To attract the best talent, many companies offer competitive parental leave policies. However, concerns over cost, productivity loss and employee retention — especially for smaller businesses — make choosing the best policy difficult. Employers must analyze if they can afford paid parental leave, flexible or part-time work schedules, and training temporary workers.

However, economists have found that offering parents leave does not appear to hurt businesses in the long run. Recent studies suggest that a majority of small and medium-sized businesses offering parents time off see higher morale, productivity and retention rates.

Here’s what to consider regarding your company’s policy.

Current Maternity Leave Laws

In the United States, there are two federal maternity leave laws that directly protect expecting and new parents:

  • The Pregnancy Discrimination Act covers companies that employ 15 or more people. It mandates that employers give pregnant mothers the same health, disability and sickness-leave benefits that they would any other employee with a medical condition. Also, businesses cannot fire a woman because she is pregnant.
  • The Family and Medical Leave Act (FMLA) applies to businesses with 50 or more employees within a 75-mile radius of the workplace. New parents are promised up to 12 weeks of job-protected, unpaid leave. This law applies to both mothers and fathers.

Also, while the FMLA guarantees unpaid leave to parents, three states — California, New Jersey and Rhode Island — ensure paid parental leave financed through employee-paid payroll taxes.

Temporary Losses vs. Attracting Talent

It can be difficult to weigh the initial costs of allowing parents time off with the long-term benefits. Some considerations:

  • Size: It’s easier for larger firms to give parents breaks because they have enough employees to divide their responsibilities without slowing workflow. Small companies often must hire and train long-term temporary employees to cover lost productivity. Ultimately, it may cost too much to lose an essential employee for too long.
  • Culture: Survey your employees to understand what they value. “You only have so many dollars to spend on benefits,” said Polly White of Whitestone Partners Inc., a management-consulting firm that specializes in helping small businesses. “Make sure you are offering those benefits most appreciated by your employees. Leave for new or expectant parents may well be a part of this equation.”
  • Competition: If other organizations with which you compete for employees offer paid parental leave, you probably need to do the same when it comes to attracting and retaining employees.

However, while maternity leave laws mandate the minimum time off your company must allow, experts suggest offering parents more time off may actually help your bottom line. A 2014 study by the International Labour Organization (ILO) found that in general, small and medium-sized businesses “overestimate the costs and underestimate potential gains, including happier workers, lower employee turnover and less absenteeism.” In California, over 90 percent of small businesses found either no noticeable or a positive effect on profitability, performance and turnover.

Consider Alternative Policies

If your company determines it cannot afford a parental leave policy, there are still alternative parent-friendly policies to consider:

  • Disability Insurance: Inc. reporter J.J. McCorvey suggests companies purchase an insurance plan that pays for medical-related maternity leave. This is a way to at least offer paid maternity leave.
  • Flexible or part-time schedules: Suzan Lewis, one of the authors of the ILO paper, says her research found that small business that allowed parents temporary part-time schedules, telecommuting or completing tasks outside normal working hours saw increased productivity and employee retention.

Karen Firestone, President and CEO of Aureus Asset Management, told Harvard Business Review her flexible parental policies have helped her retain crucial expertise. However, she understands any concerns. “Particularly at a small company, the costs of being inclusive and pursuing an egalitarian ideal are more immediately tangible than the benefits,” she said. “It’s up to the management to carefully weigh these expenses against intangibles that pay off handsomely in the long run.”

Ready to consider parental leave? Get in touch with UpCounsel Employment Legal Services Attorneys to develop the best policy that fits your business.

About the author

Alex Liu

Alex Liu

Alex began his career as a scientific legal consultant and then as a journalist researching and reporting on health policy and health sciences. At UpCounsel, he enjoys researching and analyzing data to help businesses make informed decisions. In his free time, Alex is working on a documentary.

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