Offering paid family leave varies from industry to industry and employer to employer. There are several advantages of offering this benefit to your employees, but there are some high costs to the employer as well. Understand the details around paid family leave and weigh the pros and cons before you determine the policy for your small business.
What Is Paid Family Leave?
The Family and Medical Leave Act, administered and enforced by the U.S. Department of Labor, provides specific employees with up to 12 weeks of unpaid leave annually. This leave is job-protected, which means that the employee cannot lose his job as a result of this leave. Per this act, employers are also required to continue the group health benefits while the employee is on leave. While this act makes it somewhat easier for new parents to take time off work, there is no federally regulated paid family and medical leave in the United States.
Per the FMLA, employees who qualify for family leave can take time off for the birth, adoption or foster care placement of a baby. There are other conditions where employees can take family leave as well, such as if a spouse, parent or child has a serious health condition and requires care, or if the employee himself has a health condition that makes him unable to do his job.
While there is no federal law around paid family leave, there are some states that have a paid family leave law. These states include California, Connecticut, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Washington as well as the District of Columbia. Each state is able to set its own rules for the parameters and conditions of the paid family leave, such as how long employees can take leave and the contribution amounts for employers. Some state laws do not offer job protection, only monetary benefits.
As a result, paid family leave depends on the discretion of the employer in addition to where the employer is located and whether that state has a mandated paid family leave law. In some cases, employers in states where there is no paid family leave law still offer paid family leave to their employees. Still, more than 80% of all workers do not have access to paid family leave in the U.S.
The Importance of Offering Paid Family Leave
There are many benefits of offering paid family leave to your employees. Primarily, offering paid family leave helps employees to find work-life balance during stressful times in their lives, such as when they have a new baby or when an ill family member requires care. Being able to take time off work while still being able to pay the bills enables both mothers and fathers to bond with their newborns and see to any health concerns.
In addition, offering paid family leave creates loyalty among employees for their employers. When employees see that the business cares about their overall well-being and the well-being of their new child and family, not just the company’s bottom line, it creates a sense of trust and engagement. This benefit can help to increase retention rates, reduce turnover and lower hiring and onboarding costs.
Paid Family Leave Costs
While offering paid family leave has its advantages, it also comes with high financial costs to many businesses. Companies in states with paid family/paid parental leave laws and those that choose to offer paid family leave need to consider the expenses of paying the employee benefits while on leave. Businesses also have to cover the cost of a temporary employee who may take on the role of the employee who is on leave. Keep in mind that the rules vary from state to state.
There is some government assistance in states that have paid family leave laws. In California, for example, California PFL benefits offers partial pay to qualifying employees, which is paid for by employees who have paid into their state disability insurance taxes in the last five to 18 months. In order to qualify for paid family leave in California, employees must meet a number of specific standards, and they can make a claim once every 12 months. The paid family leave lasts for six weeks and provides employees with about 60% to 70% of their income.
In addition to the wages employees earn from the PFL program, some employers choose to “top up” their employees for a certain number of weeks. This helps the employees to earn close to 100% of their wages while on leave. For example, if the PFL program covers 70% of the employee's salary for six weeks, an employer can top up an additional 30% of the salary for the first three weeks of the leave so that the employee earns 100% of her salary for the first half of the leave.
Drawbacks of Paid Family Leave
In addition to the financial cost to businesses that offer paid family leave, there are productivity costs as well. When an employee goes on leave for a number of weeks, his tasks need to be covered by other employees in the business, which can lead to a loss of productivity. Even if the business hires a temp worker to cover the leave, it will need time to onboard and train the employee.
Offering paid family leave may cause resentment among employees who choose not to have kids or who cannot have kids. It’s important to remember that paid family leave is not just for maternity leave or paternity leave — it also covers family and personal illnesses as well. As a result, it benefits all employees, not just those who have children.
Alternatives and Additions to Offering Paid Family Leave
If your small business is interested in offering paid family leave to employees, but you are not able to do so, there are some alternative benefits you can offer to make life easier for your employees. These can also be offered in addition to paid family leave. Taking this step is a way to show employees how much they are valued by your company and how much they are supported as they spend time with their families.
Examples of alternatives and additions to paid family leave include:
- Offering flexible working arrangements so employees can work from home or work during off hours in order to accommodate their new family needs
- Providing breastfeeding or pumping rooms for new mothers
- Developing a company culture where employees feel comfortable discussing their family lives
- Having an on-site day care where employees can be close to their children while they work
Examples of Paid Family Leave
There is a lot that small businesses can learn about paid family leave by looking to larger organizations that offer this benefit to their employees. By seeing what other companies are doing, you can get an understanding of the different ways that paid family leave can be offered. Examples of paid family leave policies include:
- Microsoft offers five months of paid leave to all new birth mothers, while fathers, adoptive parents and foster parents receive three months of paid leave.
- Netflix offers one year of paid leave to both mothers and fathers.
- Deloitte offers an average of 22 weeks of paid leave for moms and an average of 16 weeks of paid leave for dads.
- Snap offers 20 weeks of paid leave to mothers and eight weeks of paid leave for fathers.
- The Guardian: The US Doesn't Offer Paid Family Leave – But Will That Change in 2020?
- KFF: Paid Family and Sick Leave in the U.S.
- Fast Company: The Real Cost Of Paid Parental Leave For Business
- Forbes: Three Benefits To Paid Parental Leave
- U.S. Department of Labor: Family and Medical Leave (FMLA)
- Parents at Work: Alternatives to Paid Parental Leave That Make You an Employer of Choice to Industry Top Talent
- American Enterprise Institute: Paid Family Leave: Balancing Benefits and Costs
- Glassdoor: 6 Companies Redefining Parental Leave
- Patriot: What Are the States With Paid Family Leave?
- State of California Employment Development Department: About Paid Family Leave
- U.S. Congress. "H.R. 6201." Accessed Apr. 20, 2020.
- CBO. "H.R. 6201." Accessed Apr. 30, 2020.
- KFF. "The Families First Coronavirus Response Act: Summary of Key Provisions." Accessed Apr. 20, 2020.
- Federal Register. "Paid Leave Under the Families First Coronavirus Response Act." Accessed Apr. 20, 2020.
- DOL. "Families First Coronavirus Response Act: Questions and Answers." Accessed Apr. 20, 2020.
- IRS. "COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs." Accessed Apr. 20, 2020.
- Internal Revenue Service. "About Form 7200, Advance Payment of Employer Credits Due to COVID-19." Accessed 4/20/20.
Anam Ahmed is a Toronto-based writer and editor with over a decade of experience helping small businesses and entrepreneurs reach new heights. She has experience ghostwriting and editing business books, especially those in the "For Dummies" series, in addition to writing and editing web content for the brand. Anam works as a marketing strategist and copywriter, collaborating with everyone from Fortune 500 companies to start-ups, lifestyle bloggers to professional athletes. As a small business owner herself, she is well-versed in what it takes to run and market a small business. Anam earned an M.A. from the University of Toronto and a B.A.H. from Queen's University. Learn more at www.anamahmed.ca.