NEW YORK—Paid leave has become a growing benefit to allow families to have extended time off with their families and to assist in solving the gender wage when one considers that working women are most likely to take advantage of paid leave policies. It has also become an important benefit to working fathers, with more progressive companies expanding their paid leave policies to reduce the likelihood of talent likely to drop out of the workforce once they start a family.
We are often asked by smaller client companies about the benefits and value of adding a paid leave benefit for their employees. And for our larger clients that are working diligently in motivating, engaging and retaining talent, they ask us to propose various options associated with increasing paid leave benefits for their companies.
Many of our progressive client companies that we have worked with to add to or expand their paid leave policies have quickly found that the cost-benefit relationship has been successful in retaining talent, an essential strategic initiative in today’s employment market where demand for talent greatly exceeds the availability of well trained and qualified people to fill job openings in virtually all industries and geographic regions in the U.S.
With our global headquarters in Northern California, we have experienced firsthand how California introduced its paid family leave initiative in 2004. The majority of employers in the state found after implementing paid leave benefits to their portfolio of benefit programs that it was very positive for their business and for their employees. According to a June 2014 study by the Obama Administration, more than 90 percent of 253 employers from California surveyed reported either a positive or no effect on profitability, turnover and morale.
California’s policy is far more progressive than the country at large. The federal Family and Medical Leave Act guarantees 12 weeks of unpaid leave for the birth of a child, medical leave or to care for an immediate family member for companies with 50 or more employees. However, according to the White House report, this covers only about 60 percent of employees, leaving most states or companies themselves to derive their own policies, or have no paid leave policies at all.
While the companies in the White House report say the California policy has been good for business, experts have concluded that there are three main reasons more states should consider offering their own expanded paid leave policies.
1. Employee Retention. For some employers, the cost of not offering paid leave is greater than the cost of offering it. Those same surveys have found that providing paid leave reduces employee turnover, a major cost to organizations. And various studies have found that the cost to replace an employee runs between 20 percent and 100 percent of their annual salary.
Additionally, paid leave helps to attract qualified talent. For companies that are in in the grips of trying to attract and retain talent, progressive work-life balance benefits, such as paid family leave, helps set an organization apart from their competition, whether within the same industry or in the same community.
2. Employee Engagement. Engagement is the well-acknowledged organization practice that, when fully adapted in a company, has consistently shown that employees will go above and beyond for their team and the company with whom they work.
Paid leave favorably impacts engagement because the benefit helps employees feel they are being supported by the company. That engagement is expressed through collaborative work, teaming with colleagues, and improved customer service, productivity and profitability of the company.
Business leaders have also found that through engagement and with paid leave benefits, training other colleagues allows for greater job enrichment and involvement, and the potential to be recognized for their contributions.
Taking on that additional work also provides clarity and purpose to succession planning. While someone is away on paid leave and another colleague is doing their work, it is a real and effective way to determine the qualifications and abilities of employees before promotions are made.
3. Economic Implications. Going without paid leave poses a cost to families and the broader economy. Birth and caring for a child are expensive; the financial burden is large for individuals going without pay for prolonged weeks and months after birth. This dilemma often leads to increased stress, making the affected employee likely to have reduced engagement at work when they return, and many mothers leave the workforce to offset the high cost of child care.
Looking again at California, it requires paid leave to certain employees for six weeks, earning 55 percent of their typical weekly earnings up to a certain threshold. This legislation increased weekly hours and pay of working mothers with young children by almost 10 percent. Improved pay and increased labor force participation of women will lead to a boost in the U.S. economy, according to the U.S. Department of Labor.
As you take time to review and make changes to your benefit programs, give thoughtful consideration to adding paid family leave if you do not presently offer the benefit, and expanding your paid leave program to a level that will be greatly appreciated by your employees.
Hedley Lawson, Contributing Editor
Aligned Growth Partners, LLC