Risk Insider: Terri Rhodes

Paid Family Leave Is Increasing Employee Retention Rates

While there seems to be some momentum for federal paid family leave, it also continues to gain popularity with private employers and local and state governments. The reasons aren’t surprising — employees want it, and employers are more open to offering it as the labor market grows ever tighter. But more importantly, many of the organizations who implemented programs say that it came from the top down, with most leaders saying that it is just the right thing to do.

Beyond the feeling that employers “need to do more” to attract and retain talented employees nine years into an economic recovery, is there an actual business case for paid family leave?

That answer is a resounding absolutely.

One such group whose mission is to raise awareness of the benefits of paid family leave launched in 2017, The Paid Leave Project. The group has been gathering and analyzing data on paid leave programs over the last year and half. According to its most recent analysis, the leading benefit of paid family leave is that it increases retention, especially among women.  For example, when Google expanded its parental leave policy from 12 to 18 weeks in 2007, the retention rate of women post-maternity leave increased by 50 percent. When Aetna expanded its maternity leave policy, the percentage of women returning to work there jumped from 77 percent to 91 percent.

The next most important benefit of paid leave is its positive impact on talent attraction. A 2016 Deloitte survey reported that seventy-seven percent of employees said the amount of paid parental leave had some influence on their choice of employer. Fifty percent said they’d rather have more parental leave than a pay raise.

Paid leave benefits have an impact on more than talent retention and attraction. Improved employee engagement, reinforced company values, and enhanced brand equity are just a few.

Paid family leave can even improve health measures and lower healthcare costs.

For example, Nestlé offers 26 weeks of leave, 14 of which are paid leave. All employees, salaried and hourly, are eligible. Since implementing the program, Nestlé employees have a lower incidence of needing at least one sick visit for infants. Nestlé has also experienced health care costs which are 12 percent lower for infants whose parents participate in their leave program.

…when Google expanded its parental leave policy from 12 to 18 weeks in 2007, the retention rate of women post-maternity leave increased by 50 percent. When Aetna expanded its maternity leave policy, the percentage of women returning to work there jumped from 77 percent to 91 percent.

While the benefits are clear, it’s important that employers take steps to avoid pitfalls when adding or expanding paid leave.

The first is to consider paid family leave rather than just paid parental leave. This reduces the potential for resentment among employees who aren’t parents and sends an important signal that all kinds of families are valued.

The second step is to do what Nestle did and offer the same benefits to all employees. Again, this signals that all employees are valued team members and increases a sense of unity and common purpose. It also lowers the risk of discrimination claims and potential litigation.

And while paid family leave requires enhanced absence management policies, processes, and procedures, investing in those programs make sense anyway. Paid family leave’s return on investment is large enough that, for most organizations, the question is no longer “should we offer paid leave, but why shouldn’t we offer it?”