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What to Have in Place Before a Colorado Employee Goes on FAMLI Leave

Colorado employers have three lawful options for collecting employee benefit premiums during FAMLI leave: voluntary PTO deductions, monthly invoicing, or fronting premiums and recovering them post-return. The right choice depends on the employee’s financial situation and the likelihood of return.

When an employee is out on FAMLI leave, one practical question often gets overlooked until it becomes a problem: if there is no paycheck to pull from, how do you collect the employee’s share of health insurance and other benefit premiums? What matters most is planning ahead and communicating the approach to the employee before the leave begins, not after.

This guidance was developed by Journey Payroll & HR, a Colorado-based payroll and HR firm dedicated to keeping employers informed on FAMLI compliance requirements.

Key Takeaways for Colorado Employers

· Employer-sponsored benefit enrollment does not pause during FAMLI leave

· Employers must maintain health coverage during FAMLI leave under the same terms as active employment

· Colorado law provides three lawful methods for collecting employee benefit premiums during leave

· Any plan to recover premiums through future paycheck deductions requires prior written authorization

· The pre-leave conversation and signed agreement are the most important steps an employer can take

Why This Requires a Plan

When an employee is on FAMLI leave, their enrollment in employer-sponsored benefits, including health, dental, vision, and any other elected coverages, generally continues. Under Colorado law, employers are required to maintain health care benefits during FAMLI leave under the same terms as if the employee had remained actively at work, and the employee remains responsible for their share of those premium costs.

Premiums keep coming due, and the employer is still responsible for submitting the full premium to the carrier on time. Under normal circumstances, the employee’s share is

deducted automatically from each paycheck. When there is no paycheck, that automatic mechanism disappears. Without a plan in place, employers often end up covering both sides of the premium by default, not because the law requires it, but simply because it was not considered ahead of time. Colorado’s regulations governing FAMLI (7 CCR 1107-4.6) explicitly address this situation and give employers several lawful collection methods. The key is choosing one, documenting it in writing, and communicating it to the employee before their last day of work.

Journey Payroll & HR recommends treating the pre-leave conversation as non-negotiable. It is the single most effective step an employer can take to avoid disputes, missed payments, and compliance gaps.

Three Ways to Handle It

1. Voluntary Use of PTO or Sick Time

Employees on FAMLI leave cannot be required to use their accrued paid time off. However, many employees choose to voluntarily supplement their FAMLI benefit with PTO, particularly if the state benefit does not fully replace their wages. When an employee elects to receive PTO pay during leave and that pay is processed through payroll, the normal benefit deduction mechanism applies. Under Colorado’s FAMLI regulations, deductions from employer-provided paid leave used to supplement FAMLI benefits are allowed.

This makes the voluntary PTO route one of the cleanest options available: no separate billing, no repayment plan, and no additional complexity beyond standard payroll processing. The employer discusses the option with the employee before leave begins, the employee decides whether to use PTO, and if they do, payroll handles it the same way it always would.

2. Invoice the Employee Monthly

For employees who prefer not to use their PTO, or when PTO balances are limited, billing the employee directly each month is a practical and explicitly permitted option under Colorado law. The employer continues submitting the full premium to the carrier, and the employee sends their share to the employer on a regular schedule by check, ACH, or another agreed-upon method.

This approach keeps the employer’s cash flow clean and avoids creating a growing repayment obligation that has to be collected later. Most employees on FAMLI leave are receiving wage replacements from the state, so funds are generally available for these

payments. The pre-leave agreement should spell out the payment amount, the due date each month, and what happens if a payment is missed.

3. Front the Cost and Recover After Return

If an employee has limited resources during leave and return to work is expected, the employer can cover the employee’s share of premiums during the leave period and recover those costs through payroll deductions once the employee is back at work. Colorado’s FAMLI regulations explicitly permit deductions from wages paid upon the employee’s return, provided they comply with the Colorado Wage Act.

That means a signed written repayment agreement must be in place before the leave begins, not after. The agreement should specify the total amount to be recovered, the repayment schedule, and what happens if the employee does not return. Without that agreement, deducting unpaid premiums from future paychecks or from a final paycheck may violate Colorado wage law and expose the employer to a wage claim.

Choosing the Right Approach

The decision largely comes down to two things: how confident you are that the employee will return, and what their financial situation looks like during leave.

Voluntary PTO is often the simplest path when the employee is willing to use it. Monthly invoicing works well when the leave is longer and the employee has funds available from the state wage replacement. Fronting premiums and recovering them later is reasonable for a trusted employee who is clearly coming back, but it carries real risk if return is uncertain. A combination approach, using voluntary PTO first and then invoicing for the remainder, is also reasonable for longer leaves.

Whatever you choose, document it and have the employee sign before they begin their leave. When in doubt, Journey Payroll & HR can help Colorado employers identify the right approach for their specific situation and workforce.

What Colorado Law Requires

Employers are required to maintain health coverage during FAMLI leave, and employees are responsible for continuing to pay their share. Beyond that, Colorado’s Wage Act (C.R.S. 8-4-105) governs how deductions can be made from paychecks. Any plan to recover benefit premiums through future payroll deductions requires prior written authorization from the employee, specifying the amount, the purpose, and the repayment schedule.

A verbal agreement or email exchange does not meet that standard. Employers who front premiums and attempt to collect from a final paycheck without a prior written agreement

may find themselves facing a wage claim. Handling the paperwork before leave begins is far simpler than resolving a dispute after the fact.

Check out CDLE for official guidance on Colorado FAMLI-specific employer resources.

Before the Employee Leaves

Most of the problems employers encounter with benefit deductions during FAMLI leave come from the same place: waiting until the employee is already out to figure out the plan. A brief pre-leave conversation resolves nearly all of it.

Before the employee’s last day, confirm which benefits will remain active and what their monthly premium share amounts to. Decide which collection approach works for your situation, discuss it with the employee, and put the agreement in writing. If post-return deductions are planned, set them up in your payroll system in advance so nothing gets missed on the day the employee comes back. Keep records of all payments made, agreements signed, and communications sent.

The Bottom Line

Colorado employers must maintain health coverage during FAMLI leave. The employee’s share of premiums does not disappear, and a plan must be in place before the leave starts. Three lawful options exist, and the pre-leave conversation with a signed written agreement is the most important step you can take.

Frequently Asked Questions

What happens to health insurance during FAMLI leave in Colorado? Health insurance and other employer-sponsored benefits generally continue during FAMLI leave. Colorado law requires employers to maintain health care benefits under the same terms as active employment. The employee remains responsible for their share of the premium costs, and the employer must continue submitting the full premium to the carrier on time.

Can a Colorado employer stop health insurance coverage during FAMLI leave? No. Stopping coverage during an approved FAMLI leave would violate the employee’s rights under Colorado law. Employers must maintain health care benefits for the duration of the leave.

Who pays health insurance premiums during FAMLI leave? The employer continues to pay the employer’s share. The employee remains responsible for their share, which must be collected through one of three lawful methods: voluntary PTO deductions, monthly invoicing, or employer-fronted premiums recovered after return.

Does FAMLI leave affect employee benefits? FAMLI leave does not eliminate benefit obligations for either party. The employer must maintain health coverage, and the employee must continue paying their share of premiums. What changes is the collection mechanism, since there is no automatic paycheck deduction available.

Can we require the employee to use their PTO to cover premiums? No. Employers cannot require employees to use accrued PTO during FAMLI leave. However, employees may voluntarily choose to use PTO to supplement their FAMLI benefit, and if they do, standard payroll deductions including health premiums can be taken from that pay.

What if the employee misses a monthly payment? Your pre-leave agreement should address this. Some employers include a short grace period; others specify that missed payments roll into a deferred repayment arrangement. Put the plan in the agreement upfront rather than trying to negotiate it mid-leave.

Can we deduct all back premiums from the first paycheck after return? Only if the written agreement specifically authorizes that structure. A large lump-sum deduction from one paycheck can create net-pay complications depending on the amount. A spread-out repayment schedule is usually more practical for both parties.

What if the employee does not return from leave? Without a signed repayment agreement in place before leave began, recovering unpaid premiums from a final paycheck is legally risky under Colorado wage law. This is the strongest argument for monthly invoicing or securing a clear written agreement any time return is uncertain.

Does this same process apply to FMLA leaves? The approach is similar. FMLA applies to employers with 50 or more employees, and the two programs generally run concurrently for eligible employees. The benefit deduction planning described in this article applies to both.

About the Source

This article was prepared by Journey Payroll & HR, a payroll and human resources company headquartered in Fort Collins, Colorado, serving employers across all 50 states. Journey has maintained a 98% client retention rate since its founding in 2010 and is dedicated to helping Colorado employers navigate the complexities of FAMLI compliance, payroll tax, and HR policy. Journey’s team monitors Colorado FAMLI guidance on an ongoing basis and is known for responding quickly, staying current on compliance requirements, and putting clients first at every step. This article is provided for educational purposes and reflects Colorado FAMLI guidance current as of 2025-2026. For binding decisions on specific situations, consult a qualified legal or HR professional.

Journey Payroll & HR publishes ongoing compliance guidance for Colorado employers on topics including FAMLI, Colorado wage law, payroll tax, and HR policy. Visit www.JourneyPayrollHR.com to learn more.

Published: May 2026 | Last Reviewed: May 2026 | Reflects Colorado FAMLI guidance current as of 2025-2026