Salary Continuation Plan

What Does Salary Continuation Plan Mean?

A salary continuation plan is an agreement that defines how an employer will respond if an employee becomes disabled. The plan may outline various actions, such as retaining the employee in the workforce, reducing their responsibilities, and continuing to pay their current salary. This kind of plan can work alongside an individual disability insurance policy, which pays a portion of an employee’s income when illness or injury keeps them from working.

Insuranceopedia Explains Salary Continuation Plan

Although the name suggests that the salary will remain unchanged, a salary continuation plan may specify that a disabled employee can be paid at a reduced rate. The most critical requirement for such a plan is that it must be documented in writing before the employee becomes disabled. If the plan is not outlined in writing and made accessible to covered employees beforehand, it is not legally enforceable.

Salary continuation is different from workers’ compensation, which is mandated by state law and applies only to injuries or illnesses that happen on the job. These agreements are intended to protect both the employer and the employee.