Paid family leave adds value to both companies and employees

17 February 2017 6 min. read

Families are increasingly hard pressed to meet caring obligations, in a bid to bolster work-life balance as well as to satisfy the need to care for sick family members. Employers across a range of sectors are providing additional coverage to meet the growing demand, although only a handful of employees at major employers are currently covered. A new study based on the US market shows that the benefits of coverage for employees in most cases outweigh the costs.

While the vast majority of the developed world has legislation in place for family leave, the US has continued to buck the trend – with no federal policy in place and only a handful of states having family leave legislation in place.

Businesses in the US, particularly large multinationals, are increasingly providing paid family leave benefits on a volunteer basis. A new report from The Boston Consulting Group, and Panorama, explores the changing trend, its advantages as well as key moves companies can make to implement similar policies. The study involved a detailed examination of family leave policies at more than 250 companies, as well as in-depth interviews with 25 HR leaders at large organisations.

Paid family leave coverage in the US

The need among employees for paid family leave continues to increase as a range of social, demographic and normative changes come to bear on families. One significant change is that the phenomenon of stay at home parents, able look after a new born child or adopted child, has decreased significantly as more and more women join the workforce. As it stands, more than 70% of women with a child are part of the labour force, compared to less than 50% in the mid-1970s. Normative roles have also shifted, with families in which both parents work tending to more evenly split parenting duties.

Aside from demand from parents seeking to be parents in the early stages of their child’s life, employees are also finding themselves confronted by a need to look after a sick/dying parent in the later stages of their life. An American Time survey, found that around 16% of the US population is caring for someone older than 65, with around 45% of that group providing daily care – even while 20% also needs to provide further care duties to their dependent children.

The increased burden for families is filtering through to employers, and has seen employers increase their sponsorship of paid family leave programmes for their employees across the US, up from 11% in 2010 to 14% last year.

As wages increase, do does paid family leave coverage

While there is an uptick in companies offering their staff paid family leave, the companies offering such benefits tend to do so only to their most highly paid employees and only within a limited segment of the wider economy.

The lowest paid workers are only offered the benefit at 6% of the surveyed companies, compared to 22% for the most highly paid employees. Financial services, information and profession, scientific and technical services are by far and away the most likely to offer such benefits, at 36%, 33% and 28% of sectors respectively – these groups also tended to have average annual wages above $60,000.

The sectors with the lowest coverage include accommodation and food services, at around 6%, followed by construction, administrative, and retail. Ironically, these groups are also most hard pressed to find caring solutions, with little financial room available to them. Education services and healthcare and social assistance managed to punch slightly above the 14% average.

Five benefits of paid family leave

The study also considered the business case for offering the benefit to employees, identifying five areas of benefit with few downsides to overall business performance. One benefit is employee retention, with women paid family leave found to be 93% more likely to be working one year after the birth of a child. At top employers, the introduction of paid family leave policies saw significant reductions in female staff turnover, while for lower paid staff, it made staff 9% more likely to return to a former employer.

The study also found that the benefit improves the attractiveness of potential employers, a Deloitte study highlighting that 77% of workers said that paid family leave could sway their choice of employer. Paying employees to look after their child in the first months of life may also reinforce company values, many organisations remain dedicated to family as a key part of wider social cohesion. Additionally, the firm notes that the brand value of companies tends to be improved, paid family leave programmes are an expression of the company’s core value to enhance family life.

Employees offered paid family leave were also found to have higher moral, be more engaged and productive. A 2016 EY study of 1,500 employers, found that more than 80% of those that offered paid family leave reported a positive impact on employee morale, while more than 70% reported an increase in employee productivity.

The cost of such programme, the firm’s study found, is shown to, in 93% of cases, produce positive effects or incur no effect on profitability on balance. Trish Stroman, a BCG partner and coauthor of the report, adds, “The companies we reviewed see a compelling business case for providing or expanding paid leave to employees who take time off to care for a new child or an ill family member. Some of the recent movers are in sectors that might be surprising, including retail and hospitality. We also found that companies are able to design policies that meet the needs of their diverse workforce—from headquarters to the manufacturing plant to the retail outlet."