Does It Pay to Offer Paid Family Leave?

Sept. 24, 2014

Understanding the return on investment for businesses offering paid maternity and paternity leave.

Back in 2002, California became the first state to guarantee six weeks of paid leave for new mothers and fathers, supported by a payroll tax contribution by eligible workers.

Meanwhile, as Rhode Island and New Jersey followed California’s lead, paid maternity and paternity leave plans have been rolled out by employers – from Reddit to Major League Baseball. And yet, the United States remains one of the only developed nations that doesn’t provide paid benefits to women during maternity leave.

But experts are optimistic that paid maternity and paternity leave will eventually catch on across the country -- whether company-by-company, state-by-state or federally, through the FAMILY Act, a proposal that would create a self-sufficient paid leave program.  

“There is a growing body of evidence from the states that these programs are working,” says Vicki Shabo, vice president at the National Partnership for Women and Families.  “The data supports that it’s a benefit for families, employers and the economy in general.”

From loyalty and productivity to reducing turnover and attracting talent, here are some of the ways paid maternity and paternity leave can be good for both company and family alike.
 

  1. Builds Loyalty
    When workers feel supported -- not only as employees, but as people with lives outside of the office -- it builds loyalty. And loyalty itself has many benefits.

    “When you have a workforce that feels respected, they’re going to work harder for you, they’re going to stay with you and they’re going to produce more, says Sarah Jane Glynn, associate director of Women’s Economic Policy at the Center for American Progress. “When people feel that they’re part of a team that cares about them, they’re more willing to go that extra mile.”

    Learn about Why New Dads Don’t Take Paternity Leave
     
  2. Enhances Productivity
    Paid leave can enhance productivity in ways that go beyond happier workers being harder workers. One example is that being able to spend time at home around the birth of their new child means employees are likely to be more focused when they return to work.

    “If an employee’s entire day is worrying about their child, how much are they really going to accomplish? Presenteeism is a real problem for businesses along a number of dimensions,” says Glynn.  
     
  3. Reduces Turnover Costs 
    Women who have access to paid maternity leave are far more likely to return to their pre-birth employer, studies have shown. Along with the benefit of retaining talent, a mom returning to work post-pregnancy can be a cost saving for employers, as estimates of the costs of turnover range between 90 and 200 percent of an employee’s annual salary.

    “Retention is a real cost savings,” says Shabo. “Reducing turnover allows employers to save money in recruiting and training, and it keeps institutional knowledge.”

    Read about Common Reasons New Moms Don’t Return to Work
     
  4. Strengthens Teams
    Though fear of being replaced or passed over is often cited as a reason men and women hurry back to work after the birth of a child, the reality is that their absence does mean the company must find a way to go on without them. And that's not necessarily a bad thing.

    “Creating opportunity for colleagues to step up and strengthen teams is a benefit of employees taking leave, from a business perspective,” says Chris Duchesne, vice president of Global Workplace Solutions at Care.com.
     
  5. Empowers Women
    Not only does paid maternity leave enhance the chance that a woman will return to her pre-birth employer, but paternity leave could actually have the similar effect. Studies have shown correlations between dads taking paternity leave and moms progressing in their careers. For example, Sweden, where nearly 90 percent of dads take paternity leave, routinely ranks as one of the top countries for gender-equality.

    “The Breadwinner-Homemaker model is crumbling and is destined for the dustbin,” says John Badalament, author and program director at the Fatherhood Project. “When men are able to be involved from the start of their children’s lives, they’re more likely to stay involved at home and women are more likely to keep their foot in the workplace.”

    Read about Why Dads Need Paternity Leave
     
  6. Recruits Talent   
    Men and women both want paid parental leave. Annual “best places work” lists are filled with companies offering great maternity and paternity leave plans. A study by Boston College’s Center for Work and Families found the majority of fathers said paid paternity leave would be important if they were looking to change jobs and planned to have another child.

    At a time when Millennials and young professionals are weighing work-life fit as they make decisions about their careers, offering paid maternity and paternity leave plans could be a powerful recruitment tool.

    Learn How Companies Can Help New Parents Transition Back to Work Post-Baby
Tips and stories from parents and caregivers who’ve been there.

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