Once enrolled in one of the plan options available to them, employees are eligible to receive a portion of their weekly wages if they become disabled. Wage replacements can range from 40% to 70% with a monthly benefit maximum in some cases.

Offer your employees peace of mind with ADP’s short-term disability insurance. 

Partial disability benefits

Employees who are only partially disabled may be able to work part-time and still receive 100% of their pre-disability earnings for the duration of their claim. This benefit helps incentivize employees to return to work.

Rehabilitation services

Some insurance policies allow employees to partner with vocational rehabilitation counselors to create individualized return-to-work plans. Such plans may include job modifications or accommodations, transitional assignments and other reasonably necessary activities.

What qualifies for short-term disability?

Some of the most common reasons for a short-term disability claim are:

• Car or other major accident
• Recovery from surgery
• Medical procedure
• Short-term illness
• Pregnancy or pregnancy-related complications
• Some mental health conditions
• Digestive disorders
• Back and joint disorders

What is not covered by short-term disability?

Conditions that pre-existed prior to enrollment, including pregnancy in some cases, generally do not qualify for short-term disability. Claims may also be denied for the following reasons:

• Self-inflicted injuries
• Use of non-prescription drugs or other illegal substances
• Injury sustained during commitment of a crime
• Injury from participation in a riot or protest
• Cosmetic procedures that are not medically necessary
• Insufficient medical evidence

Can you go on short-term disability for anxiety, depression or stress?

Short-term disability generally covers behavioral health issues, which can include anxiety, depression and stress. However, the claims process for these conditions tends to be more difficult. Claims analysts may need all of the medical records pertaining to the diagnosis so they can evaluate what is preventing the employee from working.

When do short-term disability benefits start?

Employees can begin receiving short-term disability payments on day one for accidents quoted as such. However, the typical start date for payments is the eighth day after a claim is filed.

How long does short-term disability last?

As the name implies, short-term disability is temporary. The duration of benefits, depending on the provider, may be:

• 13 weeks
• 26 weeks
• 52 weeks

Can short-term disability be extended?

Employees unable to work after 13 weeks can sometimes extend their short-term disability benefits up to 26 or 52 weeks, depending on plan provisions. However, they may be required to undergo medical examinations and prove they are attending all medical appointments and following a specified treatment plan. Without this evidence, their short-term disability benefits may cease.

Employees who exhaust their short-term disability benefits can apply for long-term disability if their employer sponsors coverage. Those on parental leave might also be able to extend their short-term disability benefits via paid leave and Family Medical Leave Act (FMLA) provisions.

If extensions are unavailable, some employees can explore Social Security Disability Insurance (SSDI). Eligibility for this program is based on age and accrued work credits.

How much does short-term disability pay?

Short-term disability pricing varies based on the employee’s age and weekly compensation. But according to the U.S. Bureau of Labor Statistics, the approximate cost for employers to provide both short- and long-term disability insurance to all private sector workers is 1% of total compensation cost, or $624 per full-time worker, per year.¹

How do employees get paid short-term disability?

It can take up to two weeks for short-term disability payments to begin. After this exclusion period, employees may be paid in any of the following ways:

• Prepaid debit card
• Direct deposit
• ACH payments
• Printed checks

Insurance companies, rather than employers, issue the payments directly to the employees. They do so until the employee resumes work or until the end of the benefits period, whichever comes first.

Is short-term disability taxable?

Whether short-term disability benefits are taxable depends on how the premiums are paid during the year of the disabling event. Here’s the breakdown:

• If premiums are paid entirely with pretax dollars, then the benefits that an employee receives upon becoming disabled are taxable.
• If premiums are paid entirely with post-tax dollars, then the benefits are not taxable.
• If premiums are paid with a combination of pretax and post-tax dollars, then the benefits are taxable on a pro rata basis, calculated using a three-year lookback period for group disability plans and a one-year lookback period for individual disability policies.

Do employees have to pay back short-term disability?

Employees generally do not have to pay back their short-term disability benefits, but there may be instances where reimbursement is necessary. Examples include:

• Receiving Social Security benefits – If an employee reaches retirement age or otherwise qualifies for Social Security disability, short-term disability payments may discontinue as soon as SSDI payments begin.
• Going back to work – Some policies permit employees to work part-time while receiving short-term disability benefits, albeit with work and income limitations. Employees who exceed the limits may be required to pay back some of their short-term disability payouts.
• Overpayment by the insurance provider – In rare cases where the short-term disability insurance company overpays the employee, the provider will require repayment of the overage.

If reimbursement is required, it is often done through reduced benefits or automatic paycheck reductions. Employees can also pay a one-time lump sum.

Benefits of short-term disability insurance

To truly reap the rewards of short-term disability insurance, employers must weigh the up-front costs with the long-term benefits. For instance, if employees can’t afford to participate in the disability plan, it may diminish rather than enhance their morale. Employers who succeed in balancing cost vs. benefits may be able to:

• Attract new talent
• Retain valued team members
• Improve employee engagement
• Enhance employee financial wellness

What states require short-term disability for employees?

In most states, offering short-term disability insurance is optional, but there are a few jurisdictions that mandate disability and/or paid family medical leave. These include:

• California
• Hawaii
• New Jersey
• New York
• Puerto Rico
• Rhode Island

Short-term disability checklist for employers

Short-term disability benefits must align with workforce needs, leave policies and operational realities to be effective. The following checklist can help employers achieve this alignment:

• Integrate with paid leave programs
  Short-term disability should complement sick leave, paid time off (PTO), parental leave and state-mandated programs to avoid coverage gaps or overlaps.
• Evaluate workforce characteristics
  Job demands, pay levels, absence patterns and tenure influence appropriate short-term disability benefit levels and elimination periods.
• Manage claims correctly
  Timely decisions, clear communication and clinical support help improve employee trust and reduce disputes.
• Manage costs
  Weekly maximums, benefit durations and elimination periods directly affect premiums and predictability.
• Support compliance
  Short-term disability administration must comply with all applicable federal and state laws.

Common short-term disability mistakes

Some of the more common mistakes employers make when administering short-term disability benefits include:

• Not complying with the disability requirements in all states where people are employed.
• Miscoordinating short-term disability benefits with paid leave policies.
• Improperly training HR practitioners on how to manage and escalate claims.
• Miscommunicating coverage to employees during onboarding and open enrollment.

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Frequently asked questions about short-term disability

Next steps for your short-term disability

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This article is intended to be used as a starting point in analyzing short-term disability and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.

¹ U.S. Bureau of Labor Statistics